Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
S&P 500 Relies on Tech for Growth in Q4 2024, Says Barclays 
Trump’s "Shock and Awe" Agenda: Executive Orders from Day One 
Stock Futures Dip as Investors Await Key Payrolls Data 
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
Geopolitical Shocks That Could Reshape Financial Markets in 2025 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
2025 Market Outlook: Key January Events to Watch 
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
Urban studies: Doing research when every city is different 
Wall Street Analysts Weigh in on Latest NFP Data 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
Fed May Resume Rate Hikes: BofA Analysts Outline Key Scenarios 
FX markets were in a risk-averse mood, concerned the US-China trade negotiations may have stalled.
Australian 3yr government bond-yields fell from 0.73% to 0.71%, 10yr yields between 1.09% to 1.05% (a one-month low). Markets are pricing a 25% chance of easing at the Dec RBA meeting, and a terminal rate of 0.46% (RBA cash rate currently at 0.75%).
The supply interruptions could limit the recent fall in iron ore prices, coal prices remain near 3-year lows and we expect the US and China to reach only a very limited trade agreement in coming weeks. The Antipodeans are exposed to China, locally, both AUD and NZD sit in the midst of an ongoing central bank easing cycle, while growth and inflation outcomes are still trending soft. Over the medium term, these should be exacerbated by ongoing external dynamics from moderating China growth, trade war spill-over and poor historical performance during Fed easing cycles. Each are also subject to important structural adjustments taking place over the medium- term.
Moreover, the RBA does not want to encourage an A$ revival and pricing for another rate cut has been unwound too far, as we still expect a rate cut in Feb 2020.
The underperformer Aussie dollar against Japanese yen fell from 75.673 to the current 73.785 levels, we could foresee further downtrend in the days to come.
While AUDNZD retains downside momentum, next target 1.0540.
AUDNZD, in the medium perspective, multi-month, we target 1.10, with fair value much higher at 1.12 (AUDNZD’s extreme undervaluation may be explained by the global trade wars which have hurt the AUD more than the NZD).
Trade tips:
Contemplating above factors, buy a 3m/1m AUDJPY put spread (74.500/72.007) (spot ref: 73.785 level); sell a 3m 1.1075 AUDNZD put (spot ref: 1.0584).
Alternatively, as we could foresee further downtrend of AUDJPY in the months to come, on hedging grounds we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards below 70.500 levels in the medium run. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position (spot reference: 73.785 level). Courtesy: Westpac
