Antipodean currencies lower on APEC’s summit debacle

Summary:

• APEC summit ended up with no joint communique for the first time ever

• Antipodean currencies take a dive, US dollar marginally higher licking its Friday’s wounds

• Theresa May to appeal to business leader seeking support for her Brexit plan

APEC’s summit ends with nothing

The new trading week has begun with some falls seen in Antipodean currencies which could be a result of the Asia-Pacific Economic Cooperation (APEC) summit taking place in Papua New Guinea over the weekend. The event failed, for the first time ever, to produce a joint statement because of tensions between the US and China over trade as well as security issues. Let’s add that the APEC’s major goal is to promote free trade throughout the Asia-Pacific region. It has 21 member countries including those in the region and others such as the United States, Mexico, Russia or Canada. Scott Morrison, Australia’s Prime Minister, said after the summit that the ongoing trade battle between Washington and Beijing indisputably threatens economic growth in the region. During his press conference on Monday he focused on upbeat outcomes adding that the two feuding countries will discuss later this month when they meet at the G20 summit in Argentina. In response to this fiasco Antipodean currencies are giving back their gains in early European trading recording by far the poorest performance in the entire G10 basket. At the time of writing the NZ dollar is declining 0.45% while the Australian dollar is dropping almost 0.3%. Let’s also add that the US dollar is trading flat after experiencing heavy falls in late trading on Friday. Then, the US 10Y yield slumped from 3.12% to below 3.06% and it is trading around this level in the morning.

Even as both AUD and NZD are clearly lower this morning, they do not seem to be doomed to failure when we take a look at some charts. For example, the AUDUSD managed to break above the upper limit of the descending channel some time ago. Since then, it has tested this level and resumed rises. It appears to bode well for the pair at least in the short-term. Note that bulls may attempt to test the area in the vicinity of 0.7500. Source: xStation5

Markets calm

Looking elsewhere we cannot find too many interesting moves this morning. Stocks in Asian have been mixed so far with Chinese indices pushing slightly higher and the Australian benchmark falling 0.6%. At the same time the Japanese NIKKEI (JAP225) closed 0.65% higher. In terms of macroeconomic releases we were offered the trade data from Japan producing an unexpected deficit in October of 449.3 billion JPY compared with the consensus of a 70 billion JPY deficit. The prime culprit were imports rising as much as 19.9% YoY almost tripling its result reached in September. At the same time exports grew 8.2% YoY, slightly less than expected. The detailed data showed that exports to the US increased 11.6% YoY, to China 9% YoY and to the EU 7.7% YoY. On the EM FX front we may notice rather minor moves with the South African rand falling 0.3% and the Turkish lira moving 0.25% lower.

The Japanese NIKKEI (JAP225) could look encouragingly from a technical point of view. The index managed to stay above its crucial uptrend (even as this line was broken the move was not confirmed). Therefore, some might hope to see the price again in the neighborhood of 23000 points where the first more notable resistance falls. Source: xStation5

Pound stays flat as May seeks support for her plan

The British pound had a remarkably hectic last week being steered by incoming Brexit revelations. Talks about a possible May’s leadership challenge are still present but UK Prime Minister does not seem to care about it. She is expected to appeal to business leaders on Monday in order to help deliver her Brexit plan. Meanwhile even some of her lawmakers are discussing a possibility to rewrite the text of the announced Brexit draft. The pound is treading water this morning but it still remains within a broader range between 1.27 and 1.33.

In the other news:

• New Zealand services PMI grew 55.4 in October from 53.9 previously

• Italy’s Deputy PM di Maio reiterated the country will stay with its reforms planned in the next year’s budget and added that Italy is ready to make major cuts on wasteful spending

• ECB’s Villeroy said the ECB could consider new TLTROs if needed, the QE expected to be wound down in December