China Evergrande Avoids Official Default, For Now

AUD

The AUD was mixed if not marginally lower across most major currency pairs on Friday. Asian Equities were relatively subdued by Evergrande (see below) as the Shanghai Comp dipped -0.3% and the Nikkei up 0.3%. The ASX200 rounded out Friday unchanged at 7415.5 points but it was enough to ensure the market finished ahead for the third week straight. Commodities finished modestly in the green with Gold, Silver and Iron Ore all posting a gain. In what is a closely followed underlying sentiment risk, China's Evergrande have so far averted a formal default by wiring funds for a US dollar bond interest payment, initially due September 23, just a couple of days before a grace period was set to expire. The Chinese state-backed Securities Times on Friday said that “the company had remitted $US83 Million ($110Mio) in coupon payments to a trustee account at Citibank on Thursday”. A lack of data on the calendar to start the week with investors likely focused on Wednesdays Australian CPI Data and US Unemployment on Thursday.

USD

The AUDUSD ended a strong week performing mixed results on Friday, with the pair trading at a rate of 0.7467 at the time of writing. US Equities were soft on Friday with the Nasdaq falling 0.8% while the S&P 500 was 0.1% lower. U.S 10-year yields fell 6bps to 1.64% while oil rose 2.1% to $84.20 a barrel. In the US, October Manufacturing PMI dipped to 59.2, down from 60.7 and below expectations of 60.5. Services PMI headed the other way, rising from 54.9 to 58.2 and beating expectations of 55.2 in the process. The combined results saw the Composite PMI rise to 57.3 from 55.0. Little reaction to the data though. Fed Chair Powell on the wires saying that while inflation remains high, it was still expected to fall towards target and it would be premature to raise rates. He said that conditions were right for tapering with completion by mid-2022 though added that if inflation expectations remained high, the Fed would use their tools. There is no data on the docket today with investors likely focused on Wednesday evenings Bank of Canada meeting as well as US GDP figures later in the week.

EUR

The AUDEUR pair followed suit to trade at a loss, trading at a rate of 0.6414 at the time of writing. European stocks closed higher on Friday as fears over a massive default in the Chinese property market cooled, while investors monitored corporate earnings and key economic data. Both the CAC and the DAX finished in the green. In early data, France kicked things off with manufacturing at 53.5 (54.0 expected) with services at 56.6 (55.5 expected). German manufacturing PMI came in at 58.2 (56.6 expected) with services at 52.4 (55.5 expected). Eurozone manufacturing came in at 58.5 (57.1 expected) with services at 54.7 (55.4 expected). Little in the way of data today with the German Bundesbank Report and IFO Business Climate being the key data of note.

GBP

The AUDGBP is trading marginally lower to levels seen on Friday, with the pair trading at a rate of 0.5426. London’s FTSE 100 ended 0.2% higher led by heavyweight miners and consumer staple stocks. In the UK, British retail sales unexpectedly fell for a fifth month in a row last month, despite a rush of motorists filling their cars with fuel, adding to signs that Britain's economic recovery is losing momentum. Sales volumes dropped by 0.2% in September, official figures showed on Friday, as supply-chain problems led to gaps on store shelves. This market the longest consecutive run of monthly falls since the series began in 1996. In other news, the preliminary flash IHS Markit/CIPS Composite Purchasing Managers Index rose by the largest amount since May to hit 56.8, up from 54.9 in September. A lack of local data this week will see investors focus elsewhere for directional change.

NZD

The AUDNZD pair seesawed to 1.04950 on Friday before coming back to trade at a rate of 1.04116 this morning. The AUDNZD pair begins the week off trading with as lack of movement as New Zealand celebrates Labor Day holiday. It’s worth noting that the recent Covid conditions in NZ and the Evergrande crisis have been grim and challenged the risk-on mood setting. Given the lighter start to the week, the AUDNZD may remain sidelined during trade today.