Market Roundup
• US 29 Sep w/e Redbook m/m, 0.3%, 0.3% previous.
• US 29 Sep w/e Redbook y/y, 5.7%, 5.8% previous.
• US Sep ISM-New York Index, 822.0, 810.7 previous.
• US Sep ISM NY Biz Conditions, 72.5, 76.5 previous.
• Powell: U.S. outlook "remarkably positive" with low unemployment, tame inflation.
• Defiant Italy says no turning back on budget despite EU "threats".
• Argentina's peso extends rally on high-yield bond sales.
• "Chuck Chequers", Johnson challenges PM May on Brexit.
• South Africa's central bank will intervene if fx orderly function threatened.
Looking Ahead - Economic Data (GMT)
• 3 Oct 06:00 Japan Sep Services PMI, 51.5 previous
• 3 Oct 04:00 Australia Sep AIG Services Index, 52.2 previous
• 3 Oct 07:00 Australia Aug Building Approvals, -5.2% previous, 1.0% forecast
• 3 Oct 07:00 Australia Aug Private House Approvals, -6.6% previous
Looking Ahead - Events, Other Releases (GMT)
• Oct 3 00:00 Federal Reserve Bank of Dallas President Robert Kaplan participates in an event hosted by Kansan University School of Business in Lawrence, Kansas.
• Oct 3 06:20 Keynote speech by ECB Board Member Yves Mersch at a Latvijas Banka conference in Riga, Latvia.
• Oct 3 10:00 Andrea Schaechter, IMF Mission Chief for Spain will hold a press conference on IMF's 2018 yearly review of the Spanish economy in Madrid.
• Oct 3 10:30 Federal Reserve Bank of Chicago President Charles Evans gives Official Monetary and Financial Institutions Forum (OMFIF) City Lecture on the U.S. economic outlook in London.
• Oct 3 12:05 Federal Reserve Bank of Richmond President Thomas Barkin speaks at the West Virginia Economic Outlook Conference, in Charleston, W.Va.
• Oct 3 17:15 Federal Reserve Bank of Philadelphia President Patrick Harker speaks before a conference co-sponsored by the Federal Reserve Banks of Richmond and Philadelphia, in Baltimore, Md.
• Oct 3 18:00 Federal Reserve Board Governor Lael Brainard speaks on "Payment System" before the FedPayments Improvement Community Forum in Chicago.
• Oct 3 18:00 Federal Reserve Bank of Richmond President Thomas Barkin speaks before Marshall University students, in Huntington, W.Va.
• Oct 3 18:00 Federal Reserve Bank of St. Louis President James Bullard gives welcome remarks before the Community Banking in the 21st Century conference hosted by the Federal Reserve Bank of St. Louis.
• Oct 3 20:00 Federal Reserve Chairman Jerome Powell participates in discussion before event, The Atlantic Festival in Partnership with the Aspen Institute in Washington D.C.
Currency Summaries
EUR/USD is likely to find support at 1.1500 levels and currently trading at 1.1554 levels. The pair has made session high at 1.1570 and hit lows at 1.1529 levels. The euro declined to hit 6-week low against dollar on Tuesday after a senior lawmaker in one of Italy's ruling parties said most of the country's problems would be resolved if it readopted a national currency. Italy’s coalition proposed a budget with a higher-than-expected deficit target, exacerbating tensions with other euro zone leaders and worrying investors who want Rome to bring its debt under control. Most of the common currency's losses came after Borghi, the economic head of the right-wing League party, said Italy would enjoy more favorable economic conditions outside the euro zone. The U.S. dollar has strengthened against the euro since Wednesday, when the Federal Reserve raised interest rates as expected and said it foresees another rate hike in December, three more next year and one in 2020. Fed Chair Jerome Powell on Tuesday hailed a "remarkably positive outlook" for the U.S. economy, which he feels is on the verge of a "historically rare" era of ultra-low unemployment and tame prices. The dollar index rose 0.25 percent to 95.531, after rising to 95.744, the highest level since Aug. 21.
GBP/USD is supported in the range of 1.2919 levels and currently trading at 1.2981 levels. It reached session high at 1.2994 and dropped to session low at 1.2954 levels. Britain's pound declined to hit 3-week lows against the dollar on Tuesday. Sterling's fortunes are being driven by headlines about May's proposal for Britain exiting the European Union in six months and whether she can persuade the block and senior members of her own party to accept it.In particular, traders are focused on a new offer Britain is preparing to make to the EU on the Irish border, aimed at breaking the deadlock in Brexit talks before a decisive EU summit in late October. At her party's annual conference this week, May is defending her so-called Chequers plan for leaving the EU. But critics, including former foreign secretary Boris Johnson are openly defying her. The currency spiked on Monday following a report that Britain might back down on customs checks between mainland Britain and Northern Ireland, a major obstacle to Brexit. A potential downside risk for sterling is the prospect of May's own party challenging her leadership. Sterling had relinquished all of those gains and was trading down half a percent versus a rallying dollar at $1.2979, its lowest since Sept. 10. It was flat versus a weaker euro at 88.88 pence.
