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Asia Roundup: Kiwi eases on RBNZ rate cut expectations, dollar off highs against yen on Hong Kong worries, investors eye EZ CPI figures - Wednesday, October 16th, 2019

Market Roundup

  • Gold edges higher on Brexit uncertainty
     
  • Oil prices edge higher as OPEC hints at deeper output cuts
     
  • New Zealand Consumer Price Index rose 0.7% in the September quarter and 1.5% year-on-year
     

Economic Data Ahead

  • (0400 ET/0800 GMT) Italy Industrial Sales August
     
  • (0400 ET/0800 GMT) Italy Industrial Sales August
     
  • (0430 ET/0830 GMT) UK retail price index September
     
  • (0430 ET/0830 GMT) UK producer price index September
     
  • (0430 ET/0830 GMT) UK consumer price index September
     
  • (0500 ET/0900 GMT) Italy consumer price index September
     
  • (0500 ET/0900 GMT) EZ trade balance
     
  • (0500 ET/0900 GMT) EZ consumer price index September
     

Key Events Ahead

  • No significant events scheduled

FX Beat

DXY: The dollar index slumped to a near 1-month low after the U.S. House of Representatives on Tuesday passed four pieces of legislation taking a hard line on China, three related to pro-democracy protests in Hong Kong and one commending Canada’s government in a dispute over the extradition of an executive from Huawei Technologies. The greenback against a basket of currencies traded 0.1 percent down at 98.17, having touched a low of 98.16 earlier, its lowest since September 20.

EUR/USD: The euro consolidated within narrow ranges, as a key gauge of long-term inflation expectations reached 3-week highs at 1.21 percent amid hopes that a deal would ease economic uncertainty. The European currency traded flat at 1.1031, having touched a high of 1.1062 on Friday, its highest since September 20. Investors’ attention will remain on a series of data out of Eurozone economies, EZ consumer price index and trade balance, ahead of the U.S. retail sales, business inventories, housing market index and Fed officials' speeches. Immediate resistance is located at 1.1059 (78.6% retracement of 1.1109 and 1.0879), a break above targets 1.1084. On the downside, support is seen at 1.1013 (5-DMA), a break below could drag it below 1.0989 (10-DMA).

USD/JPY: The dollar eased after rising to a 2-1/2 month peak in the prior session, as risk sentiment weakened after Beijing rebuked a new U.S. legislation that takes a hard line against the crackdown on pro-democracy protests in Hong Kong. The major was trading 0.2 percent down at 108.66 having hit a high of 108.89 on Tuesday, its highest since August 1. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. retail sales, business inventories, housing market index and Fed officials' speeches. Immediate resistance is located at 108..99 (July 31 High), a break above targets 109.31 (August 1 High). On the downside, support is seen at 108.22 (5-DMA), a break below could take it near at 107.64 (10-DMA)

GBP/USD: Sterling edged lower after rallying to a near 5-month peak above the 1.2800 handle in the previous session on a report that officials were close to a deal for Britain to exit the European Union. However, investors are still unclear if Britain can avoid postponing its departure beyond October 31. The major traded 0.3 percent down at 1.2745, having hit a high of 1.2801 on Tuesday, it’s highest since May 21. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2826, a break above could take it near 1.2865. On the downside, support is seen at 1.2653, a break below targets 1.2605. Against the euro, the pound was trading 0.3 percent down at 87.41 pence, having hit a high of 86.24 earlier, it’s highest since May 13

AUD/USD: The Australian dollar plunged to a near 1-week low after data showed Australia’s Westpac Leading Index for September came in at -0.28 percent prior to -0.08 percent. The Aussie trades 0.2 percent down at 0.6736, having hit a high of 0.6810 on Friday, it’s highest since September 19. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6710, a break below targets 0.6671. On the upside, resistance is located at 0.6780 (September 26 High), a break above could take it near 0.6829 (September 5 High).

NZD/USD: The New Zealand dollar declined, extending losses for the third straight session, amid speculation that stronger-than-expected third-quarter inflation won't deter the central bank from cutting interest rates again in November. The economy's consumer price index increased 0.7 percent in the September quarter, bringing the annual rate of inflation to 1.5 percent, slowing from a 1.7 per cent pace in June.  The Kiwi trades 0.4 percent down at 0.6271, having touched a low of 0.6258 on Tuesday, its lowest level since October 3. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6348 (September 25 High), a break above could take it near 0.6391 (September 16 High). On the downside, support is seen at 0.6249, a break below could drag it below 0.6215.

Equities Recap

Asian shares surged as investors looked to whether Britain can secure a deal to avoid a disorderly exit from the European Union.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent.

Tokyo's Nikkei gained 1.2 percent to 22,472.92 points, Australia's S&P/ASX 200 index rallied 1.3 percent to 6,736.50 points and South Korea's KOSPI surged 0.7 percent to 2,082.83 points.

Shanghai composite index eased 0.3 percent to 2,981.18 points, while CSI 300 index traded 0.3 percent down at 3,925.66 points.

Hong Kong’s Hang Seng traded 0.6 percent higher at 26,652.01 points. Taiwan shares added 0.5 percent to 11,162.83 points.

Commodities Recap

Crude oil prices surged as investors pinned hopes on signals from OPEC and its allies that further supply curbs could be possible. International benchmark Brent crude was trading 0.1 percent up at $58.87 per barrel by 0504 GMT, having hit a high of $60.66 on Friday, its highest since September 30. U.S. West Texas Intermediate was trading 0.2 percent higher at $52.97 a barrel, after rising as high as $54.91 on Friday, its highest since September 30.

Gold prices surged after shedding nearly 1 percent in the previous session, as markets remained unclear if Britain could avoid postponing its departure from the EU beyond October 31. Spot gold was trading 0.2 percent up at $1,483.59 per ounce by 0506 GMT, having touched a low of $1,473.88 on Friday, its lowest since October 1. U.S. gold futures were 0.3 percent higher at $1,488.10 per ounce.

Treasuries Recap

The Japanese government bond prices mostly edged lower, with the benchmark 10-year JGB futures easing 0.07 points to 154.40, while the yield on the 10-year cash JGBs rose 1 basis point to minus 0.165 percent. The two-year JGB cash yield rose 1 basis point to minus 0.275 percent, its highest in nearly a month, while the five-year yield also gained 1 basis point to minus 0.290 percent. The 40-year JGB yield fell 0.5 basis point to 0.425 percent. The 30-year yield was flat at 0.385 percent, while the 20-year yield rose half a basis point to 0.215 percent.

The Australian government bonds suffered during Asian trading session tracking a similar movement in the United States’ Treasuries after hopes arose of a successful Brexit deal soon amid a calmer trade talk situation between the U.S. and China. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 3-1/2 basis points to 1.048 percent, the yield on the long-term 30-year bond surged nearly 4 basis points to 1.636 percent and the yield on short-term 2-year traded nearly 2 basis points higher at 0.722 percent.

By Lactus Fernandes
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