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It’s going to be a big day for the AUD, given the raft of data out of Australia and China. At 11:30 we get the latest retail sales report (expected to increase 0.3%), ahead of the RBA decision at the usual time of 14:30. The market is pricing in thirteen basis points of cuts over the coming twelve months, and all eyes will be on the statement to see if it provides triggers for another cut this year. We suspect the RBA is waiting for the October 23 CPI print before making up its mind around future cuts, however as things stand it has adopted a more neutral setting. Some traders will be keen to hear if it expresses more concern around overheating in the housing market, although we suspect they won’t.
It’s a huge day for Japan today, with their Q3 TANKAN report and jobless rate due at 09:50. The TANKAN report is one of the most important pieces of data in Japan and surveys both large and small manufacturing and non-manufacturing businesses. At 19:00 though, traders will be listening in Prime Minister Shinzo Abe who addresses the nation to detail plans for the much-anticipated sales tax. The key here will be whether or not the government offsets this with any sorts of stimulus; failure to do so could see the JPY strengthen.
After yesterday’s big sell-off we should see a slight stabilisation for the new quarter. All eyes will be on the budget negotiations in the US, and it looks highly likely we will see a government shutdown, although most don’t actually see this being a huge negative for stocks given its very limited impact on Q4 GDP. Keep an eye on August PMI data out of China at 11:00, with traders expecting an increase in expansion to 51.6 (from 51.0). Over the medium term, support should be seen between 5217 and 5207, while a deep retracement should find buyers at 5053 (the 38.2% retracement of the June to September rally).
Goldman Sachs has upgraded the stock to a buy (from neutral) today, given the upside to its price target (including dividends implies 17% upside). The stock has also pulled back to a more compelling valuation, trading more broadly in-line with the market price-to-earnings ratio. It sites three catalysts – pending demerger of recall, an investment market briefing on December 9 and 10 and further deprecation of AUD/USD.