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■ AUD/USD lifted again overnight to 0.6635. AUD lifted against all the cross rates too. No Australian economic data is released today. We expect AUD/USD to be heavily influenced by the count in the US election (see chart of the day for the key counties in the (mostly) swing states). We expect AUD/USD to lift if Vice President Harris wins, and AUD/USD to fall if President Trump wins. It could be a wild ride for currencies, and financial markets generally, today.
■ USD eased despite better than expected US economic data overnight. We interpret the decrease in the USD as positioning for a win by Vice President Harris. The services ISM surged to a strong 56pts in October. The index was at the highest since the middle of 2022. The prices paid and employment components were also strong. Nevertheless, market pricing for a 25bp cut in the Funds rate on Friday remains very high.
■ The US election will be the larger driver of the USD for the remainder of the week in our view. All the evidence suggests the election outcome is difficult if not impossible to call. Even the betting markets predict different winners. The election matters because the winner will influence the trajectory of US economic activity and inflation with their policy platform. We expect the USD to lift if President Trump wins and the USD to fall if Vice President Harris wins. See our analysis of the impact on the economy and markets here. Chart of the day highlights the key counties in the (mostly) swing states to watch. Also see our US election guide covering delays, disputes and even death of a candidate here.
■ AUD/NZD lifted to above 1.1060 despite a strong twice monthly dairy auction. The overall price index jumped by 4.8%. the key whole milk powder price lifted by 4.4%. There is upside risk to our ASB colleagues milk price forecast of $NZ9.20/kg. New Zealand’s labour force report is released today (8.45am Sydney time). Our ASB colleagues estimate the unemployment rate jumped to 5.1% (consensus: 5.0%). AUD/NZD will increase modestly if the labour market is weaker than expected.
■ AUD/JPY could be very volatile in the next few days as the US election count continues. Watch equity markets for direction. AUD benefits from rising equity markets while JPY benefits from falling equity markets. We expect market participants to largely ignore today’s minutes from the Bank of Japan’s policy meeting in September.
■ AUD/CAD lifted to touch 0.92 briefly. The minutes from the Bank of Canada’s prior meeting were not dovish. Despite a ‘strong’ consensus for a 50bp cut on 23 October, ‘some’ officials worried a jumbo cut could be viewed as a sign of economic trouble. The OIS market is still pricing an even chance of a 25bp and 50bp cut in December.
■ AUD/CNH lifted to almost touch 4.72 overnight. Bloomberg reports the governor of the People’s Bank of China saying he will keep monetary policy accommodative and increase the intensity of countercyclical adjustments to support economic growth. His comments are not surprising. However, the market is more interested in the details of the proposed budget stimulus. A focus on infrastructure will lift AUD while a focus on households will lift NZD.
Mid-market rates.
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6636 |
| AUD/NZD | 1.1051 |
| AUD/JPY | 100.62 |
| AUD/CNH | 4.7139 |
| AUD/EUR | 0.6072 |
| AUD/GBP | 0.5092 |
| AUD/HKD | 5.1561 |
Chart of the day
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