Market Roundup
- Merkel hangs on to power but bleeds support to surging far right
- All ears: Brussels awaits detail from Davis on May's Brexit plan
- Moody's downgrades UK rating to AA2 late Friday, outlook stable
- British banks' pessimism worst since financial crisis- CBI
- Japan PM Abe expected to announce snap poll amid worries over N.Korea crisis
- Japan PM Abe plans to compile Y2 trln stimulus package - Yomiuri
- Japan Sept mfg PMI – flash 52.6, best since May, Aug final 52.2
- Japan pace of new orders and new export orders up, output in Q4 likely very good
- New Zealand opposition Labour looks to nationalist "kingmaker" to form govt
- Australia to push through tougher rules for bank executives
- Speculators add to bearish bets against U.S. dollar -CFTC, Reuters
- Trump slaps travel restrictions on North Korea, Venezuela in expanded ban
- U.S. Senate opposition to Obamacare repeal bill grows
Economic Data Ahead
- (0400 ET/0800 GMT) Germany Sep Ifo Current Conditions, 124.8 eyed, last 124.6
- (0400 ET/0800 GMT) Germany Sep Ifo Business Climate, 116.0 eyed, last 115.9
- (0400 ET/0800 GMT) Germany Sep Ifo Expectations, 107.9 eyed, last 107.9
Key Events Ahead
- (0300 ET/0700 GMT) ECB's Constancio gives speech in Frankfurt
- (0430 ET/0830 GMT) BoE's Financial Policy Committee statement
- (0500 ET/0900 GMT) Japan PM Abe speaks in Tokyo
- (0515 ET/0915 GMT) ECB's Mersch speaks in Lisbon
- (0935 ET/0935 GMT) Norges Bank Governor Olsen speaks in Oslo
- (0900 ET/1300 GMT) ECB's Draghi speaks in Brussels
- (1045 ET/1445 GMT) ECB's Coeure speaks in Frankfurt
- (1950 ET/2350 GMT) BOJ releases the minutes
FX Beat
DXY: The dollar gained across the board as investors await Fed officials' speeches for further clues on the strength of the economy and next interest rate hike. The greenback against a basket of currencies traded 0.2 percent up at 92.33, having touched a high of 92.70 on Wednesday, its highest since Sept. 5. FxWirePro's Hourly Dollar Strength Index stood at 77.56 (Slightly Bullish) by 0500 GMT.
EUR/USD: The euro declined after German Chancellor Angela Merkel won a fourth term but faced a fractured parliament as support for the far-right surged. Merkel failed to win with a majority, recording its weakest result since 1949, and is now set to form a coalition government. The European currency traded 0.1 percent down at 1.1934, having touched a low of 1.1861 on Wednesday, its lowest since Sept. 14. FxWirePro's Hourly Euro Strength Index stood at 27.16 (Neutral) by 0400 GMT. Investors’ attention will remain on the German Ifo business surveys and ECB President Draghi’s testimony, ahead of series of Fed official speeches. Immediate resistance is located at 1.2000, a break above targets 1.12030. On the downside, support is seen at 1.1896 (Session Low), a break below could drag it near 1.1861 (Sept. 20 Low).
USD/JPY: The dollar gained against the Japanese yen, supported by renewed hope for Prime Minister Shinzo Abe's economic stimulus as he is likely to announce a snap election, to be held on October 22. The major was trading 0.3 percent up at 112.27, having hit a high of 112.71 last week, its highest since Jul. 17. FxWirePro's Hourly Yen Strength Index stood at -45.36 (Neutral) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of of Chicago Fed National Activity Index and series of Fed official speeches for further momentum. Immediate resistance is located at 112.70, a break above targets 113.00. On the downside, support is seen at 111.96 (5- DMA), a break below could take it near 111.56 (78.6% retracement of 107.31 and 112.71).
GBP/USD: Sterling rebounded from a 1-week low touched in the previous session after ratings agency Moody's downgraded the UK to an Aa2 rating from Aa1. The major traded 0.4 percent up at 1.3544, having hit a low of 1.3450 on Friday, its lowest since Sept. 15. FxWirePro's Hourly Sterling Strength Index stood at 0.19 (Neutral) by 0400 GMT. Investors’ focus will remain on the Financial Policy Committee [FPC] statement due for release at 0930GMT, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3600, a break above could take it near 1.3650. On the downside, support is seen at 1.3420 (10-DMA), a break below targets 1.3353 (61.8% retracement). Against the euro, the pound was trading 0.4 percent up at 88.10 pence, having hit a high of 87.74 pence earlier in the month, its highest since Jul. 17.