USD/CAD is supported at 1.2780 levels and is trading at 1.2817 levels. It has made session high at 1.2837 and lows at 1.2801 levels. The Canadian dollar was little changed against its broadly stronger U.S. counterpart on Tuesday, holding on to most of the gains that followed a deal over the weekend to keep Canada in a revamped NAFTA trade pact. The deal to salvage the trilateral North American Free Trade Agreement has reduced uncertainty for Canada's trade-dependent economy, boosting investor expectations for as many as four additional interest rate increases from the Bank of Canada by the end of 2019. The first of those hikes is expected at the bank's Oct. 24 policy meeting. The U.S. dollar climbed against a basket of other major currencies as the euro was pressured by Italian political developments. The price of oil, one of Canada's major exports, remained near its highest since November 2014 as markets braced for tighter supply once U.S. sanctions against Iran kick in next month. The price of U.S. crude was up 0.2 percent at $75.44 a barrel. The Canadian dollar was last trading nearly unchanged at C$1.2817 to the greenback, or 78.02 U.S. cents, outperforming every other G10 currency except the safe-haven yen and Swiss franc.
USD/JPY is supported around 113.28 levels and currently trading at 113.57 levels. It peaked to hit session high at 113.91 and made session lows at 113.51 levels. The dollar was little changed against the Japanese yen on Tuesday as risk appetite faded after getting a boost from an agreement between the United States and Canada to salvage a North American free trade deal. The newly minted United States-Mexico-Canada Agreement, announced on Sunday, preserves a $1.2 trillion open-trade zone that was on the brink of collapse after nearly a quarter century. Optimism surrounding a last-minute deal between the United States and Canada on Sunday to salvage NAFTA as a trilateral pact with Mexico, had increased the appetite for riskier assets on Monday. While fears about international trade conflicts between the United States and major trading partners including China have lifted the dollar 3.4 percent this year, an increasingly confident U.S. Federal Reserve has also boosted the greenback. Against the Japanese yen, the dollar rose 0.06 percent to 113.91 yen on Tuesday. Following the U.S.-Canada trade deal, the yen fell as low as 114.06 per dollar, its weakest since November 2017.The greenback is now up just over 1 percent against the yen this year. It strengthened 2.3 percent against the Japanese currency in September.
Equities Recap
European shares fell on Tuesday, failing to benefit from a more positive mood on Wall Street as anti-euro rhetoric from a senior Italian lawmaker spooked investors also concerned about the fate of Britain's negotiations to leave the EU.
The UK's benchmark FTSE 100 closed down by 0.2 percent, FTSEurofirst 300 ended the day down by 0.53 percent, Germany's Dax ended down by 0.5 percent, and France’s CAC finished the down by 0.7 percent.
The Dow hit a record closing high on Tuesday, but another drop in Facebook shares weighed on both the S&P 500 and Nasdaq, driving both to finish in the red.
Dow Jones closed up by 0.46 percent, S&P 500 ended down 0.05 percent, Nasdaq finished the day down by 0.48 percent.
Treasuries Recap
The yield curve flattened on Tuesday as a hawkish afternoon speech from Federal Reserve Chair Jerome Powell lifted the short end of the curve while the long end remained muted as investors sought safety from the Italian bond selloff.
The U.S. 10-year yield was last at 3.056 percent and the 30-year bond yield was at 3.205 percent. The move erased a rise in U.S. yields on Monday following the negotiation of a trilateral free-trade pact between the United States, Canada and Mexico.
Commodities Recap
Gold hit its highest in more than a week on Tuesday, vaulting the $1,200 per ounce mark, as investors sought refuge in the metal after stock markets sold off due to anti-euro comments by an Italian lawmaker.
Spot gold jumped 1.3 percent to $1,202.81 per ounce by 2:20 p.m. EDT (1820 GMT), and was on track to post its biggest one-day percentage gain since Aug. 24.Prices earlier touched $1,208.23 an ounce, the highest since Sept. 21.
U.S. gold futures for December delivery settled up $15.3, or 1.28 percent, at $1,207 per ounce.
Oil prices eased slightly on Tuesday after rallying for three straight sessions, but remained close to four-year highs on worries that global supplies will drop due to Washington's sanctions on Iran.
Brent fell 18 cents to settle at $84.80 per barrel, a day after hitting a four-year high of $85.45. U.S. West Texas Intermediate (WTI) crude futures were off 7 cents at $75.23 a barrel, after earlier touching a four-year high of $75.91.
