Market Roundup
• Fed’s Williams: Makes sense to raise rates gradually, “sooner than later”,essentially at full employment.
• Fed’s Tarullo: greatest risk to financial stability relates to funding runs, asset sales.
• ECB's Nowotny thinks QE decision will be discussed in Dec, monetary policy not enough need fiscal policies.
• Italy PM Renzi says won't change 2017 budget plan even if Brussels objects, Italy referendum Dec 4.
• USD heads for 3rd weekly gain as US rate rise bets firm; Offshore yuan hits 6-year low (above 6.76).
• GBP weaker as UK PM May attends EU summit; Euro at 7-month lows after Draghi quashes tapering talk.
• CAD weakens to 7-month low as weak inflation/RS fuels rate cut bets; CA-US 2-yr spread hits widest in 4-months.
• Brazil inflation eases to lowest in 7 years for mid-October, may pave way for further rate cuts.
Looking Ahead - Economic Data (GMT)
• No Significant Data
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.0858 levels and currently trading at 1.0880 levels. The pair has made session high at 1.0889 and hit lows at 1.0858 levels. The euro declined against the dollar on Friday as investors increased bets that Federal Reserve would raise interest rates by this year end. Recent hawkish comments from Fed officials have increased bets that the U.S. central bank will raise rates in December. New York Fed President William Dudley said on Wednesday the Fed will likely increase interest rates later this year if the U.S. economy remains on track. Greenback was also boosted by dovish European Central Bank meeting on Thursday. ECB President Mario Draghi left a wide range of options on the table and emphasized that a long-awaited rise in inflation is predicated on "very substantial" monetary accommodation. The dollar index rose as high as 98.813, the highest since Feb 3. The euro fell as low as $1.0859, the lowest since March 10.
GBP/USD is supported in the range of 1.2140 and currently trading at 1.2227 levels. It reached session high at 1.2238 and hit low at 1.2165 levels. British pound initially declined against the greenback on Friday but rebounded in the late US session erasing early losses as some investors took profit following recent dollar rally that received a boost on recent solid U.S. data. The pound has fallen nearly 18 percent since the June vote with losses accelerating in October after May raised the spectre of a "hard" Brexit, where the government will negotiate for an exit that favours tighter immigration controls over free trade, likely curbing foreign investment needed to fund Britain's huge current account deficit. Sterling's slide has sent inflation expectations soaring, driving investors to reassess chances of further easing by the Bank of England this year. Sterling hit low at $1.2270 in the mid-morning US session, but rebounded back erasing early losses to trade at $1.2227.
USD/CAD is supported at 1.3217 levels and is trading at 1.3332 levels. It has made session high at 1.3354 and lows at 1.3298 levels. The Canadian dollar declined sharply against U.S. dollar on Friday as weaker-than-expected domestic data fueled interest rate cut bets weighing on risk-sensitive Canadian dollar. Canada's annual inflation rate rose less than expected in September as the cost of gasoline fell, while food prices saw their smallest gain since 2000, data from Statistics Canada showed on Friday. The annual inflation rate rose to 1.3 percent, though that was shy of forecasts for an increase of 1.5 percent. Annual core inflation, which strips out some volatile items and is watched by the Bank of Canada, held steady at 1.8 percent, as expected. The Canadian dollar last traded at C$1.3332 to the greenback, or 75.04 U.S. cents, weaker than Thursday's close of C$1.3222, or 75.63 U.S. cents.
AUD/USD is supported around 0.7580 levels and currently trading at 0.7604 levels. It hit session high at 0.7615 and made session lows at 0.7586 levels. The Australian dollar edged lower against US dollar on Friday as recent poor employment report fuelled the risk of further rate cuts by Reserve Bank of Australia. The Aussie has been resilient in recent weeks against a resurgent U.S. dollar but recent dovish comments by the Reserve Bank of Australia in the minutes of its October policy meeting and the latest jobs data tamed its rise. Thursday's data showed a drop of 53,000 full-time jobs and a decline in the number of people looking for work. The Australian dollar was trading at $0.7604, having slid 1.3 percent on Thursday, the most since Sept. 13. Despite the decline, the Aussie is still set to end the week mostly unchanged.
Equities Recap
European stock markets posted a weekly gain on Friday, as a rebound in bank shares and some well-received company results lent markets support in spite of uncertainty over future monetary policy.
UK's benchmark FTSE 100 closed down by 0.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.01 percent, Germany's Dax ended flat, France’s CAC finished the day down by 0.1 percent.
The S&P 500 and the Dow were little changed and the Nasdaq advanced on Friday as a record day for Microsoft and earnings from McDonald's helped offset a fall in energy and healthcare shares.
Dow Jones closed down by 0.10 percent, S&P 500 ended up by 0.02 percent, Nasdaq finished the day up by 0.23 percent.
Treasuries Recap
U.S. Treasury yields were little changed on Friday as expectations the Federal Reserve would raise U.S. interest rates by year-end offset demand for bonds following comments by European Central Bank President Mario Draghi on bond purchases.
Benchmark 10-year Treasury notes were up 2/32 in price to yield 1.738percent, down less than 1 basis point from late Thursday. It reached a four-month peak at 1.841 percent on Monday.
The spread between U.S. five-year and 30-year yields earlier narrowed by 2 basis points before ending little changed on the day at 125 basis points.
Shorter-dated yields were marginally higher on expectations the Fed would raise interest rates at its Dec. 13-14 meeting.
Commodities Recap
Gold prices were little changed on Friday as a strong dollar limited gains, but the precious metal notched its first weekly rise in four as seasonal demand from Asia kicked in.
Spot gold was up 0.1 percent at $1,267.23 an ounce by 2:57 p.m. EDT (1857 GMT). For the week, prices rose 1.4 percent, clawing back part of the 6.6 percent shed over the last three weeks.
U.S. gold futures ended the session up 0.02 percent at $1,267.70.
Oil settled up on Friday on hopes Russia and OPEC will reach agreement at the weekend on market support initiatives to keep crude above $50 a barrel, although traders cautioned about pressure from a double-digit rise in the U.S. oil rig count.
Brent settled up 40 cents, or 0.8 percent, at $51.78. For the week, it ended flat. U.S. West Texas Intermediate crude settled up 22 cents, or 0.4 percent, at $50.85 a barrel.
