- The USD is weaker across the board, as US election uncertainty rises ahead of Tuesday. Weekend polling suggests a tight race, particularly in key swing states.
- US Tsy futures rose at the open, but there has been no follow through. Japan markets are out today, hence we have had no cash Tsy trading.
- Oil prices are around 1.5% higher today supported by OPEC’s decision to delay its unwinding of output reductions by a month to the end of December as well as threatening comments from Iran.
- Later US September orders and European October manufacturing PMIs print. ECB’s Elderson, McCaul and Buch make appearances and the eurogroup meeting also takes place. Key events for crude though are Tuesday’s US election and this week’s meeting of China’s legislature standing committee, which may result in further stimulus.
MARKETS
- With Japan out for Culture Day, there was no cash trading in the Asian time zone though futures were open.
- Futures had opened up stronger this morning with the Dec24 10yr note up +14 at the Tokyo open reacting to the volatility in election opinion polls in the US, before settling to be +10 by mid-afternoon.
- Tonight, the markets will have the dual challenges of the pulsating news on the election and a raft of data including Factory Orders and Durable Goods.
POLITICAL RISK: US Election Polls Tighten, Vote Even Closer
Markets will be focussed this week on Tuesday’s US election with results coming out on Wednesday Australian time. The race has been close with seven swings states likely to determine who wins the White House. Over the weekend, the national average polls tightened and those states remain on a knife edge. The narrowing of the surveys has resulted in the pullback of the Trump trade at the start of today with AUDUSD jumping 0.7% to 0.6606.
- The Economist’s probability of who will win the Presidency has narrowed to 51% for the Republican’s Trump and 49% for the Democrat’s Harris. Last Monday this was 55% to 45%. The Economist estimates that would give Trump 270 electoral votes, exactly what is needed, and Harris 268. Extremely close.
- In terms of swing states, The Economist has Harris a point ahead in Michigan and Wisconsin, worth 15 and 10 votes respectively. Trump is slightly ahead in Pennsylvania and Nevada, worth 19 and 6 votes, but they are essentially neck-and-neck. Trump is a point ahead in Georgia (16 votes) and North Carolina (16) and 2 points in Arizona (11).
- Wikipedia’s national poll average has Harris 0.8pp ahead. In terms of the states, the last 3 polls have Arizona leaning Republican but all the others are counted as “tossup”, thus enforcing that the election remains very tight.
- The NY Times/Siena College poll also has all seven swings states tight with Harris marginally ahead in North Carolina, Nevada and Wisconsin and Trump in Arizona, while Michigan, Georgia and Pennsylvania (Harris was ahead) are too close to call. The survey also reported Harris was ahead by 8pp with the 40% of those who had already voted.
- The latest Des Moines Register poll is showing Harris on 47% ahead of Trump on 44% in Republican held Iowa, according to Reuters, but it is within the error band and other polls indicate that it is “likely” to stay Republican.
BOJ: MNI BoJ Review – October 2024: Increasingly Ready For Next Hike
EXECUTIVE SUMMARY:
- The Bank of Japan (BoJ) kept its policy rate unchanged at 0.25%, as widely anticipated. Like the unanimous September decision, today’s 9-0 vote indicated a lack of contention, contrasting with the tighter 7-2 vote to raise rates in July. Of the 53 analysts surveyed by Bloomberg, all but one expected the BoJ to maintain its policy, a view that was fully aligned with market pricing.
- The BoJ’s Outlook Report reflected only minor forecast adjustments, suggesting little change in the central bank’s economic stance. The BoJ also highlighted the importance of monitoring global economic conditions, particularly the US economy, and developments in financial markets—a key factor in the decision to hold rates steady.
- Governor Ueda reiterated the BoJ’s commitment to normalising policy if economic conditions align with projections. He emphasised that future rate hikes will be data-dependent, with timing contingent on confidence in the Bank’s growth and inflation outlook.
- At the press conference, Ueda downplayed the impact of Japanese political developments on BoJ policy.
- Most analysts, including us, anticipate a 25bps rate hike to 0.50% in January. However, an earlier move in December remains a possibility if the yen weakens further amid diminishing expectations for Federal Reserve rate cuts and a stronger US dollar.
FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK:
AUSSIE BONDS: Flat Ahead Of Busy Week: RBA & FOMC Decisions & US Election
ACGBs (YM flat & XM flat) sit unchanged after dealing in narrow ranges in today’s session. There were no cash US tsy dealings in today’s Asia-Pac session with Japan out for a public holiday. US tsy futures are however stronger, with TYZ4 at 110-12+, +0-11 compared to NY closing levels.
