Market Roundup
- BoJ may rattle global bond market as Fed seen on hold, may shift policy focus to rates as monetary firepower wanes – Reuters.
- Japanese easing policy almost ready for face-lift - Nikkei.
- Foreign investors big buyers of Japan T-bills in August, Y15.45 trln, still less than Y19.24 trln in June – JSDA, IFR.
- Japan FinMin Aso – Specific monetary policy steps BoJ prerogative – Reuters.
- Japan PM Abe sees TPP jump-starting Japan's growth – Nikkei.
- BoTM Sydney sells A$300 mln 3-yr TCD via MUFG MS, ANZ et al - IFR.
- Experts warn shore up EUR before it’s too late – Reuters.
- China Prem Li – Yuan to remain basically stable at reasonable-balanced level, no basis for sustained devaluation – Xinhua.
- RBA Sept minutes - Current course of policy consistent with growth, inflation targets, rising AUD would complicate economic rebalancing - Reuters.
- Australia Q2 house price index +2.0% q/q, +4.1% y/y, +2.5% q/q forecast.
- Australian coal prices hit fresh high as Asia power demand soars.
Economic Data Ahead
- (0830 ET/1230 GMT) United States Aug housing starts, 1.19 mln AR forecast; last 1.21 mln, +2.1% m/m.
- (0830 ET/1230 GMT) United States Aug building permits, 1.17 mln AR forecast; last 1.14 mln, -0.8% m/m.
- (0900 ET/1300 GMT) Belgium Sep consumer confidence index; last -4.0.
Key Events Ahead
- N/A BoJ Policy Board, FOMC begin two-day meetings, BoE FPC meeting.
- (0440 ET/0840 GMT) Spain E2.5-3.5 bln 3 and 9-month treasury bill auctions.
- (0530 ET/0930 GMT) UK DMO GBP2.5 bln 1.5% 2047 Gilt auction.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E41 bln allotment forecast, E41.58 bln maturing.
- (0615 ET/1015 GMT) Riksbank DepGov Kerstin af Jochnick at Enkoping, Sweden seminar.
- (0630 ET/1030 GMT) ESM E1.5 bln 6-month bill auction.
- N/A Spain EconMin De Guindos at New York Global Economy Forum.
- (0745 ET/1145 GMT) Riksbank Gov Ingves speaks at Buenos Aires conference.
- (0800 ET/1200 GMT) France economic forecasts for ’17 budget.
- (0800 ET/1200 GMT) NZ Fonterra GDT auction.
- (0910 ET/1310 GMT) BoE Hauser speaks at London CREST event.
- (1235 ET/1635 GMT) BoC Gov Poloz speaks in Quebec City, press conference to follow.
FX Beat
DXY: The dollar index against a basket of currencies traded flat at 95.86, amid prevailing cautious tone in the markets ahead of the central banks’ policy decision.
EUR/USD: The euro trades between a narrow range as investors remained on the sidelines and refrained from taking positions ahead of the BoJ and Fed decision due tomorrow, which is likely to have significant impact on the dollar. On Monday, the major rose to a high of 1.1197, however, it trimmed gains to close out at 1.1173. The European currency trades at 1.1171, having failed to take out the 1.1200 level in the previous session. Investor’s attention will remain on series of data from the Eurozone economies, ahead of U.S. housing market data for further momentum on the pair. Immediate resistance is located at 1.1200, break above could take it till 1.1220. On the lower side, support is seen at 1.1140, break below could drag it near 1.1100.
USD/JPY: The dollar nudged down as the Japanese traders returned to the markets after yesterday’s holiday. Liquidity is likely to remain thin as investors remain nervous ahead of this week's policy meetings of the Bank of Japan and Federal Reserve. Markets speculate the Japanese central bank will make crucial changes to its easing programme, while the Fed to stand pat on its monetary stance. The major trades 0.1 percent down at 101.77, hovering towards a 1-week low of 101.57 hit in the previous session. Markets focus will remain on the BOJ and Fed policy outcome, while the upcoming US housing data due later are likely to have less/ no impact on the pair. Immediate resistance is located at 102.50, break above targets 102.75/ 103.00. On the downside, support is seen at 101.73 (Previous Session Low), break below could take it near 101.55.
