Analysts at Westpac offered their outlook for the antipodeans and rates.
"AUD/NZD 1 day: Probably consolidates in a 1.0900-1.1000 range.
AUD/NZD 1-3 month: September’s downward correction should give way to a resumption of the trend rise which started in June, and test 1.12, contingent on AU commodity prices recovering and risk sentiment remaining elevated.
AU swap yields 1 day: The 3yr should open around 2.14%, the 10yr around 2.90%.
AU swap yields 1-3 month: Our RBA outlook (on hold throughout 2018) is anchoring short-maturity interest rates and should keep 3yr swap rates in a 1.80% to 2.30% range, as long as core inflation remains below 2%. Longer maturity rates will largely follow US rates.
NZ swap yields 1 day: NZ 2yr swap rates should open up 1bp at 2.21%, the 10yr unchanged at 3.20%, in response to AU and US interest rates movement overnight.
NZ swap yields 1-3 month: Our RBNZ outlook (on hold throughout 2018) is anchoring short-maturity interest rates and should keep 2yr swap rates in a 2.10% to 2.50% range, as long as inflation remains below 2%. Longer maturity rates will largely follow US rates."
Forex today was driven by a stronger dollar again with some of the US rates higher while the STIR curve steepened. The US dollar index is 0.2% higher on the day.
The 2yr yields moved the most, rising from 1.53% to 1.56%. The US 10yr treasury yields moved between 2.30% and 2.33% to close unchanged at 2.30%. The market is pricing in a Fed hike for December and the chances of a more hawkish Fed Chair. The Fed fund futures yields firming and the chance of a December rate hike now at 92%.
For data, the import/export prices were both higher than expected. US industrial production rose in line by 0.3% for September. Homebuilder sentiment climbed from 64 to 68 against 64 expected.
Ears are out for Fed speak this week, while Yellen's comments from Sunday are still a factor. On Tuesday, FOMC member Harker argued that the labour market had little slack nationally but there were soft patches regionally.
While the dollar firmed across the board, carving out a bullish H&S across most major's the euro was also weighed by European yields that dropped again after the German ZEW miss. EUR fell from 1.1780 to 1.1736 before rebounding to 1.1775 late in NY. Sterling was knocked by more Brexit woes. GBP/USD fell from 1.3287 to 1.3154 the low before recovering to 1.3180 the close. USD/JPY rose from 112.10 to 112.48 and remains under pressure below the 113 handle, closing at 112.15 with eyes on N.Korean headlines. The higher beta currencies are heavy on the back of higher US rates, but managed to correct early in NY. The Kiwi dropped to 0.7147 before retracing to 0.7173, but was not kocked off its perch due to the disappointing GDT dairy auction. AUD/USD moved back from 0.7818 lows to 0.7849. Copper consolidated after yesterday's spike on a better macro outlook, while Gold dropped further on the back of a firmer greenback.
Key events in Asia
Analysts at Westpac noted the forthcoming events for the Asian session:
"Australia: Sep Westpac-MI Leading Index was last at -0.19%. The index has swung sharply in recent months from well above trend to back below trend.
China: The 19th National Congress begins where five of the seven Politburo Standing Committee members are scheduled to retire. Key agenda items are President Xi’s political power and development (Belt & Road Initiative)."
Key notes from US session
Data source: FX Street
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