- Looking ahead, the US Presidential Election takes place on Tuesday, followed by an unusual Thursday FOMC decision amid an otherwise light US economic calendar.
- Today’s domestic data drop of MI Inflation and ANZ-Indeed Job Advertisements failed to be market-moving, as expected.
- Tomorrow, the RBA will announce its policy decision. While the cash rate is unanimously expected to remain at 4.35%, the meeting statement will be closely analysed for any shifts in tone.
- Cash ACGBs are flat to 2bps cheaper.
- Swap rates are -1bp lower to 2bps higher, with the 3s10s curve steeper.
- The bills strip has bull-flattened, with pricing flat to +3.
- RBA-dated OIS pricing has softened by 2-3bps across the 2025 meetings today. These adjustments bring the pricing for 2025 meetings to just 1-5bps above pre-CPI levels from last Wednesday. Despite this, the market continues to price in a cumulative 3bps of easing by year-end, with a 7% probability assigned to a 25bp rate cut at tomorrow’s meeting.
RBA: MNI RBA Preview-November 2024: On Hold But Still "Vigilant"?
- The RBA is unanimously expected to leave rates unchanged at 4.35% at its meeting on November 5, which will include updated staff forecasts.
- With an unchanged outcome widely projected, the statement will be scrutinised for any changes in thinking. We expect the Board to reiterate that it isn't “ruling anything in or out” but it may tone down or even remove that it is “vigilant to upside risks to inflation”.
- Q4 2024 inflation may be revised lower but the outer years are likely to be little changed. There could be a near-term downward revision to the unemployment rate but also to growth.
- Not only is the RBA likely to be on hold on November 5 but it will probably again state its data dependency and signal that it is too early to discuss rate cuts let alone ease before year end. Underlying inflation remains above the top of the target band and gradual easing of the labour market appears to have stalled.
- See full preview here.
STIR: RBA OIS Softer Today But Little Chance Of Action Tomorrow
STIR: RBA Dated OIS Softer Today But Little Chance Of Action Tomorrow
RBA-dated OIS pricing has softened by 2-3bps across the 2025 meetings today.
- Today’s adjustments bring the pricing for 2025 meetings to just 1-5bps above pre-CPI levels from last Wednesday.
- Despite this, the market continues to price in a cumulative 3bps of easing by year-end, with a 7% probability assigned to a 25bp rate cut at tomorrow’s meeting.
Figure 1: RBA-Dated OIS – Today Vs. Pre-CPI
Source: MNI – Market News / Bloomberg
NZGBS: Little Changed, Subdued Start To A Busy Week In The US
NZGBs closed little changed after dealing in narrow ranges in today’s session. There were no cash US tsy dealings in today’s Asia-Pac session with Japan out for a public holiday. US tsy futures are however stronger, with TYZ4 at 110-13, +0-12 compared to NY closing levels.
- Swap rates closed 1-3bps lower, with the 2s10s curve steeper and implied swap spreads tighter.
- RBNZ dated OIS pricing closed flat to 2bps softer across meetings. A cumulative 97bps of easing is priced by February, with 55bps by year-end.
- The local calendar was quiet today, with attention turning to tomorrow’s release of the RBNZ Financial Stability Report.
- Also tomorrow, the RBA will announce its policy decision. While the cash rate is unanimously expected to remain at 4.35%, the meeting statement will be closely analysed for any shifts in tone. A dovish interpretation may arise if the forecasts suggest that underlying inflation could hit the target sooner than the current expectation of Q4 2025.
- Looking further ahead, the U.S. Presidential Election takes place on Tuesday, followed by an unusual Thursday FOMC decision amid an otherwise light U.S. economic calendar.
FOREX: USD Softens With Lower Trump Election Odds
The USD BBDXY and DXY indices are both off around 0.60% in the first part of Monday dealings. The BBDXY index is around 1256, still above the 20-day EMA support zone (near 1253.4). We haven't been sub this support point since the start of October.
- Weekend polling showing the tightness of the US Presidential race, particularly in the swing states, has trimmed Trump's election odds. In turn this has reduced reflation theme appeal and weighed on USD appetite.
- Yen was the strongest performer at one stage. but AUD, NZD, NOK and SEK have all largely caught up now. USD/JPY got to lows of 151.60, but now sits slightly higher, last 151.80/85. oct 25 lows at 151.46 remain intact for now.
