Market Roundup
- Generalized NZD outperformance despite DXY at fresh 7-month high
- NZD/USD +0.5% to 0.7125 and testing 10DMA at 0.7128
- USD/JPY -0.05%, EUR/USD +0.02%, GBP/USD -0.18%
- DXY -0.13%, DAX -0.65%, Brent -0.08%, Iron +2.31%
- EZ final Sept infl. y/y vs 0.4% previous, 0.4% expected
- Specs boost USD net longs to highest since Feb CFTC
- Swiss Sight deposits w/e Oct 14: Total up and domestic bks down
- BOE’s Broadbent says having a flexible currency very important BBC radio
- BoJ Kuroda – To adjusted policy as needed to achieve 2% inflation goal
- Japan Reuters Tankan Oct mfg index +10, non-mfg +9, September +5, +14
- Japan's Nidec still hungry for large M&A deals – Nikkei
- UK looks at paying billions into EU budget after Brexit – Financial Times
- Australia seen grabbing uninterrupted GDP growth record – Reuters poll
Economic Data Ahead
- (0830 ET/1230 GMT) The Federal Reserve Bank of New York is expected to report that manufacturing activity in New York State has expanded 1.00 in October after posting a slump of 1.99 in September.
- 0830 ET/1230 GMT) Statistics Canada will report foreign portfolio investment in domestic stocks for the month of August.
- (0830 ET/1230 GMT) The Statistics Canada will release investment in foreign securities figures for the month of August.
- (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production edged up 0.1 percent in September after declining 0.4 percent in the previous month.
- (0915 ET/1315 GMT) The Federal Reserve Board is expected to report that capacity utilization edged up to 75.6 percent in September from 75.5 percent in August.
- (0930 ET/1330 GMT) The Conference Board releases Britain's Leading Economic Index for the month of September. The index remained unchanged in the prior month.
- (1845 ET/2245 GMT) Statistics New Zealand is likely to report that consumer price index rose 0.1 percent in the year to September, after rising 0.4 percent earlier.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-yr Ginnie Mae max $1.375 bln
- (1215 ET/1615 GMT) Federal Reserve Vice Chair Stanley Fischer speaks before the Economic Club of New York.
- (1335 ET/1735 GMT) European Central Bank President Mario Draghi's Speech.
- (1430 ET/1830 GMT) FedTrade operation 15-yr Fannie Mae/Freddie Mac max $675 mln
- (1710 ET/2110 GMT) Reserve Bank of Australia Deputy Governor Philip Lowe's Speech.
FX Beat
DXY: The dollar eased versus the euro and the yen as investors turned cautious ahead of European Central Bank meeting due later in the week. The greenback against a basket of currencies edged down to 97.97, after advancing to a 7-month high of 98.17 earlier in the day.
EUR/USD: The euro gained, recovering from a 2-1/2-month low hit earlier in the session after Eurozone's final inflation figures came in-line with preliminary readings, as anticipated. Eurozone's consumer price index rose at an annualized rate of 0.4 percent in September, while core-CPI stood at 0.8 percent, both matching consensus. The major trades 0.2 percent higher at 1.0991, attempting to extend gains above the 1.1000 handle. Investors now eye ECB President Draghi's speech for more clues on the central bank's monetary policy outlook. The short term trend is bearish as long as resistance 1.10580 holds. On the lower side, support stands at 1.0950 (Jul 26 Low) and any break below that level will drag it till 1.0900/ 1.0835 in the near-term. The immediate resistance stands at 1.10670 and any break above will take the pair to next level 1.1100/1.1170 (200- day MA).
USD/JPY: The Japanese yen edged up, pulling away from an 11-week low struck last week, amid risk-off market sentiment across the board. However, the major consolidated above the 104.00 handle, supported by rising expectations of U.S. interest rate hike by end of this year. The dollar trades lower at 104.12, hovering just above a low of 103.94 hit earlier in the session. The pair will be driven by broader market risk sentiment, ahead of the release of Empire State Manufacturing Index, Capacity Utilization, industrial production data from the US. The major resistance is around 104.65 (trend line joining 104.32 and 104.48) and a break above targets 105.08/106. On the lower side, major support is around 103.30 (100- day MA) and any break below 103.30 will drag it till 102.80/102.20.
GBP/USD: Sterling attempted a minor recovery, however, it failed to take out of 1.2200 handle, as rising gilt yields and media reports of disagreements between the finance minister and his cabinet members over the terms of Brexit, weighed on the currency. The major trades 0.1 percent lower at 1.2169, having filled weekly bearish gap opening earlier in the session. Against the euro, the pound traded 0.3 percent lower at 90.30, while trade-weighted sterling was at 73.9, not far from a record low of 73.4 struck last week. Cable is facing major resistance at 1.2280 and any violation above confirms minor trend reversal, a jump till 1.2320/1.2350. On the lower side, any break below 1.2150 will drag the pair down till 1.2089 in the short term.
