Market Roundup
- BoJ Gov Kuroda – Clarifies policy on yield curve targeting, curve slope shifts on economy-prices-financial developments view on Policy Board of need for steeper curve, won’t target 10-year JGB level, inappropriate, shifts too in amount of QQE depending on curve, more delay possible in achieving inflation target - Reuters.
- PBOC fixes USD/CNY at 6.7558, highest since September ’10, last close 6.7457.
- China SAFE – Commercial banks sell net $28.4 bln in September, Aug $9.5 bln, January-September $243.4 bln.
- China Sept new home prices +11.2% y/y, Aug +9.2%, Beijing +27.8%, Shanghai +32.7%, Aug +23.5% and +31.2%.
- Foreign CB US debt holdings -$23.695 bln to $3.122 trln October 19 week, Treasury holdings -$23.533 bln to $2.801 trln, agencies +$107 mln to $261.354 bln
- NY Fed – Swaps with foreign CBs total $180 mln Oct 19 week, all with ECB.
- Lipper – investors migrate from stocks to bonds in latest week.
- German Finance Ministry – Economy solid despite global weakness, output to provide boost in Q3, exports growth slow – Reuters.
- New Zealand sees migration, long-term visitor gain in September.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Sep PSNB, GBP8.2 bln forecast; last GBP10.05 bln, PSNCR GBP730 mln.
- (0430 ET/0830 GMT) Great Britain Sep – ex-banks, GBP8.5 bln forecast; last GBP10.55 bln.
- (0900 ET/1300 GMT) Belgium Oct leading indicator, -1.5 forecast; last -2.2.
- (1000 ET/1400 GMT) Eurozone Oct consumer confidence index – flash, -8.0 forecast; last -8.2.
Key Events Ahead
- (0235 ET/0635 GMT) BoJ Gov Kuroda speaks at Tokyo trust association annual meeting.
- (0400 ET/0800 GMT) BoJ Gov Kuroda speaks at Tokyo seminar hosted by The Economist.
- N/A European Council meeting, DBRS report on Portugal.
- N/A Austria EconMin Mitterlehner speaks on the economy in Vienna.
- (0400 ET/0800 GMT) ECB quarterly survey of professional forecasters
- (0500 ET/0900 GMT) ECB/Buba Weidmann, Italy FinMin Padoan speak in Frankfurt.
- (0600 ET/1000 GMT) UK DMO GBP0.5/1.0/3.0 bln 1/3/6-month treasury bill auctions.
- (1015 ET/1415 GMT) Fed Gov Tarullo speaks at NY Columbia University Law School conference.
- (1040 ET/1440 GMT) ECB/Austria CB Nowotny speaks at Vienna event.
- (1430 ET/1830 GMT) SF Fed Williams speaks at San Francisco conference.
FX Beat
DXY: The dollar rose versus the euro after the European Central Bank slashed speculations of tapering its asset-buying program. The greenback against a basket of currencies gained 0.1 percent at 98.44, having touched a fresh 7-month high of 98.56 and was up 0.4 percent for the week.
EUR/USD: The euro slumped to a 7-month low, a day after the European Central Bank slashed speculations that it planned to taper its stimulus in near-term. The central bank at its policy decision stated that it did not discuss tapering, while Draghi noted that the ECB is unlikely to abruptly end QE. Moreover, monetary policy divergence between the Fed and ECB dragged the major below the 1.0900 handle, hitting its lowest level since March. The European currency trades 0.2 percent down at 1.0906, having hit a low of 1.0896, its lowest since March 10. The pair is likely to remain on the downside amid persistent board based US dollar strength. Investors will continue to digest the latest ECB decision, ahead of FOMC member Tarullo speech for fresh momentum. Immediate resistance is located at 1. 0957 (5-DMA), a break above could take it till 1.1000. On the downside, support is seen at 1.0860, a break below could drag it till 1.0820.
USD/JPY: The dollar rose, extending gains for the second consecutive session after data released on Thursday showed that U.S. home re-sales surged in September after declining for two straight months, which revived expectation that the U.S. Federal Reserve would hike interest rates as early as its December meeting. Separately, initial claims for unemployment benefits rose more than expected to 260,000 last week, but the trend suggested the labor market still remained strong. The major trades 0.1 percent higher at 104.09, attempting to sustain gains above the 104.00 handle. Investors will continue to track overall market sentiment, ahead of FOMC member Tarullo speech, which could provide hints on the U.S. monetary policy outlook. Immediate resistance is located at 104.40, a break above targets 104.65/105.00. On the downside, support is seen at 103.60, a break below could take it near 103.20.