- US Tsy futures rallied at the open (there has been no cash Tsy trading today due to a Japan holiday), but follow through hasn't transpired. We were last comfortably within Friday ranges.
- US equity futures were weaker at the open but sit back in positive territory now. Bitcoin has also been supported on dips, despite being another favoured Trump related trade, although Bitcoin is comfortably off recent highs.
- AUD/USD has rallied b around 0.75%, last in the 0.6605/10 region, while NZD/USD is up by close to same amount, last near 0.6010.
- For the A$ the Sep 11 low at 0.6622 is a near term upside resistance point.
- Oil prices are up, supported by OPEC’s decision to delay its unwinding of output reductions by a month to the end of December as well as threatening comments from Iran.
- Later US September orders and European October manufacturing PMIs print. ECB’s Elderson, McCaul and Buch make appearances and the eurogroup meeting also takes place. Key events for crude though are Tuesday’s US election and this week’s meeting of China’s legislature standing committee, which may result in further stimulus.
FOREX: Positioning Adjustments Still Favored USD Towards End October
- Last week's CFTC positioning update (up to Oct 29th) still showed a strong bias towards the USD. Across leveraged funds and asset managers we saw a further 90k contracts shift in favour of the dollar. This was the third straight week of strong flows into the USD.
- By currency we saw leveraged funds shift back into a net short for JPY and add to shorts against the EUR and CAD.
- AUD and NZD saw a modest uptick from leveraged funds, but this was more than offset by asset managers adding to shorts for both currencies.
- Indeed, asset managers were net sellers of all currencies against the USD last week, see the table below.
- Price action so far this week has been heavily skewed against the USD, as election uncertainty rises. Weekend opinion polls pointed to a very close Presidential race.
- This is likely seeing some USD long exposure trimmed, particularly given the build up seen in recent weeks ( nearly 380k contracts for the USD since mid Oct).
Table 1: CFTC Positioning By Currency/By Type
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | -10288 | -3462 | -13438 | -32924 |
| EUR | -20056 | -30212 | -1071 | 192049 |
| GBP | 871 | 56721 | -11599 | -18928 |
| AUD | 3184 | 19061 | -11339 | -24102 |
| NZD | 2822 | 12177 | -6035 | -11875 |
| CAD | -15910 | -80811 | -4942 | -136111 |
| CHF | 1154 | -7013 | -3235 | -28296 |
| MXN | 5659 | -3141 | -5967 | 38060 |
Source: CFTC/MNI - Market News/Bloomberg
ASIA STOCKS: Markets Positive Despite US Uncertainty.
- Asian equity markets were generally stronger today, despite the uncertainty emanating from the US election.
- China markets were positive across the board with the CSI 300 up +0.70%, Shanghai Comp +0.50% and Shenzhen Comp +1.40%. Over the weekend Chinese authorities issued changes to their foreign investment rules, allowing lower threshold for investors. This is view largely as a positive for the market at a time when Goldman Sach’s Prime Broker data shows hedge funds reducing their allocations to China.
- In Korea, news that the Opposition Party will support the proposed drop in CGT for retail equity investors was greeted positively. The KOSPI was strong throughout the day up +1.45%.
- Indonesia was the underperformer as the volatility in the currency and bond markets weigh heavy on the Jakarta Comp, down -0.90%.
- In Malaysia the FTSE Malay has put in a strong start to the week up +0.50% ahead of this week’s Central Bank’s meeting. Market expects the BNM to be on hold as the country’s data has been strong and the economic outlook remains robust.
- The Philippines market was weaker today following weaker than expected data. The S&P PMI Manufacturing moderated to 52.9 for October, down from 53.7 in September.
ASIA STOCKS: Asia Outflows Continue Ahead of the US Election.
Outflows across the board in Asia to end last week. Taiwan saw the largest outflow of $693m, which adds to the very large outflow at the end of last month.
• South Korea: Recorded outflows of -$54m Friday, bringing the 5-day total to -$921. YTD flows remain positive at +$7.104b. The 5-day average is -$184m, worse than the 20-day average of -$161m and the 100-day average of -$64m.
• Taiwan: Experienced outflows of -$693m Friday, totaling -$875m over the past 5 days. YTD flows are negative at -$11,559bn. The 5-day average is -$175m, worse than the 20-day average of +$22m and the 100-day average of -$138m.
