Talking Points:

Risk Appetite Unimpressed in Asian Trade as China Hints at More Stimulus
Australian, NZ Dollars Rise as US Yields Correct Lower After Fed Rate Hike
US Dollar May Resume Advance if Revised 3Q GDP Data Tops Forecasts

Gauge Trends and Spot Reversals in the Major Currencies with DailyFX SSI

The Australian and New Zealand Dollars outperformed in overnight trade. It is tempting to flag hopes for Chinese stimulus expansion as the catalyst for the advance. China’s official Xinhua News Agency reported that leaders called for more “forceful” fiscal policy and more “flexible” monetary policy to foster appropriate conditions for structural reforms at the government’s Central Economic Work Conference.

Equities were conspicuouslyquiet in Asian trade however, casting doubt on the China-driven “risk-on” narrative. With that in mind, it should be noted that the Aussie and Kiwi Dollars have been trading inversely of front-end US treasury yields since last week’s FOMC rate decision. The rate on the 2-year note hit a five-year high at 1.0167 percent after the announcement and has been retracing since. Within this context, a corrective rebound in higher-yielding alternatives to the greenback seems understandable.

Looking ahead, a revised set of third-quarter US GDP figures is in the spotlight. Expectations point to a slight downward revision, putting the annualized growth rate at 1.9 percent compared with 2.1 percent reported in the prior estimate. Traders will look to the report to inform speculation on the likely path Fed tightening in 2016.

Investors’ priced-in bets envision two rate hikes next year, whereas Chair Yellen and company expect to issue four. This means that markets may be more sensitive to an upside surprise that forces re-pricing of dovish bets versus the alternative. The Aussie and Kiwi may find gains swiftly capped in this scenario, while the US Dollar moves broadly higher.

Asia Session

GMT

CCY

EVENT

ACT

EXP

00:05

GBP

GfK Consumer Confidence (DEC)

02:00

CNY

Conference Board Leading Index (NOV)

342.9

–

340.7

05:00

JPY

Small Business Confidence (DEC)

48.3

49.0

49.9

European Session

GMT

CCY

EVENT

EXP

IMPACT