USD bears quietened down
Short USD protagonists in 2020 have been somewhat checked after a number of important data points showed promise for the 2020 US outperformance story and saw the US Dollar Index climb 0.32%.
US ISM Dec. Non-mfg PMI, out in late Europe, confirmed a solid finish to 2019 after seeing a 55 print exceed consensus forecasts of 54.5. Business activity numbers improved while m/m factory orders fell negative, though still better than expectations.
US International Trade Balance came in at -43.1bn against -43.8bn consensus, narrowing the US trade deficit from the prior month’s -46.9bn. While mostly attributed to lower imports as a result of the ongoing US-China trade war, this is likely to see Q4 GDP figures boosted.
US Non-farm Payrolls, arguably a more significant input into the US growth equation, is due out on Saturday 12.30am AEDT. A beat here continues to support USD against G10 FX pairs, especially against NOK and SEK whose domestic stories bode negatively for them.
AUD performance underwhelms G10
AUDUSD has crashed back under the 200d-MA (~69c) in line with our view yesterday during London/New York cross, registering a fall of -1.1%. The major Antipodean pair, trading at 0.6865, has largely followed the fall in the Aus 10yr yield, down 5bps, driven by strengthened bets that the RBA cut 25bps in February.
The likelihood of another rate cut by the RBA — having already seen three since the middle of 2019 — increased after Aussie Job Ads showed a -6.7% m/m decline and costs of the devastating bushfires were earmarked to be in excess of $700m.
Aussie traders catch Building Approvals
Nov. Building Approvals are due at 11.30am AEDT with expectations for a 2% m/m print, a beat on the prior month’s -8.1%. This is quite a choppy time series and tends to not impact the AUD to great effect, especially with global risk sentiment pegged to bigger fish at the moment.
However, investors will look to take stock of the data point as Australia’s housing resurgence continues and many wait to see when an increase in housing supply could temper the expected 2020 rally.
US vs Iran unknowns
Having spoken at length about the ongoing US-Iranian conflict, markets continue to feed off headline soundbites that give any insight into what the nature, timing and magnitude of Iran’s retaliation might be.
Iran is said to be assessing 13 revenge scenarios in which any one of them would be a “historic nightmare” for the US. Crude and Gold have failed to consolidate weekly highs as markets reassess, but are unlikely to see falls back to pre-conflict levels as tensions remain unresolved.