USD/CHF: The Swiss franc edged up, pulling away from an 11-week low as the greenback slightly weakened across the board. The dollar trades 0.1 percent down at 0.9890, having touched a high of 0.9907 last week, it’s strongest since July 27. The major will be driven by broader sentiment surrounding the greenback, ahead of U.S. Empire State Manufacturing Index, Capacity Utilization Rate, and Industrial Production data due later in the day. On the higher side, any close above 0.9910 will take the pair till 0.9960/1.000. The short term weakness can be seen only below 0.9845 (5- day MA) and any break below targets 0.9790/0.9730.
AUD/USD: The Australian dollar consolidated above the 0.7600 handle, after declining to an intra-day low of 0.7581. The major halted its three-days of winning streak as the greenback was supported by growing expectations of Fed interest rate hike by end of this year. Moreover, cautious investor sentiment around global equity market and lower crude oil prices dampened the demand around the Aussie. The pair trades 0.1 percent lower at 0.7601, attempting to sustain gains above the 0.7600 level. Traders will closely watch Reserve Bank of Australia (RBA) Governor Philip Lowe speech and minutes of the RBA's October policy meeting for further momentum. On the higher side, major resistance is around 0.7645 and any break above will take the pair till 0.7680/0.7730. The major support is around 0.75800 and a break below will drag it till 0.7530/0.7480 (trend line joining 0.74420 and 0.74460).
NZD/USD: The New Zealand dollar extended its recovery momentum above the 0.7100 handle as a broad based greenback retracement strengthened the bid tone around the Kiwi. However, the upside remained capped amid diverging monetary policy expectations from Reserve Bank of New Zealand and the Federal Reserve. The RBNZ is likely to ease interest rates at its November meeting, while the Fed is expected to hike interest rates by December. The major trades 0.5 percent up at 0.7120, retreating from an early low of 0.7077. Traders now await U.S. industrial production figures and New Zealand's inflation data, for further cues on the pair. Immediate resistance is located at 0.7140, break above targets 0.7180/ 0.7220. On the downside, support is seen at 0.7050, a break below could drag it lower 0.7030/ 0.7000.
Equities Recap
World shares tumbled, as the dollar hit fresh 7-month highs and the yields between U.S. and European government bonds rose to their highest since June.
MSCI's broadest index of Asia-Pacific shares outside Japan slumped, followed by losses in the while the MSCI World index.
The pan-European STOXX 600 index decreased 0.7 percent at 337.48 points, while the FTSEurofirst 300 index declined 0.76 percent at 1,331.38 points.
Britain's FTSE 100 trades 0.9 percent down at 6,950.37 points, while mid-cap FTSE 250 fell 0.91 percent at 17,815.98 points.
Germany's DAX slumped 0.75 percent at 10,501.50 points; France's CAC 40 trades 0.64 percent lower at 4,442.31 points.
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 gained 0.24 percent at 2,027.61 points.
Shanghai composite index declined 0.7 percent at 3,041.17 points, while CSI300 index climbed 0.8 percent at 3,277.88 points. Hong Kong’s Hang Seng tumbled 0.8 percent at 23,037.54 points.
Commodities Recap
Crude oil prices declined, giving back most of its previous session gains as a rise in the United States rig count, a strong dollar and record OPEC-output weighed on the fuel demand amid slowing global economic growth. Global benchmark Brent crude was trading 0.2 percent lower at $51.89 per barrel at 0932 GMT, having declined to a peak of 53.71 last week. U.S. West Texas Intermediate crude fell 0.24 percent at $50.17 a barrel, hovering towards a low of 49.39 hit on Thursday.
Gold prices rose as the U.S. dollar edged down, while investors remained cautious ahead of European Central Bank meeting later in the week. Spot gold gained 0.2 percent at $1,252.89 an ounce by 0939 GMT, after dropping nearly 0.6 percent to a low of 1,246.01 on Friday, its lowest since Oct. 7. U.S. gold futures were flat at $1,255.60 an ounce.
Treasuries Recap
The U.S. 10-year Treasury yields hit highest in last five months following hawkish comments from the Federal Reserve Chair Janet Yellen. The yield on the benchmark 10-year Treasury note rose 2 basis points to 1.81 percent, the yield on 5-year bond jumped 1 basis point to 1.288 percent and the yield on short-term 2-year note climbed 1/2 basis point to 0.835 percent.
The UK 10-year gilt yields touched to the highest since Brexit vote in June as weakness in the British pound boosted inflation expectations. Also, bond prices tracked a retreat in the U.S. Treasuries and dipped on Monday. The yield on the benchmark 10-year gilts rose 8 basis points to 1.174 percent, the super-long 40-year bond yield jumped 6 basis points to 1.685 percent and the yield on short-term 2-year bond climbed 1 basis point to 0.228 percent.
The German 10-year bund yields touched highest in four months following hawkish comments from the Federal Reserve Chair Janet Yellen. The yield on the benchmark 10-year bond rose 3-1/2 basis points to 0.091 percent, the yield on long-term 30-year note jumped 4-1/2 basis points to 0.725 percent and the yield on short-term 2-year bond climbed 1 basis point to -0.646 percent.
The Japanese government bonds traded nearly flat Monday, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The benchmark 10-year bond yield remained steady at -0.05 percent and the yield on short-term 2-year note hovered around -0.26 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.
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.
