Market Roundup
• At N.Korea's doorstep, Trump warns of U.S. power while also striking conciliatory note.
• House Republicans seek U.S. tax vote next week; Fitch warns on deficit.
• OPEC sees slower growth in demand for its oil as rivals pump more.
• Oil eases from 2-1/2 year highs, focus on Saudi tensions.
• US Sept JOLTS Job openings, 6.093 mln, 6.091 mln forecast, 6.082 mln previous 6.090 mln revised.
• Hard-fought Virginia governor's race to test Trump's clout.
• Saudi mass arrests jolt markets, play to ire over corruption.
• Stung by criticism, ECB seeks to defuse conflict on bad loans.
• German "wise men" sound alarm over "overheating" economy.
• China's Oct FX reserves rise slightly in the ninth month of gains.
Looking Ahead - Economic Data (GMT)
• N/A China Oct Exports y/y, 7.2% forecast, 8.1% previous.
• N/A China Oct Imports y/y, 16.0% forecast, 18.7% previous.
• N/A China Oct Trade balance (USD), 39.50 bln previous, 18.7% prev 18.6% revised.
• 23:50 Japan Oct Foreign Reserves, 1.266.30 bln previous.
Looking Ahead - Events, Other Releases (GMT)
• N/A IMF's Lagarde, BOJ Gov Kuroda, and Japanese FinMin Aso speak in Tokyo
• 11:50 Bank of England Financial Policy Committee member Don Kohn speaks in London
• 18:35 Bank of England Governor Mark Carney speaks in London
• 01:30 Bank of Japan board member Yukitoshi Funo speaks in Miyazaki
• 23:50 BOJ to release summary of opinions from board members at its Oct. 30-31 policy meeting
Currency Summaries
EUR/USD is likely to find support at 1.1500 levels and currently trading at 1.1586 levels. The pair has made session high at 1.1595 and hit lows at 1.1559 levels. The euro dipped against the dollar on Tuesday as the dollar strengthened as investors renewed bets that monetary policy will continue to diverge between the United States and the eurozone. Late last month, the European Central Bank prolonged its bond purchases well into 2018, diminishing chances it would raise interest rates next year. Meanwhile, investors expect the U.S. Federal Reserve to raise interest rates next month followed by roughly two more hikes next year. The dollar also gained as President Donald Trump's Republican party pushes ahead with its tax cut program. Republican lawmakers on Monday began revising their proposed overhaul of the U.S. tax code, as Democrats pointed to the loss of popular deductions as proof the legislation was an assault on the middle class. The dollar index, which tracks the greenback against six major currencies, was up 0.35 percent at 95.091. The index is just shy of the three-month high of 95.150 hit late last month. The euro was 0.31 percent lower to $1.1573 against the dollar. Its session low was$1.1555, its lowest since July 20.
GBP/USD is supported in the range of 1.3084 levels and currently trading at 1.3160 levels. It reached session high at 1.3165 and dropped to session low at 1.3107 levels. Sterling dipped against the greenback on Tuesday as sterling was weighed down by worries over the health of the economy as Britain prepares to leave the European Union, with the latest data offering little respite after a heavy sell-off last week. On Thursday, the pound suffered its biggest fall on a trade-weighted basis since the week after June 2016's Brexit vote after the Bank of England raised interest rates for the first time since 2007. The British central bank said it expected only two more hikes in the coming three years, however, with even that dependent on the deal Britain gets from the EU. Investors are therefore monitoring the negotiations around Britain's future relationship with the EU closely for any clues on the BoE's future rate path, as well economic data releases. Investors are eyeing the next stage of Brexit negotiations that start on Thursday, with focus on whether Britain can indeed secure the two-year transitional deal that Prime Minister Theresa May wants and avoid a "cliff-edge" exit from the bloc. Sterling fell to $1.3112, but recovered some ground in the late US session to trade last at 1.3159.