• Indonesia: Posted outflows of -$7m Friday, bringing the 5-day total to -$169m. YTD flows remain positive at +$2.523b. The 5-day average is -$34m, slightly worse than the 20-day average of -$31m with the 100-day average of +$31m.
• Thailand: Recorded outflows of -$72m Friday, totaling -$285m over the past 5 days. YTD flows are negative at -$3.498b. The 5-day average is -$57m, better than the 20-day average of -$35m and the 100-day average of -$11m.
• Malaysia: Experienced outflows of -$16m Friday, contributing to a 5-day outflow of -$246m. YTD flows stand at +$377m. The 5-day average is -$49m, worse than the 20-day average of -$15m and the 100-day average of +$4m.
• Philippines: Saw outflows of -$22m Friday, with net outflows of -$49m over the past 5 days. YTD flows are positive at +$44m. The 5-day average is -$10m, worse than the 20-day average of +$1m and the 100-day average of +$5m.
Oil Higher, OPEC Delays Extra Output, US$ Falls & Middle East Tensions Rise
Oil prices are around 1.5% higher today supported by OPEC’s decision to delay its unwinding of output reductions by a month to the end of December as well as threatening comments from Iran. Brent is up 1.5% to $74.20/bbl after an intraday high of around $74.45. WTI is 1.8% higher at $70.70/bbl. The softer US dollar is also supportive of crude (BBDXY -0.7%). The decline is being driven by an unwinding of the Trump trade following a narrowing of the polls.
- OPEC+ had planned to normalise output after cutting output 2.2mbd starting with a 180kbd increase in December. Its decision to delay a month was driven by concern over downward price pressure from soft China demand and additional non-OPEC supply, according to Reuters.
- Iran is again ramping up tensions with the Wall Street Journal reporting remarks that it is planning a “strong and complex” strike on Israel. It apparently told allies that the attack would be after the US election but before the January presidential inauguration. The US has said that it won’t restrain Israel if Iran attacks it again. A re-escalation of the conflict risks Iran’s oil facilities thus increasing the chance of crude’s geopolitical risk premium rebuilding.
- Saudi Aramco is expected to publish its prices this week and a Bloomberg survey shows expectations of a price cut for shipments to Asia.
- Later US September orders and European October manufacturing PMIs print. ECB’s Elderson, McCaul and Buch make appearances and the eurogroup meeting also takes place. Key events for crude though are Tuesday’s US election and this week’s meeting of China’s legislature standing committee, which may result in further stimulus.
GOLD: Weaker On Friday Despite Weak US Payrolls, Higher Yields Weigh
Gold is 0.2% higher in today’s Asia-Pac session, after closing 0.3% lower at $2736.53 on Friday.
- On Friday, US Nonfarm payrolls increased 12K in October, well below the consensus expectation for a 101k gain, with hurricanes, strikes along with a shortened survey period contributing factors. In addition, there were downward revisions totalling 112k for the previous two months.
- US Treasuries and the USD Dollar saw a large intra-day swing in Friday’s NY session. Yields dropped immediately after the payrolls data, with the 2-year traded from 4.21% to a low of 4.06% before reversing course to end the session at 4.21%. The US 10-year yield closed 10bp higher at 4.38%, a new high for the move that began in September.
- The bounce off yield lows was aided by higher than expected S&P Global US Manufacturing PMI, Construction Spending and ISM prices paid data.
- Looking ahead, the US Presidential Election on Tuesday and the FOMC decision unusually on a Thursday are two major risk events in an otherwise light US calendar.
- The presidential race appears close with seven swings states likely to determine who wins the White House. Over the weekend, the national average polls tightened, and those states remain on a knife edge.
CHINA: Markets Strong As Foreign Ownership Rules Relaxed.
- Data out showing Hedge Funds Allocating Away from China Equity (source MNI – Market News).
- Threshold for foreign investment in Chinese firms reduced (source MNI – Market News).
- Equity markets were positive board with the CSI 300 up +0.70%, Shanghai Comp +0.50% and Shenzhen Comp +1.40%.
2yr 1.429% 5yr 1.776% 10yr 2.118% (-2bp) 30yr 2.318%
INDONESIA: Market Weighed Down by FX Volatility.
- Indonesia seeks foreign investment to boost labour intensive industries (source: Indonesia Business Post)
- Indonesia may extend the period that natural-resource exporters must keep part of their foreign currency earnings onshore, a senior official said. (source: BBG)
- The Jakarta Composite bucked regional trends as FX volatility dampened risk appetite and saw the index down -0.85%.
