Market Roundup
• UK ready to drop Brexit demand on Irish border – Bloomberg.
• UK PM May tells businesses EU is committed to autumn Brexit deal.
• US Sep Existing Home Sales, 5.15M, 5.30M forecast, 5.34M revised, 5.33M revised.
• US Sep Existing Home Sales % Chg, -3.4%, -0.7% forecast, 0% previous, -0.2% revised.
• Fed's Kaplan sees 2-3 more rate hikes to hit 'neutral' level.
• Fed monitoring Khashoggi case, potential oil market impact –Bostic.
• U.S. Fed is raising rates for good reasons, BoE's Carney says.
• Clash over Trump tariffs heats up with barrage of WTO litigation.
• CA Sep CPI Inflation y/y, 2.2%, 2.7% forecast, 2.8% previous.
• CA Aug Retail Sales m/m, -0.1%, 0.3% forecast, 0.3% previous, 0.2% revised.
• Italy's Conte sees no need to change budget despite EU concern.
• Money-laundering watchdog to set first cryptocurrency rules by June.
Looking Ahead - Economic Data (GMT)
• 20 Oct 01:30 China Sep House Prices y/y, 7% previous
Looking Ahead - Events, Other Releases (GMT)
• 20 Oct 16:00 Atlanta Fed's Raphael Bostic participates in armchair discussion on the economy at a community conversation event in Atlanta
Currency Summaries
EUR/USD is likely to find support at 1.1434 levels and currently trading at 1.1510 levels. The pair has made session high at 1.1536 and hit lows at 1.1459 levels. The euro rose against dollar on Friday after Bloomberg News reported that British Prime Minister Theresa May is ready to drop a key Brexit demand in order to make a deal for Britain to leave the European Union (EU).May is willing to drop a requirement on the issue of the Irish border, which has impeded the two parties coming to an agreement, Bloomberg reported, citing anonymous sources.EU negotiator Michel Barnier earlier said that a Brexit deal was 90 percent done, but warned that failure to resolve the Irish border question could derail any agreement. The euro and sterling have been burdened this week by delays in the two parties reaching an exit deal.The single currency gained to $1.1512, after earlier falling to $1.1433, the lowest since Oct. 9. It is down from $1.1621 on Tuesday. Investors taking profits on bets against the euro before the weekend also helped support the single currency on Friday. The European Commission on Thursday sent Rome a letter calling a draft budget an "unprecedented" breach of EU fiscal rules, the first step of a procedure that could end with Brussels rejecting the budget and fining Italy.
GBP/USD is supported in the range of 1.3000 levels and currently trading at 1.3064 levels. It reached session high at 1.3102 and dropped to session low at 1.3020 levels. Britain's pound strengthened against the dollar on Friday after EU Brexit negotiator Michel Barnier said a deal with the United Kingdom was 90 percent done, although undercurrents of uncertainty in Britain kept the gains in check. More positive noises out of Brussels about reaching a Brexit agreement - the dominant driver of sterling - have been offset by growing unease within Prime Minister Theresa May's Conservative party about the sort of deal she is hoping to forge. Sterling rose immediately after Barnier's comments, extending to as high as $1.3102.It was last trading at $1.3062 in the late US session. On Thursday, May and other EU leaders voiced renewed confidence that they could secure a Brexit deal, yet the two sides remain at odds over how to deal with their only land border, between the British province of Northern Ireland and Ireland. Barnier said on Friday that failure to resolve that issue could still derail any deal. Britain's foreign minister Jeremy Hunt said on Friday it would be hard to resolve the issue of a backstop to the Irish border problem in Brexit talks with the EU without more detail on their future relationship.