USD/CAD is supported at 1.2734 levels and is trading at 1.2772 levels. It has made session high at 1.2818 and lows at 1.2766 levels. The Canadian dollar weakened against the greenback on Tuesday as stronger dollar and lower oil prices weighed on the Canadian dollar. Oil prices fell slightly after posting the biggest rise in six weeks following the Saudi crown prince's move to tighten his grip on power and crank up tensions between the kingdom and Iran. The U.S. dollar gained against a basket of major currencies as investors added bets that monetary policy will continue to diverge between the United States and the eurozone and as buoyant risk appetite weighed on the safe-haven Japanese yen and Swiss franc. U.S, Mexican and Canadian officials will kick off some of the next rounds of talks to rework the North American Free Trade Agreement slightly ahead of schedule on Nov. 15, four officials familiar with the process said on Monday. The Canadian dollar was last trading at C$1.2787 to the greenback, or 78.27 U.S. cents, down 0.6 percent. The currency traded in a range of C$1.2703 to C$1.2783. On Monday, it touched its strongest in 12 days at C$1.2701.
AUD/USD is supported around 0.7600 levels and currently trading at 0.7644 levels. It hit session high at 0.7657 and made session lows at 0.7625 levels. The Australian dollar declined against US dollar on Tuesday as investors were cautious ahead of the Reserve Bank of Australia's (RBA) monthly policy announcement at 0330 GMT. The RBA is expected to hold rates at 1.50 percent but might downgrade its inflation forecast after a five-year update of household spending patterns implied consumer prices were overstated by around 0.2 percentage points. Australian consumer prices were surprisingly tame last quarter while core inflation stayed below target for almost a second full year, leading investors to pare back the already slim chance of a rate hike for months to come. The local dollar dived to a 4-1/2 month trough as the consumer price index (CPI) rose 1.8 percent for the year to September, below market forecasts of 2.0 percent. Underlying inflation averaged around 1.85 percent, again missing estimates and actually a touch slower than in the second quarter. Core inflation has now undershot the Reserve Bank of Australia's (RBA) long-term target band of 2 percent to 3 percent for seven straight quarters, the longest period on record. Investors battered the Australian dollar, sending it sliding 0.7 percent to $0.7626, its lowest since mid-July.
Equities Recap
European shares pulled back from two-year highs on Tuesday as heavyweight defensive sectors dropped and some earnings reports disappointed, though oil stocks were a bright spot.
UK's benchmark FTSE 100 closed down by 0.6 percent, the pan-European FTSEurofirst 300 ended the day down by 0.40 percent, Germany's Dax ended down by 0.6 percent, France’s CAC finished the day down by 0.4 percent.
Wall Street dipped on Tuesday after a disappointing profit forecast from Priceline and as investors fretted that a Republican plan to cut corporate taxes could be watered down.
Dow Jones closed up by 0.03 percent, S&P 500 ended down 0.03 percent, Nasdaq finished the day down by 0.30 percent.
Treasuries Recap
U.S. Treasury yields fell on Tuesday, flattening the yield curve to a level not seen in a decade, as $24 billion worth of three-year government debt, the first leg of this week's $64 billion quarterly refunding, fetched average demand.
The two-year yield was a tad higher at 1.629 percent, while the 10-year yield slipped 1 basis point at 2.307 percent. This still narrowed their yield spread to just over 67 basis points, which was the tightest since November 2007.
The 30-year yield shed 3 basis points at 2.769 percent, a hair above a six-week low of 2.765 percent.
Commodities Recap
Gold prices fell 0.5 percent on Tuesday, retreating a bit from the previous day's rally as a stronger U.S. dollar reduced the appeal of safe-haven investments, and oil prices also dipped.
Spot gold was down 0.5 percent at $1,275.30 an ounce by 1:47 p.m. EST (1847 GMT), while U.S. gold futures for December delivery settled down $5.80, or 0.5 percent, at $1,275.80 per ounce.
Oil settled lower on Tuesday after rising to the highest since July 2015 the previous day, while tension flared between Saudi Arabia and Iran, and the Saudi crown prince tightened his grip on power.
Brent crude futures settled down 58 cents, or 0.9 percent, at $63.69 a barrel, having climbed 3.5 percent on Monday.
U.S. West Texas Intermediate (WTI) crude fell 15 cents, or 0.3 percent, to $57.20 a barrel.