GBP/USD: Sterling extended gains, slowly recovering from 1-month low of 1.2996 touched last week as markets worried over further interest rate cut by the Bank of England in the near term. The major trades 0.1 percent up at 1.3039, after rising as high as 1.3091 in the previous session. Investors’ will track broad based market sentiment amid absence of relevant data from the Eurozone and UK economy. Immediate resistance is located at 1.3106 (5-DMA), break above could take it near 1.3150. On the downside, support is seen at 1.2975, break below targets 1.2900. Against the euro, the pound trades up at 85.70 pence, hovering away from a 3-week low of 85.81 pence touched on Friday.
AUD/USD: The Australian dollar rose, extending previous gains after the Reserve Bank of Australia (RBA) indicated at a steady policy outlook, however, trading was subdued due to looming meetings of the Bank of Japan and Federal Reserve. Minutes of the RBA's September meeting showed a stable outlook for interest rates after it held rates at 1.50 percent earlier this month. The Aussie trades 0.1 percent up at 0.7539, having touched a high of 0.7554 following the release of the RBA's latest monetary policy minutes. On Monday, the major rose to a more than 1-week high, however, renewed selling pressure trimmed gains to 0.7533. Immediate support is seen at 0.7508 (5-DMA), break below could drag it near 0.7500/ 0.7475. On the upside, resistance is located at 0.7580, break above targets 0.7600/ 0.7620.
NZD/USD: The New Zealand dollar advanced, extending gains above the 0.7300 handle, however, the recovery appears fragile amid subdued trading activity in oil prices. The Reserve Bank of New Zealand will hold its policy meeting on Thursday and is widely expected to keep rates at 2.0 percent. The major trades 0.4 percent higher at 0.7320 on expectations of a steady outcome. Investors will focus on Fonterra’s fortnightly auction results ahead of Wednesday’s FOMC and RBNZ rate policy outcome. Immediate resistance is located at 0.7350, break above targets 0.7380/ 0.7400. On the downside, support is seen at 0.7268 (Aug 24 Low), break below could drag it near 0.7250.
Equities Recap
Asian shares edged lower as investors remained cautious ahead 2-day Federal Reserve and Bank of Japan policy meetings outcome.
MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.2 percent.
Tokyo's Nikkei shed 0.16 pct at 16,492.15 points, Australia's S&P/ASX 200 index edged up 0.05 percent at 5,297.50 points and South Korea's KOSPI advanced 0.25 percent at 2,025.63 points.
Shanghai composite index declined 0.18 percent at 3,020.73 points, while CSI300 index was trading 0.23 percent lower at 3,255.73 points.
Hong Kong’s Hang Seng was trading 0.1 percent down at 23,523.29 points. Taiwan shares added 0.1 percent at 9,161.58 points.
Commodities Recap
Crude oil prices declined, extending losses for the third straight day after Venezuela said that global supplies required to drop by 10 percent in order to bring production in line with consumption levels. Global benchmark Brent crude oil was trading 0.2 percent lower at $45.79 per barrel at 0407 GMT, hovering towards a 2-week low of $46.38 touched on Friday. U.S. West Texas Intermediate crude rose 0.9 percent in a bullish gap at $43.60 a barrel.
Gold rose, extending previous session gains, as markets expect the Federal Reserve to leave U.S. interest rates unchanged at its 2-day meeting that kicks off later during the day. Spot gold was up 0.2 percent at $1,315.79 an ounce by 0424 GMT, while U.S. gold futures were steady at $1,318 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.6996 percent higher by 0.002, while 5-year was at 1.2148 percent up by 0.008 bps.
The Australian government bonds traded narrowly mixed as investors remained focused on the Federal Reserve and Bank of Japan’s monetary policy decisions scheduled to be released on Wednesday. The yield on the benchmark 10-year Treasury note fell ½ basis point to 2.177 percent, the yield on long-term 15-year note dipped 1 basis point to 2.559 percent and the yield on short-term 2-year jumped more than 2 basis points to 1.655 percent.
The New Zealand government bonds traded modestly lower ahead of the Reserve Bank of New Zealand’s monetary policy decision, which is scheduled to be held on September 21. The yield on the benchmark 10-year bond rose 1-1/2 basis points to 2.625 percent, the yield on 7-year note also ended 1-1/2 basis points higher at 2.285 percent and the yield on short-term 2-year note climbed 1 basis point to 2.00 percent.
Canadian government bond prices were lower across the yield curve, with the 2-year bond down half a Canadian cent to yield 0.584 percent and the benchmark 10-year losing 3 Canadian cents to yield 1.193 percent.
