FX and commodities in focus today

Four major markets in focus today.

AUD/USD

After yesterday’s RBA rates announcement, retail sales and current account balance, consensus for today’s Q2 GDP is 0.5% (it was 0.6% yesterday). As we wrote in our afternoon note yesterday, the statement that accompanied the rate decision was fairly neutral, however there were a few signs the bank could look to cut if the domestic data deteriorates or the AUD pushes up convincingly. GDP by its very nature is backwards looking, however we feel the market is once again positioned short and thus a number above 0.7% on the quarter should push AUD/USD towards 0.9100.

USD/CAD

The Bank of Canada meets at midnight tonight and while the bank don’t look as closely at the domestic currency as say the RBA, it does pay keen attention to stable inflation, slack in the economy  and ‘imbalances in the household sector’. We quite like the price action in USD/CAD at present and a move above 1.0568 (August 23 high) should bring 1.0609 (July 5 high) into play.

Natural Gas

Natural gas pushed higher in US trade to a five-week high, on concerns that bad weather will disrupt supplies, while recent hot weather could increase demand for power-plant fuels. Natural gas has seen strong price action of late, having rallied 17% from the recent lows and is in a strong uptrend.

Fortescue Metals (FMG)

FMG is seeing positive price action, having rallied 58% from the June 25 low and closing above the August 26 high yesterday. Iron ore was unchanged overnight and at $138 per tonne should continue to FMG’s valuation and investment case. Given our modestly constructive view on China at present, pullbacks in this name could present themselves as good buying opportunities.

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