Market Roundup
- GBP/USD +0.45%, EUR/USD +0.15%, USD/JPY +0.15%
- EUR/GBP -0.6%, GBP/JPY +0.75%, GBP/CHF +0.65%
- DXY -0.05%, DAX +1.1%, Brent +0.6%, Iron -0.7%
- UK Sept CPI +1.0% y/y vs 0.6% previous, 0.9% expected
- UK Sept Core CPI +1.5% y/y vs 1.3% previous, 1.4% expected
- UK Sept RPI +2.0% y/y vs 1.8% previous, 2.0% expected
- UK Sept Core output prices +1.4% y/y vs revised 1.4% previous, 1.4% expected
- Brexit ‘threatens $590bn US investment in the UK’
- Government lawyer-UK Parliament Will very likely have to ratify agreement with EU when exits
- EU-UK could agree that any deal would come into effect without parl. approval
- Japan FinMin Aso – Closely watching FX moves
- Aso- Excess volatility, disorderly moves would hurt economy
- RBA Gov Lowe – Economy adjusting well, end in sight for mining slump
- Lowe - Commodity prices rising, weighing jobs-household debt
- Lowe - further AUD rise to complicate adjusted process, AUD levels suitable
- RBA October meeting minutes – Q3 inflation important for November rate call
- China growth has stabilized but debt still of concern
- Gold may regain ground in ’17 but bumpy road ahead
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. consumer price index likely increased 0.3 percent in September, after gaining 0.2 percent in August. Excluding food and energy, the core CPI is expected to rise 0.2 percent after increasing 0.3 percent in August.
- (0830 ET/1230 GMT) Statistics Canada releases manufacturing shipments data for the month of August. Manufacturing sales are likely to have increased 0.3 percent after rising 0.1 percent in July.
- (1000 ET/1400 GMT) The National Association of Home Builders (NAHB) is expected to report that U.S. Housing Market Index declined to 63 for the month of October from 65 in September.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
- (1930 ET/2330 GMT) The Melbourne Institute will release Australia's Westpac Leading Index for the month of September. The index stood unchanged in the previous month.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade ops 30-yr Fannie Mae/Freddie Mac max $2.750 bln
FX Beat
DXY: The dollar lost ground versus its major peers as investors’ cautiously awaited U.S. CPI data, which could provide further clues on the Fed's most likely step. The greenback against a basket of currencies traded 0.1 percent down at 97.74, but still within the sight of a 7-month high of 98.17 hit on Monday.
EUR/USD: The euro advanced, extending gains for the second consecutive session, as the greenback weakened across the board on fading expectations of U.S. interest rate hike by December. However, further upside lacked momentum as steep losses in the EUR/GBP cross weighed on the European currency. The major trades 0.1 percent up at 1.1010, rebounding from a low of 1.0963 hit in the previous session. Markets attention now remains on U.S. CPI figures for fresh impetus on the pair. The immediate resistance stands at 1.1058 and any break above will take it to next level 1.1100/1.1170 (200- day MA). On the lower side, support stands at 1.0950 (Jul 26 Low) and any break below that level will drag it till 1.0900/1.08350 in the short term.
USD/JPY: The dollar attempted a minor recovery to move back above 104.00 handle after declining to an intra-day low of 103.68 on disappointing US manufacturing data. Improving investor risk-appetite aided the major to regain some lost ground; however, the recovery mode ran out of steam as traders turned cautious ahead of U.S. consumer price index data. The major traded flat at 103.90, attempting to extend gains above the 104.00 level. 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 will drag the pair till 102.80/102.20.
GBP/USD: Sterling steadied above the 1.2200 handle after data showed UK inflation rose more than expected in September, its biggest jump two years. The economy's consumer prices increased by 1 percent last month on the year, above estimates of a 0.8 percent rise, which could abstain the Bank of England from cutting interest rates. While the core inflation gauge edged up 1.5 percent versus the consensus of 1.4 percent and previous 1.3 percent. Sterling trades 0.8 percent higher at 1.2298, attempting to extend gains above the 1.2300 handle. Investors will continue to digest UK's inflation report, ahead of U.S. CPI data. Major resistance is seen at 1.2320 and any violation above confirms minor trend reversal, a jump till 1.2350 is possible. On the lower side, any break below 1.2200 will drag the pair down till 1.2150/1.2089 in the short term. Against the euro, the pound trades 0.6 percent up at 89.70 pence.
