By Nicholas Cork
AUD continued to grind higher throughout Fridays trading session testing towards the top of the recent 6670/6770 range, following on from the local retail sales data which had come in more or less on expectations at +0.4%, just shy of the +0.5% forecast. The widely anticipated US employment data release was a mixed bag, showing slightly fewer jobs created than expected and wage growth which was lower than all expectations. The unemployment rate actually fell to a 50 year low of 3.5% and previous months jobs created were revised higher, helping the market’s to a relatively positive close for the week.
The Dow rallied strongly erasing the losses of the previous 2 days, bets for an October rate cut in the US were subsequently reduced. The RBA’s financial stability review noted ‘uncertainty about the outlook for global economic growth has increased since the previous Financial Stability Review, with a greater chance of weak growth.’ They also noted that ‘the cuts to the cash rate, and the resulting reductions in borrowing rates, have contributed to a turnaround in some established housing markets. Housing prices have risen in Sydney and Melbourne in the past few months after falling for around 18 months.’ A link to the full review is here. After none of the big four banks passed on the full rate cuts, the PM and Treasurer were full of bluster about their profiteering but took no action. Sky News reported that ‘Australia’s big four banks are raking in an extra $14 billion a year by not passing on rate cuts in full… the figures show standard variable rates for mortgages have fallen by 2.99 percent since October 2011, yet over the same period the Reserve Bank has reduced the cash rate by four percent.’
Globally, tensions continue to rise with Hong Kong reaching new levels of protest and violence, North Korea walking out on nuclear disarmament talks with the US, a second whistleblower coming out against Trump around the pressure he put on Ukraine over Biden, and Britain’s housing secretary said the government has “no plan” if it is blocked from taking the UK out of the EU on October 31.
No Australian data of note this week, with the highlights being the minutes from the FOMC meeting and US CPI. One to watch will be the scheduled resumption of Trade Talks this week between the US and China.
Technically, AUD support from exporter demand continues to build sub 67 cents, and if 0.6770 can be taken out a test towards the next resistance levels around 0.6820/30 can’t be ruled out.
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