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Andro Matugas-Barnes
Sep 06 2019

TAT FX Brief: Sep'19

News & Insights
TAT FX Brief: Sep'19
<p><strong>It&#39;s all about trade for the AUD of late, with news of a thawing in the U.S.-China trade war, and strong trade surplus&nbsp;numbers out of Australia proving supportive.&nbsp;</strong></p> <p>Global stock markets and currencies that tend to derive a good dose of value from the Chinese economy were trading&nbsp;higher Thursday following positive developments in the U.S.-China trade war arena.&nbsp;</p> <p>The U.S. and China have agreed to proceed with trade talks in October, ensuring a thawing of tensions between the&nbsp;world&#39;s&nbsp;two largest economies.</p> <p>Global trade has fallen steadily through the course of 2019 as trade tensions between the U.S. and China ratcheted&nbsp;up, leading to concerns for the outlook of global growth.<br /> Fears for a slowdown in the Chinese economy meanwhile hit the currencies of those countries with strong trade links&nbsp;with China, with the AUD and NZD being the most notable.</p> <p>Indeed, the AUD is considered to be a liquid proxy for investors seeking exposure to Chinese fortunes.&nbsp;</p> <p>A d&eacute;tente in the trade war could therefore be construed as being a positive for global growth and the AUD.</p> <blockquote> <p>&quot;Risk sentiment was boosted by a confluence of factors, including reports that US-China trade talks will resume next&nbsp;month. Other factors include a perceived reduction in no-deal Brexit risks and the withdrawal of the extradition bill in&nbsp;Hong Kong&quot;,&nbsp;says Hann-Ju Ho, an economist with Lloyds Bank.&nbsp;</p> </blockquote> <p>Following the news the GBP/AUD exchange rate was quoted at 1.7963, down 0.4%. The Aussie is meanwhile looking&nbsp;to notch up its third consecutive day of advances against the USD.</p> <blockquote> <p>&quot;News that senior Chinese and US officials will meet in early October to progress trade talks also supported AUD,&quot;&nbsp;says Kim Mundy, a strategist with Commonwealth Bank of Australia in Sydney. &quot;AUD will be subject to global factors&nbsp;such as news on the US-China trade tensions and US economic data, including US August non &ndash;farm payrolls data<br /> tomorrow.&quot;</p> </blockquote> <p>The Australian currency has also been supported by domestic data, released overnight.</p> <p>According to statistics, Australia&#39;s trade surplus eased by less than expected to $A 7.3 billion in July, consensus had&nbsp;been looking for a reading of $A 7.0 billion.</p> <blockquote> <p>&quot;Australia&#39;s July trade surplus is still very large and the second largest on record, led by a 1.0% rise in exports and a&nbsp;3.0% lift in imports,&quot;&nbsp;says Mundy.</p> </blockquote> <p>The trade surplus matters for currencies simply because it is through trade that a country earns foreign currency; if a&nbsp;country has a trade surplus it suggests it exports more than it imports, therefore demand for the domestic country&nbsp;outstrips supply of the currency.</p> <p>The data is therefore likely to provide a fundamental underpinning to a currency that has struggled thus far in 2019:&nbsp;AUD/USD is 3% down on the USD in 2019, and 6% down on the JPY and CAD.</p> <p>It has however recorded a 0.8% gain on GBP, but considering the Brexit uncertainty that has befallen the British&nbsp;currency, one might expect a stronger performance.</p> <p><strong>How long Australia&#39;s strong trade performance can continue providing its currency with a fundamental underpinning&nbsp;could be significant.</strong></p> <p>Hayden Dimes, an economist with ANZ says <strong>Australia might now have witnessed a peak in its trade surplus.</strong></p> <p>July has delivered another massive trade surplus, although coming off the revised record high of the previous month.