AUD/USD: The Australian dollar rose, extending previous session gains as improving sentiment around the commodity bloc underpinned the bid tone around the major. The Aussie trades 0.1 percent up 0.7963, having hit a low of 0.7908 in the prior session, it’s lowest since Aug. 31. FxWirePro's Hourly Aussie Strength Index stood at -72.11 (Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7908 (Previous Session Low), a break below targets 0.7871. On the upside, resistance is located at 0.8000, a break above could take it near 0.8080.
NZD/USD: The New Zealand dollar slumped to a 1-week low after a general election left no single party in power. Prime Minister Bill English's National Party won the largest number of votes in Saturday's election but not enough seats to rule outright. The Kiwi trades 0.9 percent down at 0.7268, having touched a low of 0.7251 earlier, its lowest level since Sept. 18. FxWirePro's Hourly Kiwi Strength Index was at -56.70 (Bearish) by 0600 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7343 (Previous Session High), a break above could take it near 0.7363. On the downside, support is seen at 0.7249 (21-DMA), a break below could drag it till 0.7211.
Equities Recap
Asian shares slumped, weighed down by concerns about China's economy, while Kiwi tumbled after the country's ruling National Party won the largest number votes in a weekend election but failed to secure a ruling majority.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.35 percent
Tokyo's Nikkei rose 0.5 percent to 20,397.58 points, Australia's S&P/ASX 200 index gained 0.05 percent to 5,683.70 points and South Korea's KOSPI declined 0.4 percent to 2,379.56 points.
Shanghai composite index eased 0.4 percent to 3,338.19 points, while CSI300 index was trading 0.5 percent down at 3,820.22 points.
Hong Kong’s Hang Seng was trading 1.1 percent lower at 27,570.81 points. Taiwan shares shed 1.1 percent to 10,335.89 points.
Commodities Recap
Crude oil prices steadied, holding most of their gains from the previous session to hold near their highest levels in months, as major producers meeting in Vienna said the market was well on its way towards rebalancing. International benchmark Brent crude was trading 0.05 percent up at $56.78 per barrel by 0422 GMT, having hit a high of $56.89 earlier, its strongest since Apr. 12. U.S. West Texas Intermediate was trading 0.2 percent down at $50.51 a barrel, after rising as high as $51.09 last week, its highest since May. 25.
Gold prices eased after recording a second consecutive weekly decline last week, as the U.S. dollar firmed, while the euro edged lower on political uncertainty in Germany. Spot gold declined 0.2 percent to $1,293.75 per ounce at 0437 GMT, after falling to its lowest since Aug. 25 at $1288.01 on Thursday. U.S. gold futures for December delivery fell 0.2 percent to $1,295.30 per ounce.
Treasuries Recap
The 10-year U.S Treasury yield stood at 2.253 percent lower by 0.009 bps, while 5-year yield was 0.004 bps down at 1.864 percent.
The Japanese government bonds traded flat as investors wait to watch the Bank of Japan’s monetary policy meeting minutes for the month of September, scheduled to be released on September 25 by 23:50GMT. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 0.02 percent, the yield on long-term 30-year also hovered around 0.82 percent and the yield on short-term 2-year too traded steady at -0.14 percent.
The Australian bonds rallied on the first trading day of the week, tracking strength in the U.S. Treasuries as investors converged towards risk-haven assets, following renewed geopolitical tensions over North Korea and the war of words between US President Donald Trump and the former’s Kim-Jon-Un. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped nearly 1-1/2 basis points to 2.80 percent, the yield on 15-year note also fell 1-1/2 basis points to 3.09 percent and the yield on short-term 2-year also traded 1 basis point lower at 1.97 percent.
The New Zealand bonds gained at the time of closing after investors poured into safe-haven instruments, following the country’s inconclusive results of its general election held over the weekend. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 3.01 percent, the yield on 7-year note also fell 1/2 basis point to 2.87 percent and the yield on short-term 2-year too ended 1/2 basis point lower at 2.15 percent.