USD/CHF: The Swiss franc rose, extending gains from the previous session, as the greenback weakened on diminishing expectations of Federal Reserve rate hike by December. The dollar trades 0.1 percent lower at 0.9881, hovering towards an intra-day low of 0.9866. The major is likely to remain on the down amid risk-on market sentiment across the board. 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 rallied to a 2-week high as the minutes from Reserve Bank of Australia's latest policy meeting showed little bias for further monetary easing in the near future. The major was also strengthened by higher oil prices and RBA Gov Philip Lowe comments, which provided an upbeat assessment of the current level of the exchange rate and interest rates. The Aussie trades 0.76 percent higher at 0.7686, having hit a high of 0.7689, it’s highest since Oct. 4. Investors now await US CPI report due later in the day and Chinese GDP data scheduled tomorrow for fresh cues on the major. On the higher side, major resistance is around 0.7680 and any break above will take it till 0.7730/0.7760. The major support is around 0.7580 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 rose more than 1 percent above the 0.7200, extending upbeat CPI-led bullish momentum. The major continues to strengthen after a report showed New Zealand's quarterly CPI unexpectedly rose to 0.2 percent in the third quarter against estimates of a flat reading, easing speculation of further rate cut by the RBNZ at its November meeting. Moreover, board based greenback weakness following disappointing U.S. manufacturing data and rising commodities prices kept the bid tone around the Kiwi intact. The pair trades 1.11 percent higher at 0.7212, having hit a fresh 2-week high of 0.7213. Investors focus now shifts on U.S CPI figures and Fonterra’s fortnightly dairy auction results due later in the day. Immediate resistance is located at 0.7245, break above targets 0.7260/ 0.7300. On the downside, support is seen at 0.7117 (5-DMA), a break below could drag it lower 0.7100.
Equities Recap
European shares rose, boosted by rising commodity prices, while sterling briefly strengthened after data showed Britain's inflation rose by its most in more than two years in September.
The pan-European STOXX 600 index increased 1.15 percent at 341.30 points, while the FTSEurofirst 300 index added 1.09 percent at 1,346.84 points.
Britain's FTSE 100 trades 1.07 percent up at 7,022.69 points, while mid-cap FTSE 250 added 0.97 percent at 17,964.99 points.
Germany's DAX gained 1.03 percent at 10,612.03 points; France's CAC 40 trades 1.22 percent higher at 4,504.61 points.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.8 percent, led higher by financials and energy shares.
Tokyo's Nikkei rose 0.38 percent at 16,963.61 points, Australia's S&P/ASX 200 index climbed 0.46 percent to 5,413.30 points and South Korea's KOSPI gained 0.24 percent at 2,027.61 points.
Shanghai composite index added 1.4 percent at 3,083.88 points, while CSI300 index advanced 1.3 percent at 3,321.333 points. Hong Kong’s Hang Seng jumped 1.6 percent to 23,394.39 points.
Commodities Recap
Crude oil prices rose, reversing most of its previous session losses, aided by a weaker U.S. dollar and on views that the global markets might not be as oversupplied as suggested by other analysts. Global benchmark Brent crude was trading 0.3 percent higher at $51.82 per barrel at 0915 GMT, rebounding from a low of 51.13 hit on Monday. U.S. West Texas Intermediate crude rose 0.6 percent at $50.32 a barrel, pulling away from a low of 49.45 hit the prior day.
Gold prices rose, extending gains for a second straight day, as the U.S. dollar weakened amid spurring uncertainty over the timing of the U.S. Federal Reserve interest rate hike. Spot gold was up 0.55 percent at $1,261.41 an ounce at 0921 GMT, having touched a high of $1263.52, its highest since Oct. 10. U.S. gold futures had gained 0.5 percent to $1,262.60 an ounce.
Treasuries Recap
The U.S. Treasuries traded modestly higher across the complex as investors await the September consumer inflation data in an attempt to estimate the Fed's most likely step. The yield on the benchmark 10-year Treasury note fell 1 basis point to 1.759 percent and the yield on the short-term 2-year bonds also slid 1 basis point to 0.815 percent.
The U.K gilts gained as investors speculate that the Bank of England will lower its interest rate in November’s monetary policy meeting. The yield on the benchmark 10-year gilts fell 3 basis points to 1.094 percent, the super-long 30-year bond yield slid 2-1/2 basis points to 1.760 percent and the yield on short-term 3-year bond tumbled 1 basis point to 0.229 percent.
The German bunds traded nearly flat ahead of the super-long 30-year note auction. The yield on the benchmark 10-year bond hovered around 0.06 percent mark, the yield on long-term 30-year note remained steady at 0.68 percent and the yield on short-term 2-year bond climbed 1 basis point to -0.65 percent.
The Japanese government bonds traded nearly flat, 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 10-year bond yields closed nearly five months high after higher-than-expected third quarter consumer inflation data lowered the Reserve Bank of New Zealand’s easing bets. The yield on the benchmark 10-year bond rose 7-1/2 basis points to 2.635 percent, the yield on 7-year note ended 6 basis points higher at 2.303 percent and the yield on short-term 2-year note also climbed 6 basis points to 1.980 percent.
The Australian 10-year bond yields hit highest in five months on rising market expectations that the Reserve bank of Australia will hold its official cash rate at record low of 1.5 percent in its upcoming monetary policy meeting. The yield on the benchmark 10-year Treasury note rose 3-1/2 basis points to 2.358 percent, the yield on 15-year note jumped nearly 4 basis points to 2.722 percent and the yield on short-term 3-year climbed 1 basis point to 1.773 percent.
