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■AUD/USD has recovered most of the previous day’s losses to trade at 0.6680. AUD has also recovered against many of the cross rates. Just like yesterday, there are no important economic data releases scheduled today in Australia or China. We expect AUD/USD to trade around 0.67 today in what we expect is a quiet day.
■There is still no news when the Chinese government will hold its National People’s Congress (NPC) to agree the details of the economic support package. It looks increasingly likely market participants will have to wait until November to find out the details. Typically, the start and end dates of the NPC are known seven days in advance and the NPC lasts 4‑5 days. The lack of clarity on the NPC’s timing could pull AUD/USD up on the idea that the longer it takes to announce the NPC dates, the larger the support package being planned. It is plausible the NPC is delayed until after the US election, so they know the contours of the US’s China policy. A return to the White House by President Trump raises the chances of another trade war that could be offset by a large pick‑up in government spending that may favour AUD/USD.
■USD consolidated around 104pts. US and European equity markets are largely unchanged. Highly rated government bond yields are steady to modestly higher. Pricing for two 25bp cuts to the Funds rate is slowly fading. The FOMC’s Beige book is the highlight in an otherwise quiet day. We expect the Beige book will discuss disruptions to economic activity in regions effected by hurricanes. Natural disasters typically disrupt activity for a short period followed by a jump in activity as the clean‑up, repair and rebuild starts.
■AUD/GBP increased modestly to above 0.5160. Bank of England (BoE) Governor, Andrew Bailey, did not comment on monetary policy in a speech yesterday. Instead, he discussed regulation and surveillance of non‑banks such as hedge funds. Governor Bailey speaks tomorrow morning at the Institute of International Finance (5.45am Sydney time). We consider the main risk is that Governor Bailey is dovish because of the larger than expected fall in UK CPI inflation in September. Financial markets have fully priced a 25bp cut by the BoE in November but pricing for a cut in December is around 60%. Therefore, AUD/GBP can increase if Governor Bailey is dovish.
■AUD/CAD will be influenced by the Bank of Canada’s (BoC) policy decision tomorrow (12.45am Sydney time). Financial markets are currently pricing around a 90% chance of a large 50bp cut. If the BoC cuts by 50bp, AUD/CAD will likely receive a small boost. By contrast, if the BoC sticks with its usual sized 25bp cut, AUD/CAD can fall sharply and break below support at 0.9200. We note the Canadian labour market improved in September and so we would not be surprised if the BoC opted to cut by only 25bp.
Mid-market rates.
Currency Pair | Mid-market rate |
AUD/USD | 0.6682 |
AUD/NZD | 1.1059 |
AUD/JPY | 100.95 |
AUD/CNH | 4.7691 |
AUD/EUR | 0.6189 |
AUD/GBP | 0.5146 |
AUD/HKD | 5.1936 |
Chart of the day
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