In Monday’s Asia-Pacific Outlook, we can anticipate a positive start for the region’s markets following a robust rally on Wall Street. Major indexes displayed a strong performance on Friday, with the Dow Jones Industrial Average closing the week with a 2.47% surge. Moreover, the US Dollar experienced a pullback against its major counterparts.
Notably, the Federal Reserve is currently in a blackout period until the November 02 FOMC meeting, where an anticipated 75 basis point hike in the benchmark rate is expected, according to overnight index swaps.
Bank of Canada and European Central Bank Rate Decisions:
This week, we anticipate rate decisions from both the Bank of Canada and the European Central Bank. These central banks appear ready to implement 75 basis point rate hikes. Consequently, the Euro and Canadian Dollar showcased strength against the USD. On Friday, USD/CAD experienced a decline of 0.91%, while EUR/USD demonstrated a rise of 0.78%.
Additionally, the drop in European natural gas prices has contributed to easing concerns regarding an energy crisis. Specifically, the Dutch TTF benchmark has fallen approximately 40% since the beginning of the month. Similarly, US prices have experienced a 26% decrease during the same period.
China’s Q3 GDP Growth and Economic Data:
On Monday, we anticipate the release of China’s third-quarter gross domestic product (GDP) growth, along with industrial production, retail sales, and trade balance data for September. These data points collectively provide a comprehensive view of the world’s second-largest economy. As per a Bloomberg survey, China’s Q3 GDP growth rate is expected to be reported at 3.4% compared to the previous year.
Chinese Yuan’s Performance and Intervention Measures:
Despite measures taken to curb its decline, the Chinese Yuan experienced a decrease against the Dollar last week. Reuters reported, citing sources, that state banks sold off USDs in the onshore market to defend the 7.25 level. While this level held, sustained defense is unlikely unless the Greenback weakens on its own merits.
In contrast, the Japanese Yen witnessed a surge on Friday, likely attributed to intervention by the Bank of Japan. This stance is supported by Japan’s Nikkei news on Saturday morning.
Australian Dollar Technical Outlook:
Turning our attention to the Australian Dollar (AUD), the currency has managed to surpass a resistance level that previously posed a challenge over the past few weeks. This breakthrough indicates the potential for a longer-term reversal, though it is crucial for the AUD/USD pair to overcome the October high at 0.6547 before a more bullish narrative can be established.
In conclusion, Asia-Pacific markets are poised for a positive start after a strong Wall Street performance. The upcoming rate decisions from the Bank of Canada and the European Central Bank will further influence market dynamics. Meanwhile, the release of China’s Q3 GDP growth and economic data will provide valuable insights into the global economy.
As market participants closely monitor the Chinese Yuan’s performance and intervention measures, the Australian Dollar’s technical outlook shows signs of a potential reversal.