APAC Morning Update - 09/03/21

The NZDUSD opens at 0.7136 and the AUDUSD opens at 0.7661.

There is a lot going on in the world, so probably a good chance for a recap. Biden’s 1.9 Trillion Stimulus only has to go through the Democratic House overnight, then get signed off by himself, both of which you would expect to happen. This is pretty positive for growth and the recovery etc., so has created somewhat of a positive mood in markets. Now where things get interesting is that hopes of a US recovery have driven bond yields higher globally. Problem is a lot of countries do not feel ready for yields to increase, as they want to remain as stimulatory as possible, so as to really imbed the recovery in. The US, looking at circa 6% growth rate, is a lot more happy letting it run. So you are starting to see divergence in the currencies, as the yield difference is either narrowing, as is the case with Australia, or increasing, as is the case with Japan. Stocks in the US are doing well, albeit with some rotation out of the really high flying tech stocks, but stocks in a place like Germany are doing very well, as they are benefiting from the stimulus, but also getting buoyed by the very dovish local central banks.

So where does this leave us? Well the trend in the stronger USD looks set to continue, and if inflation comes in higher, then that is only really going to add to all of the above, at least in terms of the USD. The really big thing to look out for is the Fed. In a word they could massively dent the whole argument by saying they are worried about bond yields. Even if they do nothing else, this would walk back a lot of the markets current thinking. On the flipside, if they keep saying nothing, or say they are happy, this will automatically strengthen the USD. So the Fed is well worth watching, as whatever they do at the next meeting should heavily move the market.

Global equity markets are generally up: Dow +1.4%, S&P 500 +0.1%, FTSE +1.3%, DAX +3.3%, CAC +2.1%, Nikkei -0.4%, Shanghai -2.3%.

Gold prices are off -1.1%, currently trading at $1,680 an ounce. WTI Crude Oil prices are off from the highs, down 3.9% trading at $65.0 a barrel

AUDUSD 0.7661 -0.4%
AUDEUR 0.6462 0.1%
AUDGBP 0.5538 -0.3%
AUDJPY 83.42 0.1%
AUDNZD 1.0739 0.1%
GBPAUD 1.8055 0.3%

NZDUSD 0.7136 -0.3%
NZDEUR 0.6018 0.1%
NZDGBP 0.5157 -0.3%
NZDJPY 77.68 0.1%
NZDAUD 0.9313 -0.1%
NZDCAD 0.9030 -0.4%
GBPNZD 1.9391 0.3%