Article / 02 October 2017 at 2:29 GMT

Macro Monday: RBA meets, nonfarm payrolls and final PMIs — #SaxoStrats

Global Macro Strategist / Saxo Bank Group - Singapore Hub

  • The focus will be on language from the RBA, with no rate move expected
  • Several key PMIs are scheduled for release shortly
  • The PMIs should show that global growth and expansion is fairly robust
  • Much of Trump's tax plan has been priced in, but implementation is uncertain
  • The future make-up of the Fed is unknown; will there be more hawks, or doves?

By Kay Van-Petersen

Summary of prior week

  • Fed speakers stuck to the script; doves being doves, hawks being hawks..
  • US tax plan: USD and rates higher. Still needs to pass House and Senate, there is a mismatch between the Budget $1.5trn and the plan’s $2.2trn.
  • Economy wise: Flash PMIs in Eurozone in-line with expectations, US saw GDP beat 3.1%a 3.0%e with PCE coming in at 1.4%a 1.5%e, Core inflation 1.3%a 1.4%e.
  • Equities: Risk-on across US & EZ indices with Asia closing primarily down for the week.
  • FI: Rates cont. wider, yet key 100 days of 2.33% on US treasuries holding.
  • Commodities: Oil bull run continued. Precious metals continue to ease back due to stronger USD plus risk-on.
  • Forex: It was a big week for USD, saw continuing reversal in euro, yet still closed a fig above 1.1717 lows.
  • Vol compression continuing.
COT report

  • Forex: 30% increase in net USD shorts. Canadian dollar, Australian and British pound longs at 52 week highs.
  • Commodities: Precious metals reduction continues, increase in energy continues.
The week ahead

  • Key Focus: RBA; Final PMIs; US Nonfarm payrolls.
  • Central banks:  RBA +1.50%e/p (3) RBI 6.00%e/p (4) SNB FX Reserves (6)
  • Fed speakers this week: Robert Kaplan (October 3/6), Jerome Powell (October 3/5), Janet Yellen (October 5), John Williams (October 5), Patrick Harker (October 5), Esther George (October 6), Raphael Bostic (October 6), William Dudley (October 6), James Bullard (October 6), Eric Rosengren (October 7).
  • Other: China and South Korea taking public holidays for the entire week, Hong Kong closed for Monday and Friday.
  • Daylight Savings Time began on October 1 in some Australian states.
Economic data
  • US: ISM manufacturing. 57.5e 58.8p, ADP, Market PMIs, TB, Factory Orders, Durable Goods, Nonfarm payrolls +75ke 156kp, U/R 4.4%e/p
  • China: Forex reserves
  • Eurozone: Market PMIs, PPI, RS
  • Japan: PMI, Tankan
  • UK: PMI, House data
  • Australia: House Data, TB, RS
  • New Zealand: House Data
  • Seasonality: How do certain markets fair in the final quarter of the year. S&P usually does well.


Markets are closed in China from October 1 to 8, for the Golden Week holiday, to celebrate the October 1 National Day and the mid-Autumn festival. Photo: Shutterstock
Thoughts on positioning

  • Reserve Bank of Australia: No delta expected by market or KVP – as has generally been the case for last few quarters; it's all about language.
  • Reserve Bank of India: No delta expected by market or KVP. INR has been push back heavily in September given the USD bounce, feel this is a tactical move rather than strategic. That is, we still want a structurally long emerging market high yielding FX basket. In the case of INR, we feel recent big move up has been driven more by real money bond investors getting nervous; 1 month USDINR now yields over 5% annualized, versus sub-2% a few weeks ago as forward points move.
  • PMIs: Likely to show global growth and expansion still robust, now over a year of trend continuing to the upside. It worth noting whilst global GDP may not be the highest in recent years, from a broad base perspective… it’s the best it’s been in over a decade. Every OECD country is in expansion with the vast majority of them growing above trend.
  • Fed: Composition of the Fed, hawks or doves or both. We are still unsure… part of the moves on Friday in rates seemed linked to Kevin Warsh (former Fed governor) being a potential run-in for Fed Chair an seen as a hawk.
  • Tax Plan Outline versus Tax Plan Implementation: Quite a bit priced in, yet how long before its actually implemented. Running out of time in 2017, still have outstanding issues: North Korea, Debt ceiling, Potential Tariffs, Obamacare Repeal 18.0 Decent risk that could be delayed to Q1, 2018.
Technical picture: James Kim

  • DXY:  closes above 200 week moving average. And break yearly downtrend. Therefore a bullish view. 94.02 the target, supported at 92.50
  • Euro: 200 week moving average acts as support last week. EUR break trend below April-June trend. 1.1858 the resistance areas. Failure here, looks for a test to 200 WMA

EURUSD chart


  • USDCAD: rebound continues, has short term uptrend and expected to trade with bullish tone. Target 1.2660.
  • USDCHF: appears to have bottomed out. Big noisy levels at  the 0.9770 area.  A break above this would open big gains to 200 DMA at 0.9843.Support seen at 0.96, high poses a buying opportunity.
  • AUDUSD:  back at its break out level,  at 0.78 level, risks to further downside. Too early to call a buy, need to see 0.7732 for that level.

USDJPY monthly

  • USDJPY: above the 200 DMA. Needs to close above ¥113; ¥114.3 the key upside target, 200 DMA is the support level at ¥112.
  • S&P/ASX200: continues to trade within it long term range. No change in view.
  • S&P500: Remains resilient, RSI getting into overbought territory.
  • XAU: Failed to hold the 2017 break out level. Sets a negative tone for the week ahead, look at the level 1266 as the next support zone.

SPX index


Source: Bloomberg

KVP portfolios

  • Tactical Book: No position update
  • Strategic Book: First profit target hit on IYF long, returning c. +9% on the leg of the trade +42 basis points to the portfolio. Balance of core position is targeting 118 level


Here is this morning's recording of this week's Macro Monday call.

For more on forex, click here.

– Edited by Robert Ryan

Kay Van Petersen is Global Macro Strategist at Saxo Bank. You can follow him on Twitter: @SaxoStrats or @KVP_Macro. Please join us live for next Monday's Macro Call at 0830 [Singapore/Hong Kong], 0930 [Tokyo], 1030 [Sydney].


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