By Nicholas Cork
News on Friday night that tariffs had been postponed and potential/partial deals on agriculture, the Chinese currency, and some aspects of intellectual property were close saw a partial return to risk trades, pushing the AUD to the highest since mid-September near 0.6810. Trump described the outcome as a “substantial phase one deal” whilst Chinese Vice Premier Liu He was more reserved stating that, “we will continue to make efforts”. The DOW responded positively before easing near the close, dragging the AUD back below 0.6800 with it.
AUD yellow vs the DOW red
The biggest mover of the week was the GBP which rose over 3% in the last 2 days on news that ‘EU Brexit negotiator Michel Barnier said that he’d had a “constructive” meeting with his British counterpart, Stephen Barclay, and the 27 countries in the EU gave him the go-ahead to try and agree withdrawal arrangements before the Oct. 31 deadline.’ FX Traders rushed to cover their ‘short’ GBP positions, with one FX strategist pointing out that “I think it’s very important to specify that sterling liquidity is very thin so volatility is high.”
Tensions are still increasing in Hong Kong with several attacks on both uniformed and plain clothes police, 27 metro rail stations were closed and over 2300 arrests taken place so far. In his first public comments on the situation Chinese President Xi Jinping said that “Anyone attempting to split China in any part of the country will end in crushed bodies and shattered bones,” according to China’s state broadcaster CCTV. “And any external forces backing such attempts dividing China will be deemed by the Chinese people as pipe-dreaming!” he was quoted as saying.
After a data less week last week, this week starts with Chinese Trade Balance today and Chinese PPI and CPI tomorrow. NZ will be watching the Global Dairy Auction on Wednesday, Aussie employment data is due on Thursday and US Retail Sales on Thursday night. Friday sees more Chinese data with their Retail Sales, Industrial Output and GDP al falling due.
As mentioned, exporter demand continues to support the AUD sub 67 cents and it will need to hold above 0.6770 to keep 0.6820/30 in view.
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