Market Talk: FXWW

From the FXWW Chatroom: – The NZD/AUD widow-maker showed its true colours yesterday as weak second tier Australian data drove a 90pt squeeze (top-to-bottom) indicative of a short positioned market.
– Aussie Q3 Wage Data lagged at 0.5% q/q (exp +0.7%q/q) and issuing concerns that inflationary pressures do not exist, contrary to the view that NZ wage growth will establish via Labour policy.

– The USD had been biased to weaken into their much anticipated October CPI numbers, but with core prices exceeding expectations it was enough to turn the Dollars fortunes.

– NZD poked its nose above 69 cents for a brief while, before better USD buying returned the kiwi sub 69 cents.
– U.S Oct CPI 0.1% (mkt: 0.1%; last: 0.5%) with core inflation at 0.2% (mkt: 0.2%; last: 0.1%). On an annual basis headline inflation was at 2.0%, from 2.2% with core lifting to 1.8%, from 1.7%.

– The Fed will continue to wrestle with a lack of intense inflationary pressures, however they are likely to take solace in the lift in core inflation. With growth firm and labour market tightening, the Fed is odds-on a Dec hike
– The UK unemployment rate remained stable in Q3, however there was a drop of 14k (mkt: +52k) in employment compared to Q2. The participation rate ticked downwards, leading to the stable unemployment rate.
- U.S Yields managed a small bounce following the result, but with other matters at play are ending the session lower, U.S 10yr -3bps at 2.34%

– Global Equities continued their decline and volatility increased again as this stealthy risk-aversion continues to track. VIX +10% o/n. See ANZ’s comments below
- Ahead Today: Locally, ANZ-Roy Morgan Consumer Confidence (Nov) at 1pm, focus will be whether consumers have remained upbeat despite housing headwinds and heightened political uncertainty. Australian labour market figures will also be a focus (1.30pm), where our Australian colleagues are looking for a 10k lift (consensus +18.8K) in employment.

– The Kiwi filled a minor gap back to 6920 overnight and saw NZDAUD towards 91 cents following the weak Aus data, But sellers were evident on the rally and has kept a lid on top-side moves. FIFX remains of the opinion that NZD will struggle in tow with the NZ economy over coming months and favour selling rallies looking for fresh 2017 lows in due course.. NZD/AUD needs to get through the lottery of the Aussie labour data today, but any rally would be viewed as a better medium term entry point.
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