</p> <p>&quot;The decline from the previous month largely reflected a pick-up in imports. Consumption imports were the main&nbsp;drivers of this rise, in particular car imports. Exports were only up a touch, with LNG and gold exports helping offset&nbsp;declines in iron ore and coal,&quot;&nbsp;says Dimes in a note to clients.</p> <p>ANZ economists believe Australia has likely reached the peak in trade surpluses.</p> <p>&quot;We still anticipate strong surpluses from here but expect their size to decline as key commodity prices, like iron ore,&nbsp;stabilise at lower, though still elevated, levels,&quot;&nbsp;says Dimes.</p> <p><u><strong>Today&rsquo;s Ranges</strong></u></p> <ul> <li>AUD/USD: 0.6810 - 0.6817</li> <li>AUD/EUR: 0.6171 - 0.6178</li> <li>AUD/GBP: 0.5522 - 0.5531</li> <li>AUD/CNY: 4.8677 - 4.8731</li> <li>AUD/INR: 48.983 &ndash; 49.050</li> </ul> <p><u><strong>Announcements to Watch:</strong></u></p> <p>Monday, September 2, 2019</p> <p>All Day &nbsp;&nbsp;Holiday Canada - Labour Day<br /> All Day &nbsp;&nbsp;Holiday United States - Labor Day<br /> All Day &nbsp;&nbsp;Holiday India - Ganesh Chaturthi<br /> 11:45 &nbsp;&nbsp;CNY &nbsp;&nbsp;Caixin Manufacturing PMI (Aug) 50.4 49.8 49.9<br /> 17:55 &nbsp;&nbsp;EUR &nbsp;&nbsp;German Manufacturing PMI (Aug) 43.5 43.6 43.6<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Manufacturing PMI (Aug) 47.4 48.4 48</p> <p>Tuesday, September 3, 2019</p> <p>11:30 &nbsp;&nbsp;AUD &nbsp;&nbsp;Retail Sales (MoM) (Jul) -0.10% 0.20% 0.40%<br /> 14:30 &nbsp;&nbsp;AUD &nbsp;&nbsp;RBA Interest Rate Decision (Sep) 1.00% 1.00% 1.00%<br /> 14:30 &nbsp;&nbsp;AUD &nbsp;&nbsp;RBA Rate Statement&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Construction PMI (Aug) 45 45.9 45.3</p> <p>Wednesday, September 4, 2019</p> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;ISM Manufacturing PMI (Aug) 49.1 51.1 51.2<br /> 11:30 &nbsp;&nbsp;AUD &nbsp;&nbsp;GDP (QoQ) (Q2) 0.50% 0.50% 0.50%<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Composite PMI (Aug) 50.2 &nbsp;&nbsp;50.7<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Services PMI (Aug) 50.6 51 51.4</p> <p>Thursday, September 5, 2019</p> <p>0:00 &nbsp;&nbsp;CAD &nbsp;&nbsp;BoC Interest Rate Decision 1.75% 1.75% 1.75%<br /> 22:15 &nbsp;&nbsp;USD &nbsp;&nbsp;ADP Nonfarm Employment Change (Aug) 195K 148K 142K</p> <p>Friday, September 6, 2019</p> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;ISM Non-Manufacturing PMI (Aug) 56.4 54 53.7<br /> 1:00 &nbsp;&nbsp;USD &nbsp;Crude Oil Inventories&nbsp;-4.771&nbsp;M -2.488M -10.027&nbsp;M<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Nonfarm Payrolls (Aug) &nbsp;&nbsp;160K 164K<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Unemployment Rate (Aug) &nbsp;&nbsp;3.70% 3.70%<br /> 22:30 &nbsp;&nbsp;CAD &nbsp;&nbsp;Employment Change (Aug) &nbsp;&nbsp;18.9K -24.2K</p> <p>Saturday, September 7, 2019</p> <p>0:00 &nbsp;&nbsp;CAD &nbsp;&nbsp;Ivey PMI (Aug) &nbsp;&nbsp;55.2 54.2<br /> 2:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Fed Chair Powell Speaks&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p>Monday, September 9, 2019</p> <p>9:50 &nbsp;&nbsp;JPY &nbsp;&nbsp;GDP (QoQ) (Q2) &nbsp;&nbsp;0.50% 0.40%<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;GDP (MoM) &nbsp;&nbsp;&nbsp;&nbsp;0.00%<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Manufacturing Production (MoM) (Jul) &nbsp;&nbsp;-0.10% -0.20%</p> <p>Tuesday, September 10, 2019</p> <p>All Day &nbsp;&nbsp;Holiday India - Moharram<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Average Earnings Index +Bonus (Jul) &nbsp;&nbsp;3.70% 3.70%<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Claimant Count Change (Aug) &nbsp;&nbsp;&nbsp;&nbsp;28.0K</p> <p>Wednesday, September 11, 2019</p> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;JOLTs Job Openings (Jul) &nbsp;&nbsp;&nbsp;&nbsp;7.348M<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;PPI (MoM) (Aug) &nbsp;&nbsp;0.10% 0.20%</p> <p>Thursday, September 12, 2019</p> <p>All Day &nbsp;&nbsp;Holiday South Korea - Chusok - Full Moon Festival<br /> 0:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Crude Oil Inventories &nbsp;&nbsp;&nbsp;&nbsp;-4.771M<br /> 21:45 &nbsp;&nbsp;EUR &nbsp;&nbsp;Deposit Facility Rate (Sep) &nbsp;&nbsp;-0.50% -0.40%<br /> 21:45 &nbsp;&nbsp;EUR &nbsp;&nbsp;ECB Monetary Policy Statement&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 21:45 &nbsp;&nbsp;EUR &nbsp;&nbsp;ECB Interest Rate Decision (Sep) &nbsp;&nbsp;0.00% 0.00%<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Core CPI (MoM) (Aug) &nbsp;&nbsp;0.20% 0.30%<br /> 22:30 &nbsp;&nbsp;EUR &nbsp;&nbsp;ECB Press Conference&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p>Friday, September 13, 2019</p> <p>All Day &nbsp;&nbsp;Holiday South Korea - Chusok - Full Moon Festival<br /> All Day &nbsp;&nbsp;Holiday China - Mid-Autumn Festival<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Core Retail Sales (MoM) (Aug) &nbsp;&nbsp;0.30% 1.00%<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Retail Sales (MoM) (Aug) &nbsp;&nbsp;0.30% 0.70%</p> <p>Monday, September 16, 2019</p> <p>All Day &nbsp;&nbsp;Holiday Japan - Respect for the Aged Day<br /> 12:00 &nbsp;&nbsp;CNY &nbsp;&nbsp;Industrial Production (YoY) (Aug) &nbsp;&nbsp;5.20% 4.80%</p> <p>Tuesday, September 17, 2019</p> <p>11:30 &nbsp;&nbsp;AUD &nbsp;&nbsp;RBA Meeting Minutes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 19:00 &nbsp;&nbsp;EUR &nbsp;&nbsp;German ZEW Economic Sentiment (Sep) &nbsp;&nbsp;-28.5 -44.1</p> <p>Wednesday, September 18, 2019</p> <p>18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;CPI (YoY) (Aug) &nbsp;&nbsp;1.90% 2.10%<br /> 19:00 &nbsp;&nbsp;EUR &nbsp;&nbsp;CPI (YoY) (Aug) &nbsp;&nbsp;1.00% 1.00%<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Building Permits (Aug) &nbsp;&nbsp;1.270M 1.317M<br /> 22:30 &nbsp;&nbsp;CAD &nbsp;&nbsp;Core CPI (MoM) (Aug) &nbsp;&nbsp;&nbsp;&nbsp;0.30%</p> <p>Thursday, September 19, 2019</p> <p>4:00 &nbsp;&nbsp;USD &nbsp;&nbsp;FOMC Economic Projections&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 4:00 &nbsp;&nbsp;USD &nbsp;&nbsp;FOMC Statement&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 4:00 &nbsp;&nbsp;USD &nbsp;&nbsp;Fed Interest Rate Decision &nbsp;&nbsp;&nbsp;&nbsp;2.25%<br /> 8:45 &nbsp;&nbsp;NZD &nbsp;&nbsp;GDP (QoQ) (Q2) &nbsp;&nbsp;0.60% 0.60%<br /> 11:30 &nbsp;&nbsp;AUD &nbsp;&nbsp;Employment Change (Aug) &nbsp;&nbsp;14.0K 41.1K<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Retail Sales (MoM) (Aug) &nbsp;&nbsp;-0.20% 0.20%<br /> 21:00 &nbsp;&nbsp;GBP &nbsp;&nbsp;BoE Interest Rate Decision (Sep) &nbsp;&nbsp;0.75% 0.75%<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Philadelphia Fed Manufacturing Index (Sep) &nbsp;&nbsp;10 16.8</p> <p>Friday, September 20, 2019</p> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;Existing Home Sales (Aug) &nbsp;&nbsp;5.39M 5.42M<br /> 22:30 &nbsp;&nbsp;CAD &nbsp;&nbsp;Core Retail Sales (MoM) (Jul) &nbsp;&nbsp;&nbsp;&nbsp;0.90%</p> <p>Monday, September 23, 2019</p> <p>All Day &nbsp;&nbsp;Holiday Japan - Autumn Equinox<br /> 17:30 &nbsp;&nbsp;EUR &nbsp;&nbsp;German Manufacturing PMI (Sep) &nbsp;&nbsp;43 43.5</p> <p>Tuesday, September 24, 2019</p> <p>All Day &nbsp;&nbsp;Holiday South Africa - Heritage Day<br /> 18:00 &nbsp;&nbsp;EUR &nbsp;&nbsp;German Ifo Business Climate Index (Sep) &nbsp;&nbsp;95.1 94.3<br /> 21:00 &nbsp;&nbsp;BRL &nbsp;&nbsp;BCB Copom Meeting Minutes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p>Wednesday, September 25, 2019</p> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;CB Consumer Confidence (Sep) &nbsp;&nbsp;&nbsp;&nbsp;135.1</p> <p>Thursday, September 26, 2019</p> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;New Home Sales (Aug) &nbsp;&nbsp;&nbsp;&nbsp;635K<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;GDP (QoQ) (Q2) &nbsp;&nbsp;3.10% 2.00%</p> <p>Friday, September 27, 2019</p> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;Pending Home Sales (MoM) (Aug) &nbsp;&nbsp;&nbsp;&nbsp;-2.50%</p> <p><span style="font-size:9px"><em>Source:&nbsp;</em></span><span style="font-size:9px"><em> /&nbsp;</em></span></p>

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