2yr 6.519% (+1.5bp) 5yr 6.709% 10yr 6.805% (+2bp) 30yr 6.941% (-1bp)
ASIA FX: North Asia FX Rallies, USD/CNH Back Sub 7.1000
North Asia currencies have all rallied firmly against the USD, with lower Trump election odds, weighing on broader USD sentiment and the reflation theme. CNH and KRW spot are both up around 0.60%, while TWD has lagged somewhat, up around 0.40%.
- Spot USD/CNH is back to the low 7.0900 region, lows back to mid October. Note on Oct 14th we got close to 7.0710 level, a potential downside target. Election uncertainty has risen, with weekend polls suggesting a very tight race between Trump and Harris, particularly in the swing states. Those seen at risk from greater trade tensions with the US have rallied so far today.
- The other focus point for China markets will be this week's NPC meeting, which kicks off today and concludes on Nov 8. The market will be looking for fresh impetus around fiscal stimulus measures.
- Spot USD/KRW is back to 1369/70, up around 0.60% in won terms, and continuing to unwind recent underperformance. Outside of broader USD softness, the rebound in local equities, up +1.4%, as plans to drop capital gains tax for financial investments for retail investors has gained support from the opposition party in South Korea.
- Spot USD/TWD is back to 31.84, fresh lows going back to the first part of Oct.
ASIA FX: SEA FX Rallies On Broad USD Weakness, SGD Leads
South East Asia FX is mostly firmer against the USD, albeit to varying degrees. Election uncertainty in the US, after weekend polls showed a very close Presidential race, particularly in the swing states, has reduced USD appeal. So far SGD FX has been the standout, up a little over 0.75%, largely tracking the majors (BBDXY and DXY indices off 0.60%).
- USD/SGD is back sub 1.3200, last near 1.3160. This puts us back sub the 100-day EMA (1.3185), while the 20-day is around 1.3150, which marked earlier lows.
- USD/IDR spot was higher at the open but is now back to flat, last near 15725. The 1 month NDF is close to 0.6% stronger in IDR terms, last near 15760/65. The implied softer US yield backdrop, given higher US Tsy futures (no cash trading today due to Japan holiday), is aiding the IDR. Friday's close amid the surging US yield backdrop was the highest since mid August.
- USD/MYR is also lower, last back near 4.3600, close to 0.45% firmer. The stronger yuan backdrop will be spilling over to MYR given historical correlations.
- USD/THB is down to 33.70/75, so off recent highs, while USD/PHP has seen benefit from broader USD softness. The pair is little changed at 58.15/20. Earlier we had a dip in the PMI for Oct, but it remains comfortably in expansion territory.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 04/11/2024 | 0700/0200 | * |  TR | Turkey CPI |
| 04/11/2024 | 0815/0915 | ** |  ES | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | 0845/0945 | ** |  IT | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | 0850/0950 | ** |  FR | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | 0855/0955 | ** |  DE | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | 0900/1000 | ** |  EU | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | - |  EU | ECB's Lagarde and Cipollone in Eurogroup meeting | |
| 04/11/2024 | 1330/1430 |  EU | ECB's Elderson speech at '10 years of SSM' conference | |
| 04/11/2024 | 1400/1500 |  EU | ECB's Elderson in panel 'Achievement...and the outlook' | |
| 04/11/2024 | 1500/1000 | ** |  US | Factory New Orders |
| 04/11/2024 | 1530/1030 |  CA | BOC market participants survey | |
| 04/11/2024 | 1630/1130 | * |  US | US Treasury Auction Result for 26 Week Bill |
| 04/11/2024 | 1630/1130 | * |  US | US Treasury Auction Result for 13 Week Bill |
| 04/11/2024 | 1800/1300 | *** |  US | US Note 03 Year Treasury Auction Result |
| 05/11/2024 | 0330/1430 | *** |  AU | RBA Rate Decision |
| 05/11/2024 | 0645/0745 | ** |  CH | Unemployment |
| 05/11/2024 | 0745/0845 | * |  FR | Industrial Production |
| 05/11/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 05/11/2024 | - |  EU | ECB's De Guindos participate in ECOFIN Meeting | |
| 05/11/2024 | - |  US | US Presidential Election | |
| 05/11/2024 | 1330/0830 | ** |  US | Trade Balance |
| 05/11/2024 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 05/11/2024 | 1355/0855 | ** |  US | Redbook Retail Sales Index |