Market Roundup
- Specs boost USD net longs to highest since February, market still net long JPY, AUD though – CFTC, Reuters.
- US sees no currency manipulation, adds Switzerland to watch list alongside China, Japan, South Korea and Germany – Reuters.
- NY Fed Dudley – Moving ever so slowly towards rate hike – Wall St Journal.
- BoJ Gov Kuroda – Sticks to script, to adjust policy as needed to achieve 2% inflation goal – Reuters.
- Japan Reuters Tankan Oct mfg index +10, non-mfg +9, September +5, +14, mfg index eyed at zero in January, non-mfg at +22.
- Japan makes early push in Asia to ratify TPP trade deal, Australia also although some see drive backfiring in US – Wall Street Journal.
- Japan's Nidec still hungry for large M&A deals – Nikkei.
- PBOC fixes CNY at 6.7379 vs USD, highest September ’10, last close 6.7271.
- UK looks at paying billions into EU budget after Brexit – Financial Times.
- Australia seen grabbing uninterrupted GDP growth record – Reuters poll.
- New Zealand Sept BNZ/BNZ PSI -3.8 points to 54.1, still well in expansion territory.
Economic Data Ahead
- (0400 ET/0800 GMT) Italy Aug trade balance – global/EU; last E7.8 and E52.91 bln surpluses.
- (0500 ET/0900 GMT) Eurozone Sep inflation – final, +0.4% m/m, +0.4% y/y eyed; flash +0.1%, +0.4%.
- (0500 ET/0900 GMT) Eurozone Sep – ex-food/energy, +0.5% m/m, +0.8% y/y eyed; flash +0.2%, +0.8%.
- (0830 ET/1230 GMT) United States Oct NY Fed Empire State manufacturing index, 1.00 eyed; last -1.99.
- (0915 ET/1315 GMT) United States Sep industrial output, +0.2% m/m eyed; last -0.4%.
- (0915 ET/1315 GMT) United States Sep capacity utilization, 75.6% eyed; last 75.5%.
Key Events Ahead
- N/A BoJ quarterly branch managers meeting, various speakers.
- N/A Riksbank executive board meeting, BTP Italia syndication.
- (0515 ET/0915 GMT) Slovakia 1.375% 2027, 1.625% 2031, zero% 2023 SLOVGB228/229/230 auctions.
- (0540 ET/0940 GMT) Netherlands 3 and 6-month DTC auctions.
- (0945 ET/0945 GMT) ECB Mersch speaks at Universite de Luxembourg event.
- (0830 ET/1230 GMT) Canada August securities flow data, last C$5.23 bln net inflows.
- (0850 ET/1250 GMT) France BTF treasury note auctions.
- (1045 ET/1445 GMT) BoE DepGov Broadbent parliamentary testimony.
- (1215 ET/1615 GMT) FOMC ViceChair Fischer speaks at Economic Club of New York.
- (1335 ET/1735 GMT) ECB Pres Draghi address at ECB European Cultural Days ’16 reception.
- (1710 ET/2110 GMT) RBA Gov Lowe speech at Sydney conference.
FX Beat
DXY: The dollar gained versus the euro and the yen as upbeat U.S. data last week stoked expectations of a rate hike by Fed as early as December. The greenback against a basket of currencies traded flat at 98.08, having hit a fresh 7-month high of 98.17 earlier in the session.
EUR/USD: The euro steadied after declining to a 2-1/2-month low below the 1.1000 handle on positive U.S. macro fundamentals which boosted the chances of another rate hike by the Fed before the year-end. The European Central Bank meets on Thursday, where it is widely expected to extend its QE program further, before beginning the QE Taper. The major trades 0.1 percent up at 1.0981, having touched an early low of 1.0963, its weakest since July 27. Looking ahead in the day, attention will remain on Eurozone’s consumer price index and US-German bond yield spread, ahead of U.S. industrial production figures and ECB President Draghi's speech. Immediate resistance is located at 1.1014 (5-DMA)/, break above could take it till 1.1040/ 1.1080. On the downside, support is seen at 1.0951, a break below could drag it till 1.0910.
USD/JPY: The dollar rose, opening on a weekly bullish gap as increasing expectations of Fed rate hike bets kept the spot above 103.00 levels. However, the major came under renewed selling pressure after the People’s Bank of China announced a lowest Yuan fix since 2010, triggering risk-off market sentiment. The major traded higher at 104.25, pulling away from an intra-day low of 103.94. The pair is likely to remain on the upside, as upbeat U.S. data released last week and a rise in U.S. yields to 4-month highs buoyed the greenback. Investors will continue to track broad based market sentiment, ahead of U.S. industrial production figures and third & final U.S. presidential debate between Democrat Hillary Clinton and Republican Donald Trump due on Wednesday. Immediate resistance is located at 104.65, a break above targets 105.00/105.60. On the downside, support is seen at 103.65 (10-DMA), a break below could take it near 103.20/ 103.00.
