Tuesday 2nd December: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei up 0.20 %, Shanghai Composite gained 0.80 %, Hang Seng rose 0.70 %, ASX rallied 1.40 %
• Commodities: Gold at $1203 (-1.20 %), Silver at $16.33 (-2.15 %), Crude Oil at $68.51 (-0.70 %)
• Rates: US 10 year yield at 2.234, UK 10 year yield at 1.913, German 10 year yield at 0.744

News & Data:

• Reserve Bank of Australia leaves the main rate unchanged at 2.50 %
• RBA: Monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with target
• RBA: AUD remains above estimates of fundamental value particularly given further declines in key commodity prices (previously said AUD remains high by historical standards)
• RBA: Inflation is expected to be consistent with the 2-3% target over the next two years
• RBA: Recent data on prices confirmed that inflation is running between 2-3%, as expected
• RBA: China’s growth has generally been in line with policymakers’ objectives; weakening property markets there present a challenge in the near term
• RBA: Most data are consistent with moderate growth in the economy
• Australia Building Approvals 11.4 %, Expected: 5.2 %, Previous: -11.2 %
• Australia Current Account -A$12.5bln, Expected: -A$13.5bln, Previous: A$-13.9bln
• New Zealand ANZ Commodity Price Index -1.6 %, Previous: -0.8 %

Markets Update:

The RBA decided to keep the main rate unchanged at 2.50 %, as expected, and maintained its neutral stance. AUD/USD rallied to 0.8525 as specs who were expecting more dovish remarks covered their short positions. The pair is struggling with the 0.8530 resistance area and there is talk of offers resting in front of the 0.8550 level. To the downside, intraday support noted at 0.8475 and then 0.8415. Keep in mind that there are A$2.6 billion worth of option expiries for today’s NY cut at 0.85, which might keep price close.

EUR/USD is back in the middle of the 1.2420-1.2510 range and flows were light in Asia. Selling interest remains decent above the big figure, while to the downside, decent support noted pre-1.24. Unless we see any data surprises, the pair might very well be stuck in that range until the ECB meeting on Thursday. Meanwhile, GBP/USD had a decent rally yesterday and formed a triple bottom at 1.5585. However, the pair failed to post a daily close above 1.5735, so keep an eye on the 1.5675/80 intraday support area to see if momentum can be sustained. To the topside, resistance seen at 1.5762 and then 1.5820.

Upcoming Events:

• 09:30 GMT – UK Construction PMI (61.2)
• 13:30 GMT – Fed Chair Yellen speaks

Source:: Tuesday 2nd December: European Open Briefing