Increased Risk Appetite Amid US-China Trade Optimism and Brexit Extension Benefit Aussie and Kiwi Dollars

The AUDUSD opens at 0.6838 (mid-rate) and the NZDUSD opens at 0.6344 (mid-rate) this morning.

The AUD and NZD are benefiting from an increase in risk appetite amid continued optimism about US-China trade talks along with overnight news that the European Union has granted Boris Johnson accepted a Brexit deadline extension.

Overnight, Boris Johnson formally accepted the EU's offer of a Brexit extension until 31 January 2020 ruling out his we will leave with or without a deal on the 31 October promise. Speaking in the Commons, Mr Johnson has again pushed for an early December election with the labour party leader Jeremy Corbyn continuing to insist that his party will only add its support for an early election if the prospect of a no-deal exit is taken off the table.

A statement from US Trade Representative Robert Lighthizer that they are “making headway on specific issues and the two sides are close to finalizing some sections of the agreement," has helped push equity markets higher with the S&P now trading at record highs.

Despite the market pricing in a better than 90% chance that the Federal Reserve will cut its funds rate by 25 bps in the early hours of Friday morning, the US 10-year Treasury yield is trading at a six-week high of 1.85% as investors reduce their expectations for multiple cuts in 2020.

Tomorrow morning’s quarterly inflation data is the key domestic driver for the AUD with current expectations for 0.5% increase in CPI during Q3 with core CPI forecast to rise by 0.4%.

Global equity markets are on the front foot - Dow +0.43%, S&P 500 +0.57%, FTSE +0.09%, DAX +0.37%, CAC +0.15%, Nikkei +0.30%, Shanghai +0.85%

Gold prices are little changed trading at $1,492 an ounce. WTI Crude Oil prices are slipping lower, down 1.5% trading at $55.93 a barrel.

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Australia Morning Update  |  New Zealand Morning Update