GBP/USD: Sterling declined after European Council chief Donald Tusk said EU leaders would not engage in negotiations on Brexit at PM Theresa May's first summit in Brussels, which excluded any negotiations until May formally launches the exit process. Sterling trades 0.1 percent lower at 1.2239, having touched a 2-day low of 1.2209 on Thursday following the comments. Investors will continue to track developments surrounding Brexit negotiations, ahead of the UK's public sector net borrowing report. Immediate resistance is located at 1.2370, a break above could take it over 1.2400. On the downside, support is seen at 1.2100, break below targets 1.1900. Against the euro, the pound was flat at 89.10 pence.
AUD/USD: The Australian dollar steadied after declining from a 6-week high following weaker-than-expected employment report that triggered the risk of further rate cuts. On Thursday, the major shed 1.3 percent but was set to end the week mostly unchanged, despite the slide. The Aussie trades 0.1 percent up at 0.7632, attempting to regain some lost ground. The recovery mode seems to appear fragile as the greenback continues to gain amid weak crude oil prices. Investors now await Australia's consumer price print due next week, which is likely to show underlying inflation rose by 0.4 percent for the third quarter. Immediate support is seen at 0.7658 (5-DMA), a break below could drag it till 0.7627 (20-DMA). On the upside, resistance is located at 0.7654 (5-DMA), a break above targets 0.7610/ 0.7580.
NZD/USD: The New Zealand dollar declined, extending losses below the 0.7200 handle, as the greenback strengthened following the European Central Bank policy outcome and Draghi’s speech. The major has rallied 1.4 percent this week after better-than-expected consumer price figures suggested inflation may have finally bottomed. The Kiwi trades 0.3 percent lower at 0.7171, pulling further away from a high of 0.7265 hit on Thursday, its highest since Oct. 4. The pair is likely to remain weak as speculation of RBNZ rate cut at its Nov. 10 policy meeting and declining crude oil prices continue to weigh on markets sentiment. Immediate resistance is located at 0.7230, break above targets 0.7250/ 0.7290. On the downside, support is seen at 0.7135 (10-DMA), a break below could drag it near 0.7100.
Equities Recap
Asian shares traded lower as the dollar rose to a 7-month high against a basket of currencies and weighed down crude oil prices, which hampered investor risk appetite.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent.
Tokyo's Nikkei tumbled 0.30 percent at 17,184.59 points, Australia's S&P/ASX 200 index fell 0.30 percent to 5,445.60 points and South Korea's KOSPI was trading 0.4 percent lower at 2,031.78points.
Shanghai composite index was trading 0.2 percent down at 3,079.24 points, while CSI300 index edged down 0.1 percent at 3,310.65 points. Taiwan shares declined 0.1 percent to 9,306.57 points.
Commodities Recap
Crude oil prices declined, weighed down by a stronger dollar, however, the downside was limited as signs that physical fuel markets were tightening, supported market sentiment. International benchmark Brent crude was trading 0.5 percent lower at $51.13 per barrel at 0356 GMT, having touched a fresh 1-week low of 51.11 earlier in the session. U.S. West Texas Intermediate crude also declined by 0.5 percent to $50.34 a barrel, having touched a high of $51.91 on Wednesday, its strongest since July 16, 2015.
Gold edged down, extending losses from the previous session, as the dollar firmed, however, remained on track for its first weekly gain in four weeks. Spot gold was down 0.26 percent at $1,262.17 an ounce at 0404 GMT but was set to end the week up over 1 percent. U.S. gold futures fell 0.2 percent to $1,265.50.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7452 percent lower by 0.002 bps, while 5-year was 0.008 bps up at 1.2511 percent.
The Australian government bonds traded nearly flat, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 2.30 percent mark, the yield on 15-year note remained steady at 2.66 percent and the yield on short-term 2-year stood flat at 1.67 percent.
The New Zealand government bonds closed narrowly mixed ahead of the long weekend as markets will remain closed Monday on account of Labour Day. The yield on the benchmark 10-year bond fell 1/2 basis point to 2.615 percent, the yield on 7-year note ended steady at 2.29 percent and the yield on short-term 2-year note rose 1 basis point to 1.96 percent.
Canadian government bond prices were higher across the yield curve, with the 2-year up 2.5 Canadian cents to yield 0.55 percent and the benchmark 10-year rising 20 Canadian cents to yield 1.171 percent.
