Forex news for Asia trading for Thursday 15 October 2020
- UK Times: Johnson’s chief negotiator will tell the PM not to walk out of Brexit trade talks
- China says the US is seriously undermining peace and stability in the Taiwan Strait
- US President challenger Biden campaign has nearly half a billion $ in campaign cash
- China September inflation: CPI +1.7% y/y (expected 1.9%) PPI -2.1% (vs. -1.8%)
- PBOC conducts a 500bn yuan MLF
- Nomura expects the RBA to announce further easing on November 3
- PBOC sets USD/ CNY reference rate for today at 6.7374 (vs. yesterday at 6.7473)
- FX option expiries for Thursday October 15 at the 10am NY cut
- Goldman Sachs join the dovish RBA express - see potential November easing
- RBA Governor Lowe's speech has prompted forecasts of imminent RBA rate cuts
- Australia September jobs: -29.5 K (expected -40K) & Unemployment rate 6.9% (expected 7.0%)
- Australia survey of consumer inflation expectations, for October: 3.4% (prior 3.1%)
- Hedge funds traded on private government briefings at beginning of coronavirus market rout
- TD on Brexit trade deal talks, says the chance of no deal has fallen to 20-25% (GBP to rise)
- Trade ideas thread - Thursday 15 October 2020
- More from Fed's Kaplan - keeping rates at zero risks people taking more risk
- More from RBA Lowe - possible to cut rates to 0.1%
- AUD testing its overnight low after RBA Gov Lowe spoke
- Fed's Kaplan remarks crossing - sees GDP contraction in 2020, growth in 2021
- RBA Governor Lowe - reasonable to expect further easing would be more impactful than earlier
- Mnuchin says Trump told him to keep negotiating until a deal is done
- More from Merkel - Germany will take measures in 10 days if virus spread not capped
- Private oil inventory survey shows a larger than was expected draw in headline stocks
- BoA forecast the USD higher in the weeks ahead
- German Chancellor Merkel says in a serious stage of the COVID-19 pandemic
- More from Fed's Quarles - costs of negative rates have outweighed their benefits
The Australian dollar was an early mover in the timezone, falling on the back of remarks from Reserve Bank of Australia Governor Lowe. Lowe shifted to a more dovish stance, committing again to not raising the Bank's cash rate until inflation is sustainably in the 2-3% range. Further, he gave indications that more RBA easing is to come entailing a cut to 0.1% for the cash rate, the 3 year yield target, and also likely expanded longer-term bond buying.
As noted already, the Australian dollar dropped. The market response was that further easing is imminent, with pricing now indicating a circa 75% chance of a cut at the November meeting (November 3 ... that's going to be an important date!) Analyst notes soon followed, with many tipping a Nov. 3 cut from the Bank. Its a conundrum, I didn't hear much from him indicating any sense of urgency and that November is likely. Given the priors from the RBA I'm unconvinced the November meeting will see a move. Contra what the market seems to think admittedly.
News flow was not limited to Dr. Lowe, also of note:
- US Treasury Secretary Steven Mnuchin said getting a stimulus agreement before the election and executing on that would be difficult. (no surprise in this)
- The People's Bank of China launched a 500bn yuan MLF operation (200bn mature this week thus a net injection of 300bn)
- The weekly international securities flows data from Japan showed a whopping +$18bn of foreign bonds bought from Japan in the last week, the highest since March this year. You'll recall a persistent market narrative that Japanese are buying JGBs in preference to offshore bonds due to positive 'real' yield and thus this is keeping funds at home and contributing to yen strength. This huge weekly outflow runs a little counter to that.
Apart from the notable AUD move other currencies are not too much changed. USD/JPY is up 20 or so points from earlier lows and yen crosses are higher also (AUD/JPY of course not so much). Gold slipped lower a few dollars.
