• AUDUSD reached a fresh record high near 0.7390, after Australia’s Q3 GDP beat expectation
• U.S. inflation expectations jump to highest since July 2019
• As Biden started the presidency transition, CAD and MXN are likely two biggest beneficiaries in the long run
Australi’s Q3 GDP has arrived at 3.3% QoQ growth rate, higher than market expectation. This figure has helped AUDUSD reached a record high near 0.7390, a strong positive signal especially considering that it failed to show much movement yesterday when China’s Caixin PMI released. This rebound from economic recession has also been confirmed by RBA’s governor Philip Lowe’s rhetoric, who said that RBA is prepared to do more if required. Earlier today, RBA has announced to keep the official cash rate at 0.1% unchanged, meeting market’s expectation.
On the other hand, USD is facing downward pressure. Inflation expectations rose to a 17-month high, as indicated from the bond market. Yields on the regular 10- and 30-year treasuries have spiked, with the latter reaching 1.683%, a 10-bps increase. Investors are seeing a high likelihood of Biden’s administration to increase government spending significantly next year. On Tuesday, a bipartisan group of U.S. lawmakers introduced a $908 million COVID relief plan, which failed to gain widespread support. Nonetheless, it is a positive signal that things are moving in the right direction.
As Biden started to receive president’s intelligence briefings yesterday, developments in the U.S. over the past few weeks, including the presidency transition, vaccine news, potential stimulus package, and new appointment of Yellen, have all indicated a long-term bullish sign for US’s two neighbors: Canada and Mexico. A Biden government means relaxed trade tensions at least regionally, possibly reductions on tariffs, and a more concerted efforts to bring North America’s COVID pandemic under control. This direction has suggested that CAD and MXN are likely two biggest beneficiaries in the long term, even regardless of the composition of Congress.