Market Roundup
• US Sep Industrial Production m/m, 0.3%, 0.2% forecast, 0.4% previous.
• US Sep Industrial Production y/y, 5.14%, 4.86% previous.
• US Aug JOLTS Job Openings, 7.136M, 6.945M forecast, 6.939M previous, 7.077M revised.
• US Sep Capacity Utilization SA, 78.1%, 78.2% forecast,78.1% previous.
• US Sep Manuf Output m/m, 0.2%, 0.2% forecast, 0.2% previous, 0.3% revised.
• US Oct NAHB Housing Market Index, 68, 67 forecast, 67 previous.
• US Senate will not vote on new North America trade pact in 2018 –McConnell.
• U.S. mortgage supply expected to drop in 2019, rise in 2020 –MBA.
• Argentine peso up 2.19 pct on higher interest rates –traders.
• Turkish lira firms to its strongest in two months against dollar.
• Stand together, Britain's May calls for unity on Brexit.
Looking Ahead - Economic Data (GMT)
• No major economic data is scheduled
Looking Ahead - Events, Other Releases (GMT)
• 07:00 Riksbank executive board meeting in Stockholm
• 07:30 ECB’s Peter Praet speaks at "La Caixa" conference in Madrid, Spain
• 08:30 Record of Financial Policy Committee meeting of Oct. 3, 2018
• 13:15 BoE’s Jon Cunliffe appears before parliament's Treasury Committee for a re-appointment hearing in London
• 16:10 Fed’s Lael Brainard speaks on "Fintech and Financial Inclusion" before a conference in Boston
• 19:00 FOMC releases minutes from its September 25-26 policy meeting
Currency Summaries
EUR/USD is likely to find support at 1.1532 levels and currently trading at 1.1572 levels. The pair has made session high at 1.1620 and hit lows at 1.1564 levels. The euro was little changed against dollar on Tuesday as mounting tensions between western powers and Saudi Arabia kept investors cautious. Concerns about rising tensions between western powers and Saudi Arabia have weighed on markets this week. Saudi Arabia has been under pressure since prominent Saudi journalist Jamal Khashoggi, a critic of Riyadh and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul. U.S. Secretary of State Mike Pompeo met Saudi Arabia's king and crown prince to discuss the disappearance of Khashoggi on Tuesday, and Turkey's foreign minister said Pompeo would bring information about the case to Ankara. The next economic focus for markets will be the release of the minutes from the Federal Reserve's September meeting on Wednesday, which will be evaluated for any new indications on how many further rate increases are likely. On the data front,U.S. industrial production increased for a fourth straight month in September, boosted by gains in manufacturing and mining output, but momentum slowed sharply in the third quarter. Against a basket of its rivals, the dollar rose 0.03 percent at 95.07. It has fallen 1.2 percent in the last eight sessions to a three-week low.
GBP/USD is supported in the range of 1.3081 levels and currently trading at 1.3182 levels. It reached session high at 1.3234 and dropped to session low at 1.3166 levels. Britain's pound gained against the dollar on Tuesday as investors prepared for a European Union summit where diplomats will try to pave the way for an agreement on Brexit.Traders have been unwinding short positions on sterling, in part because they see a growing chance of a breakthrough at Wednesday's EU summit in Brussels. With only six months before Britain leaves the EU, major obstacles remain to securing an agreement, including how to keep an open border between the British province of Northern Ireland and the EU member Ireland. It is not clear what EU leaders will be able to agree on on Wednesday, when UK Prime Minister Theresa May will give her view of the Brexit talks. Even if the Irish border issue is resolved, investors fear it could signal the start of another, potentially tougher battle for May with her own lawmakers, many of whom want a clean break from Europe. The pound rose 0.3 percent to $1.3197 against the dollar. It gained 0.1 percent to 87.85 pence against the euro.