GBP/USD: Sterling is seen making an attempt to fill a weekly bearish gap opening amid growing “hard Brexit" worries. On Friday, BoE Gov Carney reiterated that the central bank did not target a particular exchange rate for the pound and that the currency’s level did not matter for inflation and the conduct of monetary policy. Sterling trades 0.2 percent down at 1.2155, attempting to regain the 1.2200 handle. Data released overnight showed UK Rightmove house price index rising at 0.9 percent in October as compared to 0.7 in the previous month. The pair will be driven by developments surrounding Brexit, ahead of Britain's leading economic index, which is likely to have less impact on the major. Immediate resistance is located at 1.2270, a break above could take it above 1.2300. On the downside, support is seen at 1.2100, break below targets 1.1900. Against the euro, the pound trades 0.4 percent lower at 90.37 pence.
AUD/USD: The Australian dollar declined, giving back some of its previous session gains, as the U.S. dollar strengthened on positive economic data that reinforced prospects of a December interest rate hike by the Federal Reserve. Moreover, weaker daily Yuan fix and lower commodity prices also weighed on the Aussie, however, fading expectations of the RBA cutting rates cut provided some support. The major trades 0.2 percent lower at 0.7602, recovering from an intra-day low of 0.7581. The Aussie traders now await Reserve Bank of Australia (RBA) Governor Philip Lowe speech and minutes of the RBA's October policy meeting for further clues. Immediate support is seen at 0.7577 (5-DMA), a break below could drag it till 0.7530. On the upside, resistance is located at 0.7640, a break above targets 0.7670/ 0.7700.
NZD/USD: The New Zealand dollar rebounded, extending gains above the 0.7100 handle. On Friday, the major rose to a high of 0.7132 but closed lower at 0.7084 as positive U.S. retail sales and producer prices showed a pickup in inflation, raising the likelihood of a December rate hike to about 70 percent, from 65 percent last week. The Kiwi trades 0.3 percent higher at 0.7107, hovering towards a high of 0.7132 hit in the previous session. However, the upside likely remains capped amid lower oil prices, weaker Yuan fix and increasing speculation of RBNZ easing in November. Markets will closely watch U.S. IP number, ahead of New Zealand's inflation data, which is expected to show a further slowdown to just 0.1 percent in the year to September. Immediate resistance is located at 0.7124 (10-DMA), break above targets 0.7150/ 0.7180. On the downside, support is seen at 0.7050, a break below could drag it lower 0.7030/ 0.7000.
Equities Recap
Asian shares tumbled, while the dollar stood firm near 7-month high against a basket of currencies after comments from Fed Chair Janet Yellen strengthened long-dated U.S. bond yields.
MSCI's broadest index of Asia-Pacific shares outside Japan slumped 0.7 percent.
Tokyo's Nikkei rose 0.29 percent at 16,900.12 points, Australia's S&P/ASX 200 index declined 0.7 percent at 5,396.70 points and South Korea's KOSPI added 0.4 percent at 2,030.21 points.
Shanghai composite index edged up 0.02 percent at 3,064.56 points, while CSI300 index traded 0.08 percent lower at 3,303.16 points.
Hong Kong’s Hang Seng was trading 0.6 percent down at 23,095.86 points. Taiwan shares rose 0.1 percent to 9,176.22 points.
Commodities Recap
Crude oil prices edged down, weigh down by a strong dollar and increasing rig count in the United States amid slowing global economic growth that could hamper fuel demand. International benchmark Brent crude was trading 0.2 percent down at $51.87 per barrel at 0405 GMT, retreating from a peak of $53.71 hit last week. U.S. West Texas Intermediate crude declined 0.25 percent at $50.17 a barrel, having touched a high of 51.12 on Friday.
Gold prices were little changed as the dollar continued to strengthen after positive U.S. economic data late last week, boosted the prospects of Federal Reserve interest rate hike by year-end. Spot gold was trading 0.2 percent up at $1,253.29 an ounce by 0411 GMT, recovering from previous session losses. While, U.S. gold futures were down 0.3 percent at $1,252.30 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7889 percent lower by 0.003 bps, while 5-year was 0.002 bps down at 1.2802 percent.
The Australian government bonds traded lower ahead of the Reserve Bank of Australia Governor Philip Lowe’s speech. The yield on the benchmark 10-year Treasury note rose 4-1/2 basis points to 2.319 percent, the yield on 15-year note jumped 5 basis points to 2.682 percent and the yield on short-term 3-year climbed 1 basis point to 1.761 percent.
The New Zealand government bonds closed lower as investors await third quarter consumer inflation and Global Dairy Trade (GDT) price index figures. The yield on the benchmark 10-year bond rose 5 basis points to 2.560 percent, the yield on 7-year note ended 3 basis points higher at 2.245 percent and the yield on short-term 2-year note climbed 1 basis point to 1.920 percent.
