Event risks and US re-cap - Westpac

Sean Callow, analyst at Westpac explained that risk appetite remained elevated, including record highs in the S&P 500 and NASDAQ, though they were only a fraction higher on the day. European equity gains were more eye-catching.

Key Quotes:

"There was little data of note in the US, as usual in the days following the employment report.

Amid the broad USD decline, AUD/USD squeezed as high as 0.7687, its strongest point since the RBA’s 3 May rate cut, which sparked heavy losses. EUR/USD jumped from 1.1075 in the London morning to a high of 1.1123 around the same time AUD was bouncing. USD/JPY’s decline was steadier, from 102.50 late Sydney to 101.80/90 late NY.

NZD/USD also gained over the day, touching 0.7180. This left AUD/NZD about flat in the low 1.07s after a choppy day. The kiwi will be on edge today ahead of the early Thursday RBNZ decision (7am AEST). Westpac agrees with consensus for -25bp to 2.00% but there has been a little chatter about -50bp. There is also uncertainty over the tone of the statement, so kiwi volatility seems likely.

US 10yr treasury yields fell about 4bp over the day, to 1.55%. The Bank of England’s gilt purchase program only started on Monday and has already hit rough waters, with investors not willing to sell all the GBP1.17bn in long-dated bonds that the BoE wanted to buy.

Event risk: At 10:30am AEST we see the August survey of Australian consumer sentiment, which was conducted last week. The July reading was 99.1, with the -3% fall not a bad outcome given the Brexit vote and Australia’s inconclusive federal election. An hour later we see Australia’s June housing finance approvals data. Home loans dipped in May, and approvals over the year are broadly flat. June is expected to be more positive: we look for +3%. RBA governor Stevens speaks in Sydney at 1:05pm AEST, at a luncheon which will include Q&A."