USD/CAD is supported at 1.2886 levels and is trading at 1.2933 levels. It has made session high at 1.2952 and lows at 1.2914 levels. The Canadian dollar strengthened to nearly a one-week high against the greenback on Tuesday, boosted by a rise in stocks and growing expectations of a Bank of Canada interest rate hike next week. Stocks gained as upbeat earnings reports helped ease jitters over the impact of various global issues, including tariffs, on corporate profits. Canada runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows.Still, Canadian business optimism remained at near-record levels in the third quarter as companies reported rising pressure on capacity, labor and prices amid signs of stronger sales, the Bank of Canada said on Monday. The central bank has raised rates four times since July 2017. Its policy rate is currently 1.50 percent. Chances of another rate hike at the Oct. 24 announcement have climbed to more than 90 percent. They were less than 80 percent before a deal to revamp the North American Free Trade Agreement was struck at the end of September.
USD/JPY is supported around 111.60 levels and currently trading at 112.28 levels. It peaked to hit session high at 112.28 and made session lows at 112.02 levels. The dollar edged higher against the Japanese yen on Tuesday as rising stock markets reflected an improved risk appetite. The three main Wall Street indexes each rose more than 1.5 percent as upbeat earnings from blue-chips such as Johnson & Johnson and Goldman Sachs eased jitters over the impact of rising interest rates and tariffs on corporate profits. The greenback was also supported as benchmark 10-year Treasury yields surged to a seven-year high of 3.26 percent. The improved risk tone reduced demand for safe-haven currencies such as the Japanese yen and Swiss franc. Meanwhile, domestic data signaled the U.S. economy likely grew at a solid pace in the third quarter. The Labor Department said domestic job openings grew to 7.14 million in August, the highest on record, while the Federal Reserve Board said industrial production rose 0.3 percent last month, slightly stronger than an expected 0.2 percent gain. Against this upbeat economic backdrop, traders await possible clues on the Fed's stance on future hikes when it releases the minutes of its September policy meeting at 2 p.m. (1800 GMT) on Wednesday.
Equities Recap
European shares rebounded from a 22-month low on Tuesday as optimism fuelled by the start of the reporting season and buoyant results from Goldman Sachs from Morgan Stanley lifted investor sentiment.
UK's benchmark FTSE 100 closed down 0.4 percent, the pan-European FTSEurofirst 300 ended the day down by 1.41 percent, Germany's Dax ended down by 1.4 percent, France’s CAC finished the day up by 1.5 percent.
U.S. stocks surged more than 2 percent on Tuesday after upbeat earnings reports from major companies, including UnitedHealth and Goldman Sachs, and solid economic data, as equities rebounded from a recent sharp sell-off.
Dow Jones closed up by 2.19 percent, S&P 500 ended up by 2.16 percent, Nasdaq finished the day up by 2.90 percent.
Treasuries Recap
U.S. Treasury yields were little changed on Tuesday as the bond market settled into a tight trading range in the aftermath of wild swings stemming from worries about inflation and a rout across global equities.
On moderate trading volume, the 10-year Treasury yield was down marginally at 3.160 percent. A week ago, it reached a seven-plus year high at 3.261 percent.
The 30-year yield slipped half a basis point at 3.336 percent, which was below the four-year peak at 3.446 percent set last week.
Commodities Recap
Gold held steady near 2-1/2-month highs on Tuesday as dollar weakness offset improved risk appetite among investors, reflected in recovering global stock markets.
Spot gold was unchanged at $1,226.29 per ounce by 1:52 p.m. EDT (1752 GMT), having peaked at $1,233.26 in the previous session, its highest since July 26.U.S. gold futures settled up $0.7, or 0.1 percent, at $1,231 an ounce.
Oil prices edged up in cautious trade on Tuesday as expectations of higher U.S. shale output and inventories vied with worries that crude supply from the Middle East could be disrupted by looming U.S. sanctions on Iran and growing tensions with top exporter Saudi Arabia.
Brent crude rose 63 cents, or 0.8 percent, to settle at $81.41 a barrel, while West Texas Intermediate (WTI) crude ended the session up 14 cents at $71.92 a barrel.
