ASIA WRAP: AUD Slips On Employment


*AUDUSD trades below 0.68 on fragile employment picture
*ASX breaches 6,700 as October rate cut gets baked in
*USDJPY bears take control following BoJ hold



FX:

  • AUDUSD sold-off -0.6%. Jobs data saw higher employment (34.7k vs 15.2k consensus), higher participation rates (66.2% vs 66.1%e), though importantly, an increase in the unemployment rate to 5.3% and less FT employment (-15.5k). The RBA are now more likely to cut, 67% probability priced in, in October given the fragile employment picture. 
  • USDJPY rallied post the Fed's hawkish cut but pulled back -0.5% below 108 on a BoJ hold. The BoJ kept short-term and 10y rates unchanged, and suggested a deeper examination of economic developments at the next meeting. I think, along with most, traders were a bit surprised by the bearish move given there wasn't anything particularly hawkish by the BoJ's press conference. 
  • Elsewhere across the G10 complex, NZDUSD was lower -0.2% given its close association with AUD, while EURUSD, GBPUSD and USDCAD were slightly better against the dollar in Asia. 
  • USDNOK and USDCHF have central bank announcements coming up in the next hour. 

Equities:

  • Equities all round were a little shaky post the Fed's hawkish, however, ASX and Nikkei have managed to hold up. The Fed median dot plot is now pricing no further cuts in 2019 and 2020, with hikes set up for 2021 and 2022. 
  • ASX was led higher by its futures, gaining 0.5% to breach 6,700 and finishing at 6,717.5. Flows into the index come off the back of lower yields in the front end of the curve as markets priced in a higher chance of a 25bps rate cut. 
  • Big movers across the ASX were seen in industrials and construction materials - CIMIC Group (+4%), Brickworks (+6.4%) and Reliance Worldwide (+3.6%).
  • Nikkei futures finished +0.3% higher while Hang Seng futures fell -1.3%. 

Fixed Income:

  • AUS 10y yields dropped -9bps as markets baked in an October rate cut.
  • US 10y yields edged higher +5bps across the day. 

Commodities:

  • Commodities were broadly lower on the session as US yields rallied post Fed. 
  • Gold futures are down -0.8%, while silver similarly tumbled -0.7%. 
  • Iron ore futures are off -2.3% on weaker AUDUSD. 
  • Brent crude futures finished fairly flat at 63.56.



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