Market Roundup
- China cuts new loan rate for the second month but struggling economy likely needs more
- Ireland says Brexit deal is not yet closed but sentiment has improved
- India cuts effective corporate tax rate to 25.17% to revive investment
- Oil heading for 7 percent weekly gain
- Gold edges higher as Gulf tensions lend support
Economic Data Ahead
- (0800 ET/1200 GMT) Bank of England releases its Quarterly Bulletin
- (0830 ET/1230 GMT) Statistics Canada is expected to report that retail sales gained 0.6 percent in July after staying flat in June. While excluding autos, retail sales are likely to have risen 0.3 percent, after advancing 0.9 percent in the previous month.
- (1000 ET/1400 GMT) The European Commission releases Eurozone's preliminary Consumer Confidence reading for the month of September. The index posted a final reading of -7.1 in the prior month.
- (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count.
Key Events Ahead
- (0815 ET/1215 GMT) Federal Reserve Bank of New York President John C. Williams gives a speech
- (1120 ET/1520 GMT) Boston Federal Reserve President Eric Rosengren's speech
FX Beat
DXY: The dollar index nudged up, as the benchmark 10-year Treasury yield edged nearly 1 basis point up ahead of speeches by the Federal Open Market Committee (FOMC) members Williams and Rosengren. The greenback against a basket of currencies traded up at 98.38, having touched a low of 97.14 earlier, its lowest since August 16.
EUR/USD: The euro trimmed gains after the German Finance Ministry stated that the economy started the third quarter on a weaker note, with signs emerging of a future rise in unemployment. The European currency traded flat at 1.1042, having touched a high of 1.1109 last week, its highest since August 27. Immediate resistance is located at 1.1084 (September 5 High), a break above targets 1.1109 (September 13 High). On the downside, support is seen at 1.1015 (September 9 Low), a break below could drag it below 1.0963 (August 30 High).
USD/JPY: The dollar consolidated within narrow ranges as investors refrained from taking big positions as few signs of progress have emerged between U.S. and China talks and a wide gulf remaining. Market eye U.S.-China trade talks in Washington, aimed at laying the groundwork for high-level discussions next month. The major was trading flat at 107.76, having hit a high of 108.47 on Thursday, its highest since August 1. Investors’ will continue to track the broad-based market sentiment, ahead of Fed officials' speeches. Immediate resistance is located at 108.63 (July 5 High), a break above targets 108.99 (July 10 High). On the downside, support is seen at 107.52 (September 12 Low), a break below could take it lower at 106.96 (21-DMA).
GBP/USD: Sterling surged to an over 2-month peak after European Commission President Jean-Claude Juncker said he thought Brussels could reach a deal with Britain to leave the European Union. On Thursday, the Bank of England kept policy rates unchanged, as widely expected, with all nine members of the Monetary Policy Committee voting to keep rates on hold at 0.75 percent and reiterated their warnings that exiting the European Union without a deal damaged growth. The major traded flat at 1.2521, having hit a high of 1.2582 earlier, it’s highest since July 25. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2605 (June 17 High), a break above could take it near 1.2644 (May 31 High). On the downside, support is seen at 1.2480 (5-DMA), a break below targets 1.2404 (10-DMA). Against the euro, the pound was trading flat at 88.10 pence, having hit a high of 87.85 earlier, it’s highest since May 22.
USD/CHF: The Swiss franc rose, extending previous session gains as risk sentiment weakened, weighed down by tensions in the Middle East, U.S.-China trade tensions, concerns over the global economic growth outlook and prospects of monetary easing by central banks. The major trades 0.1 percent down at 0.9915, having touched a low of 0.9889 earlier, it’s lowest since September 16. On the higher side, near-term resistance is around 0.9999 (June 17 High) and any break above will take the pair to next level till 1.0042 (May 24 High). The near-term support is around 0.9875 (21-DMA), and any close below that level will drag it till 0.9854 (September 13 Low).
Equities Recap
European shares jumped as stimulus measures by major central banks eased worries about growth.
The pan-European STOXX 600 index rallied 0.4 percent at 393.20 points, while the FTSEurofirst 300 advanced 0.4 percent to 1,544.99 points.
Britain's FTSE 100 trades 0.2 percent up at 7,367.13 points, while mid-cap FTSE 250 gained 0.5 to 20,179.75 points.
Germany's DAX rose 0.2 percent at 12,483.72 points; France's CAC 40 trades 0.5 percent higher at 5,685.55 points.
Commodities Recap
Crude oil prices surged and were on track to jump more than 7 percent this week, their biggest weekly rise in months, on rising Middle East tensions after a key Saudi Arabian supply facility was knocked out in an attack last weekend. International benchmark Brent crude was trading flat at $64.73 per barrel by 1031 GMT, having hit a high of $69.64 on Monday, its highest since May 30. U.S. West Texas Intermediate was trading 0.1 percent up at $58.66 a barrel, after rising as high as $63.33 on Monday, its highest since May 21.
Gold prices rose, extending previous session gains and were headed for their first weekly gain in a month, supported by a weak dollar, tensions in the Middle East and caution about U.S.-China trade talks. Spot gold was trading 0.4 percent up at $1,504.19 per ounce by 1032 GMT, having touched a low of $1,483.06 on Wednesday, its lowest since August 13 but has gained about 1 percent so far this week. U.S. gold futures were up 0.5 percent at $1,513.5 per ounce.
Treasuries Recap
The U.S. Treasuries slipped slightly during the afternoon session ahead of a host of speeches by members of the Federal Open Market Committee (FOMC) – Williams and Rosengren, scheduled to be delivered today by 12:15GMT and 15:20GMT respectively. The yield on the benchmark 10-year Treasury yield edged nearly 1 basis point up to 1.782 percent, the super-long 30-year bond yield also gained 1 percent to 2.221 percent and the yield on the short-term 2-year too traded 1 basis point higher to 1.751 percent.
The United Kingdom’s gilts suffered during European trading hours after the Bank of England’s (BoE) unchanged monetary policy decision did not create any major economic impact on markets, thus making investors trade on the sidelines. The yield on the benchmark 10-year gilts, rose 1 basis point to 0.647 percent, the 30-year yield remained flat at 1.055 percent and the yield on the short-term 2-year surged 1-1/2 basis points to 0.532 percent.
The German bunds edged tad higher during European trading session after the country’s producer price index (PPI) for the month of August, disappointed market participants, going into negative territory from the prior reading in July. The German 10-year bond yield, which move inversely to its price, remained tad 1/2 basis point down at -0.507 percent, the yield on 30-year note slipped 1 basis point to 0.020 percent and the yield on short-term 2-year hovered around -0.703 percent.
The Japanese government bonds closed mixed as investors remained divided amid a silent session that barely witnessed data of major economic significance ahead of the country’s long weekend, following Autumn Equinox on Monday. The yield on the benchmark 10-year JGB note, which moves inversely to its price, closed flat at -0.219 percent, the yield on the long-term 30-year jumped 2-1/2 basis points to 0.334 percent and the yield on short-term 2-year suffered 4 basis points to -0.303 percent.
The Australian government bonds rallied during Asian session of the last trading day of the week amid a muted session that witnessed data of little economic significance. However, the Federal Reserve’s 25bp rate cut on Wednesday added to decline in yields, which investors are wary of neglecting in the wake of ongoing global geopolitical tensions. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 3 basis points to 1.058 percent, the yield on the long-term 30-year bond suffered nearly 2 basis points to 1.636 percent and the yield on short-term 2-year suffered nearly 1-1/2 basis points to 0.779 percent.
