Market Roundup
• Trumps vows to resist any Democratic effort to investigate White House.
• Fed likely on steady course even as U.S. political landscape shifts .
• Infrastructure, healthcare, judges on U.S. Senate agenda.
• US 2 Nov w/e MBA Mortgage Applications, -4.0%, -2.5% previous.
• US 2 Nov w/e MBA 30-yr Mortgage Rate, 5.15%, 5.11% previous.
• Irish PM sees fading chance of Brexit deal in November.
• Italy government wins confidence vote amid coalition tensions.
• Return to oil production cuts in 2019 cannot be ruled out - OPEC sources.
• CA Oct Ivey PMI, 64.6, 56.5 previous
Looking Ahead - Economic Data (GMT)
• 7 Nov 20:00 Reserve Bank of New Zealand Cash Rate, 1.75% forecast, 1.75% previous
• 7 Nov 23:50 Japan Sep Machinery Orders y/y, 7.7% forecast, 12.6% previous
• 7 Nov 23:50 Japan Sep Machinery Orders m/m, -10.0% forecast, 6.8% previous
• 7 Nov 23:50 Japan Sep Current Account NSA (JPY), 1,772.6B forecast, 1,838.4B previous
• 7 Nov 23:50 Japan 3 Nov w/e Foreign Bond Investment (JPY), 1,077.8B
• 7 Nov 23:50 Japan Oct Bank Lending y/y, 2.3% previous
• 8 Nov NA China Oct Exports y/y, 11.0% forecast, 14.5% previous
• 8 Nov NA China Oct Imports y/y, 14.0% forecast, 14.3% previous
• 8 Nov NA China Oct Trade Balance (USD), 35.00B forecast, 31.69B previous, 31.70B revised
Looking Ahead - Events, Other Releases (GMT)
• 7 Nov 20:00 Reserve Bank of New Zealand announces Official Cash Rate and Monetary Policy Statement at a media conference
• 7 Nov 23:50 Bank of Japan to release summary of opinions from board members at its Oct. 30-31 policy meeting in Tokyo
• 8 Nov 08:00 Riksbank's Stefan Ingves holds an open hearing on current monetary policy in Stockholm
• 8 Nov 14:15 ECB's Benoit Coeure speaks at conference on "Scaling up Green Finance: The Role of Central Banks” in Berlin
• 8 Nov 16:00 ECB's's Ewald Nowotny speaks in Stuttgart
• 8 Nov 17:30 Swiss National Bank's Andrea Maechler and Thomas Moser speak at a Money Market Event in Geneva
• 8 Nov 19:00 U.S. Federal Reserve announces its decision on interest rates followed by a statement in Washington, DC
Currency Summaries
EUR/USD is likely to find support at 1.2392 levels and currently trading at 1.1412 levels. The pair has made session high at 1.1483 and hit lows at 1.1423 levels. Euro declined against the dollar on Wednesday, despite a weaker U.S. dollar following the U.S. congressional election results, as the euro succumbed to profit-taking. Democrats won control of the U.S. House of Representatives, giving them the opportunity to block President Donald Trump's push for a further round of tax cuts and deregulation - measures that have boosted the U.S. economy, stock markets and the dollar, and have kept the Fed on a policy-tightening path. Market participants are now keeping a close eye on a two-day Fed meeting, which began on Wednesday, to gauge the outlook for U.S. monetary policy. The Fed raised U.S. rates in September and said it planned four more increases by the end of 2019 and another in 2020, citing steady economic growth and a robust jobs market. Against a basket of six other currencies .DXY, the dollar was up 3.9 basis points on the day, last at 96.031.The euro was last trading at $1.1438. Earlier, the single currency was up more than 1 percent above this year's trough of $1.1301, reached on Aug. 15.
GBP/USD is supported in the range of 1.3074 levels and currently trading at 1.3134 levels. It reached session high at 1.3167 and dropped to session low at 1.3114 levels. Sterling strengthened against the dollar on Wednesday as sterling was buoyed by reports suggesting Britain is preparing for a Brexit agreement by the end of November. The pound has benefited from growing hope among investors that Britain is close to reaching a deal with the European Union less than five months before it is due to exit the bloc. A 3 percent rally in the currency over the last week comes despite unresolved differences including over the Irish border. Prime Minister Theresa May's cabinet ministers have been invited to read an almost complete draft of the Brexit withdrawal agreement, Bloomberg reported on Wednesday. But it is still unclear if enough progress has been made in time to hold an emergency summit of EU leaders in November to sign off on a deal. Against a weaker dollar, the pound rose 0.4 percent to hit a two-week high of $1.3176. It traded broadly flat against the euro at 87.27 pence.
