Market Roundup
• Hurricane recovery boosts U.S. September new auto sales.
• US Redbook w/e, 0.0% MM, 4.1% YY, 0.0%, 4.0% previous.
• US ISM-New York Index Sep, 748.6, 748.8 previous.
• US ISM NY Biz Conditions Sep, 49.7, 56.6 previous.
• Canada growth to surpass potential output -BoC's Leduc.
• Canada watchdog says mortgage changes to be finalized this month.
• Brazil inflation likely grinds to near halt in September.
• Trump praises response to Puerto Rico, says crisis straining budget.
• US Defense Secretary Mattis suggests sticking with Iran nuclear deal.
Looking Ahead - Economic Data (GMT)
• 22:30 Australia AIG Services Index Sep, 53.0 previous
Looking Ahead - Events, Other Releases (GMT)
• 16:15 ECB’s Draghi speaks at the inauguration of the ECB Visitor Centre in Frankfurt
• 18:30 BoE Dep Gov Sam Woods gives Speech at Mansion House, London
• 19:15 Fed Chair Yellen to speak at the Fed Reserve Bank of St. Louis
• N/A ECB Governing Council meeting. No interest rate announcements scheduled
Currency Summaries
EUR/USD is likely to find support at 1.1690 levels and currently trading at 1.1744 levels. The pair has made session high at 1.1771 and hit lows at 1.1736 levels. The euro edged slightly higher against the dollar on Tuesday as investors squared positions after a three-week greenback rally, and before three days of heavy data culminating in Friday's employment report for September. Stronger U.S. data along with the prospect of U.S. tax cuts and the likelihood of a further interest rate hike in December have boosted the U.S. currency in recent weeks. The euro was partially supported by large option expires on Tuesday that put a floor under the single currency. About $4 billion worth of currency options were expiring between the 1.1750 to 1.18 levels on Tuesday. However, euro’s upside was limited as an unexpected outcome of the German election on Sept. 24 and Sunday's violence-marred independence referendum in the Spanish region of Catalonia put the brakes on euro-bullish trades, with markets increasingly looking for the single currency to test the July lows of around $1.15.Traders and investors were also looking to add bets on the possible divergence between the monetary policy outlooks in the United States and Europe, with expectations growing that the European Central Bank will adopt a more cautious stance. The euro was last up 0.20 percent against the dollar at $1.1744.
GBP/USD is supported in the range of 1.3200 levels and currently trading at 1.3239 levels. It reached session high at 1.3266 and dropped to session low at 1.3231 levels. Sterling declined to hit three-week low against the dollar on Tuesday after data showed construction sector activity tumbled in September, and as investors worried about the political and economic uncertainty surrounding Britain's exit from the European Union. Brexit minister David Davis told the Conservative Party conference on Tuesday that Britain wants to negotiate an exit agreement with the EU but is ready to walk away with no deal, and that officials were "contingency planning" to make sure all scenarios were covered. The comments added to a sense of uncertainty over Britain's future both political and economic for investors that has dragged sterling down more than 10 percent against the dollar since last June's vote for Brexit. Despite foreign minister Boris Johnson saying at the conference that the cabinet was united behind every syllable of Prime Minister Theresa May's recent speech in Florence, the event has been overshadowed by reports of disunity and leadership bids from rivals in the government. Sterling was trading down 0.2 percent on the day at $1.3239, having earlier hit a three-week low of $1.3222. It also hit an 11-day low of 88.815 pence per euro, down around half a percent on the day.
USD/CAD is supported at 1.2455 levels and is trading at 1.2484 levels. It has made session high at 1.2524 and lows at 1.2478 levels. The Canadian dollar strengthened against its U.S. counterpart on Tuesday as lonnie was boosted by comments from Bank of Canada Deputy Governor Sylvain Leduc , while the greenback was slightly weaker as investors squared positions after a three-week rally and before several days of heavy U.S. data. Prices of oil, one of Canada's major exports, edged lower as speculators took profits on some large positions that have built up in the last couple of weeks. The Canadian dollar was trading at C$1.2597 to the greenback, up 0.1 percent. The currency's strongest level of the session was C$1.2475, while it touched its weakest since Aug. 31 at C$1.2539. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries after U.S. data on Monday backed expectations of another interest rate increase by the Federal Reserve before the end of the year. On the data front, Canada’s trade data for August is due on Thursday and the September employment report is scheduled for release on Friday.
AUD/USD is supported around 0.7783 levels and currently trading at 0.7833 levels. It hit session high at 0.7833 and made session lows at 0.7802 levels. The Australian dollar stayed near three-month low against the dollar on Tuesday after the country's central bank held rates steady as expected and cautioned that a higher currency would drag on the economy and inflation. The Aussie was down 0.4 percent at $0.7793 against U.S. dollar and is set to test chart support in the $0.7786/7795 zone. The Reserve Bank of Australia's (RBA) decision to keep rates at 1.5 percent was far from a surprise given Governor Philip Lowe recently stated it would be "some time" before a hike was likely. Lowe’s statement from Tuesday's October policy meeting maintained the same relaxed tone, noting inflation remained low and unemployment would decline only gradually despite recent strong jobs growth. Markets are not fully priced for a rate rise until August next year, a contrast with the U.S. Federal Reserve which continues to flag a possible hike in December this year. Oil prices dipped as speculators took profits for the second day after big third-quarter gains, but prospects for reducing the global crude glut lent support.
Equities Recap
European shares hovered around three-month highs on Tuesday as a sell-off in Spanish stocks eased and financials gained as Wall Street set fresh records.
UK's benchmark FTSE 100 closed up by 0.4 percent, the pan-European FTSEurofirst 300 ended the day up by 0.18 percent, France’s CAC finished the day up by 0.4 percent.
The S&P 500, the Dow, Nasdaq and the Russell 2000 indexes all posted record high closes for the second straight day on Tuesday, helped by gains in carmakers after strong September vehicle sales and a jump in airline shares.
Dow Jones closed up by 0.37 percent, S&P 500 ended up by 0.22 percent, Nasdaq finished the day up by 0.24 percent.
Treasuries Recap
U.S. Treasury debt yields fell on Tuesday in volatile trading as the market remained cautious two days after a mass shooting in Las Vegas, with investors also continuing to weigh the prospects of another interest rate hike this year.
In late trading, the benchmark 10-year U.S. Treasury note yield was 2.335 percent, down slightly from 2.337 percent late on Monday, while the 30-year yield was up at 2.876 percent, compared with Monday's 2.865 percent.U.S. two-year notes were at 1.475 percent, down from 1.487 percent on Monday.
Commodities Recap
Oil prices dipped on Tuesday as speculators took profits for the second day after big third-quarter gains and on concerns that higher prices might spur increased U.S. shale production.
Brent crude futures closed down 12 cents or 0.2 percent to $56.00 a barrel, having lost almost 2.5 percent on Monday. U.S. crude futures fell 16 cents or 0.3 percent to $50.42.
Gold on Tuesday rose above a seven-week low as the U.S. dollar came off its highs. Bullion was pressured earlier by strong U.S. economic data that reinforced expectations of another U.S. interest rate increase this year and pushed the dollar and U.S. bond yields higher.
Spot gold was up 0.1 percent at $1,272.04 per ounce by 3:13 p.m. EDT (1913 GMT), after the dollar flattened and U.S. bond yields eased from earlier highs.
U.S. gold futures for December delivery settled down $1.20, or 0.1 percent, at $1,274.60 per ounce, after hitting the lowest in nearly a month at $1,271.