USD/CAD is supported at 1.3021 levels and is trading at 1.3109 levels. It has made session high at 1.3130 and lows at 1.3080 levels. The Canadian dollar weakened to its lowest in more than five weeks against the greenback on Friday after domestic data showing a slowdown in inflation suggested the Bank of Canada would be unlikely to speed up the pace of interest rate hikes. The annual inflation rate in September dipped to 2.2 percent from 2.8 percent as price pressures from gas and air travel eased. Analysts had forecast an annual rate of 2.7 percent. The central bank's three core inflation measures all fell, for the first time since November 2016. The central bank said in September that it had discussed dropping its gradual approach to raising rates. A faster pace of tightening could boost the loonie. Money markets still expect the Bank of Canada to lift its policy rate by 25 basis points next week to 1.75 percent, but the amount of tightening seen by March slipped to 51 basis points from 55 basis points before the data. Separate data showed that the value of Canadian retail trade unexpectedly fell by 0.1 percent in August, the second decline in three months. The loonie had been trading higher ahead of the data as oil prices rebounded. After the data it slumped to its weakest since Sept. 11 at 1.3120 before recovering. The Canadian dollar was last trading 0.2 percent lower at 1.3115 to the greenback.
AUD/USD is supported around 0.7103 levels and currently trading at 0.7118 levels. It hit session high at 0.7150 and made session lows at 0.7116 levels. The Australian dollar strengthened against greenback on Friday after Beijing offset a mixed bag of Chinese data by pledging more support for the economy, though risk sentiment remained all-too fragile after a rough week. The Aussie dollar firmed 0.1 percent to $0.7118, though that followed repeated failures to crack $0.7150 resistance and left it flat on the week. China's third quarter economic growth slowed to its weakest pace since the global financial crisis, and missed expectations, as a years-long campaign to tackle debt risks and the trade war with the United States began to bite.The economy grew 6.5 percent in the third quarter from a year earlier, slower than the second quarter, the National Bureau of Statistics said on Friday. Analysts polled had expected the economy to expand 6.6 percent in the July-September quarter. The GDP reading was the weakest year-on-year quarterly growth since the first quarter of 2009 at the height of the global financial crisis. The dollar index against a basket of currencies was down 0.2 percent, retreating from a one-week peak scaled earlier in the session.
Equities Recap
European stocks ended a choppy trading session broadly flat on Friday but managed to eke out a weekly gain despite mixed third-quarter earnings and while the budget row between Italy's populist government and the European Union heated up.
UK's benchmark FTSE 100 closed up 0.4 percent, the pan-European FTSEurofirst 300 ended the day up by 0.15 percent, Germany's Dax ended down by 0.3 percent, France’s CAC finished the day down by 0.6 percent.
The benchmark S&P 500 stock index slipped on Friday as strong earnings from Procter & Gamble Co were offset by ongoing concerns about rising interest rates and geopolitical tensions denting U.S. economic growth.
Dow Jones closed up by 0.23percent, S&P 500 ended down by 0.06 percent, Nasdaq finished the day down by 0.50 percent.
Treasuries Recap
U.S. Treasury yields rose on Friday, with the 10-year yield hovering near a one-week high as traders pared safe-haven bond positions stemming from hopes for reduced tension between Italy and the European Commission over the country's debt-laden budget.
Benchmark 10-year Treasury yield yield was 3.200 percent, up over 2 basis point from Thursday when it reached a one-week peak of 3.179 percent. Last week, it reached a 7-1/2 year peak of 3.261 percent.
Commodities Recap
Oil prices rose on Friday on signs of surging demand in China, the world's No. 2 oil consumer, although prices were headed for a second weekly decline on swelling U.S. inventories and concern that trade wars were curbing economic activity.
Brent crude futures rose 49 cents to settle at $79.78 a barrel. West Texas Intermediate (WTI) crude futures rose 47 cents to settle at $69.12 a barrel.
Gold prices edged up on Friday and were on course for a third straight week of gains, supported by robust technical momentum and a softer dollar.
Spot gold was up 0.1 percent to $1,225.75 an ounce by 3:14 p.m. EDT (1914 GMT). U.S. gold futures settled down $1.4, or 0.11 percent, at $1,228.7.