USD/CAD is supported at 1.3048 levels and is trading at 1.3113 levels. It has made session high at 1.3118 and lows at 1.3055 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday, as the greenback broadly fell after U.S. midterm congressional elections and as oil prices rose. The U.S. dollar slumped to its lowest in more than two weeks against a basket of major currencies after the election outcome of a split U.S. Congress raised expectations that any major fiscal policy boost to the economy is unlikely for now. The price of oil, one of Canada's major exports, rebounded after a report said Russia and Saudi Arabia were discussing oil output cuts in 2019.On the data front, Canadian purchasing activity expanded at a faster pace in October as measures of employment and inventories rose, according to Ivey Purchasing Managers Index (PMI) data released on Wednesday. The seasonally adjusted index rebounded to 61.8 after having slumped in September to 50.4, its lowest in more than two years. The Canadian dollar was last trading 0.1 percent higher at 1.3113 to the greenback, or 76.26 U.S. cents. The currency touched its strongest level since Friday at 1.3057 before paring its gains.
USD/JPY is supported around 112.91 levels and currently trading at 113.58 levels. It peaked to hit session high at 113.58 and made session lows at 113.19 levels. The U.S. dollar strengthened against the yen on Monday as investors digested the results of the U.S. midterm congressional elections, after an initial sell-off on expectations that the election outcome would make further fiscal stimulus measures unlikely. The elections delivered the most expected outcome: split control of the U.S. Congress, with Democrats winning control of the House of Representatives and Republicans cementing their majority in the Senate. Market watchers believe the divided Congress will make further tax cuts and deregulation unlikely for now, which contributed to the dollar's early fall.The greenback has been the surprise winner in the global currency markets this year after Republicans pushed through President Donald Trump's significant tax cuts, and strong economic growth prompted the Federal Reserve to steadily raise interest rates.By Wednesday afternoon, the focus was turning to the Fed, with the U.S. central bank's Federal Open Market Committee (FOMC) due to release its policy decision on Thursday at the end of a two-day meeting.
Equities Recap
European shares bounced on Wednesday in a broad rally after U.S. midterm elections delivered no big surprise, with a string of solid earnings updates and a rally in Spanish banks on a favourable tax ruling also providing relief.
The UK's benchmark FTSE 100 closed up by 1 percent, FTSEurofirst 300 ended the day down by 1.01 percent, Germany's Dax ended up by 0.8 percent, and France’s CAC finished the up by 1.1 percent.
U.S. stocks ended more than 2 percent higher on Wednesday with broad gains led by the technology and healthcare sectors as investors, relieved to have midterm elections behind them, made bets that a divided Congress would be good for equities.
Dow Jones closed up by 2.65 percent, S&P 500 ended up 2.14 percent, Nasdaq finished the day up by 2.11 percent.
Treasuries Recap
The gap between short- and longer-dated U.S. Treasury yields shrank on Wednesday after the U.S. midterm elections delivered a divided Congress, leaving investors to assess the impact on government spending and borrowing in the coming year.
The benchmark 10-year Treasury yield was little changed at 3.219 percent. It traded as high as 3.250 percent earlier on Wednesday, just a shade below a 7-1/2 year peak of 3.261 percent reached nearly a month ago.
The two-to-10-year part of the yield curve flattened by nearly 3 basis points to 26.70 basis points, a level not seen since Oct. 3.
Commodities Recap
Gold pared some gains on Wednesday but held firm as the dollar slid after the U.S. midterm elections delivered a split Congress and as investors looked ahead to a Federal Reserve meeting for signals on future interest rate hikes.
Spot gold was up 0.1 percent at $1,227.03 per ounce at 1:31 p.m. EST (1831 GMT), having earlier hit a high of $1,235.83, while U.S. gold futures settled up $2.40, or 0.20 percent, at $1,228.70.
Oil prices slipped on Wednesday, continuing a recent slide after surging U.S. crude output hit another record and domestic inventories rose more than expected.
U.S. crude futures fell 54 cents to settle at $61.67 a barrel, nearly 20 percent below a peak close of $76.41 a barrel in early October.
