6 things Australian traders will be talking about this morning

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Good morning.

To the scoreboard:

Dow: 22,024.87 +25.88 (+0.12%)
S&P 500: 2,468.11 +3.50 (+0.14%)
AUD/USD: 0.7931 +0.0106 (+1.39%)
ASX200 SPI futures (Sept contracts): 5,758 (+12)
Iron ore benchmark 62% fines $US73.68/t (-1.4%)

1. US dollar gets hammered: The minutes from the US Federal Reserve’s July meeting revealed that committee members had voiced their concerns about stubbornly low inflation despite strong employment. President Trump also tweeted that he was disbanding two business councils amid a mass exodus, with currency markets impacted by more political turmoil. That was enough for the US dollar index to sharply reverse course after it had found recent support with data flow improving.

2. And here comes the Aussie: The AUD started to find support in late Asian trade yesterday as base metals strengthened (copper up 2.9%, zinc up 5.4%), while iron ore futures rallied overnight and the Aussie stormed ahead as the USD weakened. This chart tells the story:


3. It’s jobs day: The ABS will release monthly employment figures at 11:30am AEST. It follows yesterday’s key wages data, with annual wage growth coming in as forecast (but remaining sluggish) at 1.9%. The expectation is for the recent strength in employment figures to continue, with analysts forecasting a monthly gain of 20,000 jobs which would mark the 10th straight month of growth. David Scutt has everything you need to know here.

4. Four straight for the ASX200?: Futures traders are feeling confident, as lower bond yields provided a backdrop for US stocks to edge higher while UK’s FTSE and the Euro STOXX600 indexes both climbed by 0.7%. It follows a solid session yesterday when the ASX200 rose by 0.48% with earnings season in full swing. A close above 5,800 for the first time since June 29 could be in play, while a further 11 companies report full-year earnings today.

5. Bond bubble won’t so much pop as steadily deflate: The yield on benchmark US 10-year treasuries dipped overnight amid more turmoil in Washington. Despite the market’s dovish interpretation of the Fed minutes, committee members said the bank was still on track to commence tapering its bond purchases in September. Looking ahead, this research note from Alliance Bernstein predicts that yields will continue to climb, but there’s unlikely to be a dramatic spike which sends shock waves through markets.

6. What volatility?: And traders would seem to agree that markets will remain benign for now. They’ve loaded up on bets that the VIX volatility index for US stocks will fall as market calm is restored. The VIX spiked last week amid geo-political tension with the US and North Korea, but low volatility has been a feature of markets this year central bank policy remains broadly accommodative and company earnings have been steady.