Market Roundup
- EUR/USD -0.4%, GBP/USD -0.20%, USD/JPY -0.13%
- DXY +0.25%, DAX +0.05%, Brent +0.35%, Iron +0.57%
- UK Sept PSNB GBP 10.118 bln m/m vs 10.327 bln previous, 8.2 bln expected
- UK Sept PSNCR GBP 13.285 bln m/m vs 729 mln previous
- CB officials looking into factors behind Oct 7 Stg crash: Will report to BIS
- BoJ Gov Kuroda – Clarifies policy on yield curve targeting
- Kuroda – Will continue to implement extremely accommodative policy
- Kuroda – Many CBs think inflation target should be maintained at 2.0%
- German Finance Ministry – Economy solid despite global weakness
- M&G to re-open property portfolio Nov 4
- Portugal government bond yields just above 6-week lows ahead of key rating reviews
- ECB l/t inflation survey sees 1.8% by 2021, unchanged from the last survey
Economic Data Ahead
- (0830 ET/1230 GMT) The Statistics Canada is likely to report that annual inflation rate rose 1.5 percent in September from 1.1 percent in August, bringing it closer to the Bank of Canada’s 2 percent target. While core consumer price index is expected to rise at an annual rate of 1.8 percent.
- (0830 ET/1230 GMT) Canadian retail sales for August are likely to have increased 0.3 percent after declining 0.1 percent in the prior month.
- (1000 ET/1400 GMT) The European Commission releases Eurozone's preliminary Consumer Confidence reading for the month of October. The index is expected to slump 8.0 percent after posting a drop of 8.2 in the prior month.
- (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count.
Key Events Ahead
- (1015 ET/1415 GMT) Federal Reserve Governor Daniel Tarullo speaks about "Pedagogy and Scholarship in a Post-Crisis World" at the Columbia Law School Conference on the New Pedagogy of Financial Regulation.
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae max $1.375 bln
- (1330 ET/1730 GMT) San Francisco Fed chief John Williams gives a keynote address at the Federal Home Loan Bank's 2016 Member Conference.
FX Beat
DXY: The dollar gained versus its major rivals on revived expectations of a rise in U.S. interest rates in December. The greenback against a basket of currencies gained 0.2 percent at 98.53, after rising to a fresh 7-month high of 98.61 and was on course for its third consecutive week of gains.
EUR/USD: The euro tumbled hitting fresh 7-month low below the 1.0900 handle after Draghi said that there wasn’t any discussion on tapering the QE program, slashing speculation that the central bank might abruptly end its bond purchase program. Moreover, the recovery in the major appears to be fragile amid board based greenback strength. The pair trades 0.33 percent lower at 1.0892, having hit an early low of 1.0877, its lowest since Mar. 10. The short-term trend is bearish as long as resistance 1.1030 holds and any break above will take it to next level till 1.10580/1.10750 in the short term. The minor resistance is around 1.0960. On the lower side, any break below 1.0900 will drag it down till 1.08350.
USD/JPY: The Japanese yen gained, following BoJ Governor Kuroda’s comments, stating that the central bank will continue implementation of extremely accommodative expansionary monetary policy. The dollar weakened despite ongoing bullish momentum in the greenback against major currencies, as persisting risk-averse sentiment strengthened the safe-haven yen. The major trades 0.2 percent lower at 103.72, hovering towards an intra-day low of 103.67. Investors now await Federal Reserve Governor Daniel Tarullo’s speech for hints over the timing of next Fed rate-hike decision. 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 103.05 (100- day MA) and any break below 103.30 will drag it till 102.80/102.20.
GBP/USD: Sterling edged down on expectations that Britain's economy is likely to suffer from a firm stance by the European Union on Brexit negotiations. The European Council chief Donald Tusk on Thursday stated that EU leaders would not engage in negotiations at the Brussels summit and ruled out negotiations until May formally triggered the Brexit process. Moreover, UK's September Public Sector Net Borrowing rose to 10.118 BLN GBP, against a forecast of 8.200 BLN GBP and previous 10.051 BLN GBP, adding to the downward pressure on the major. Sterling trades 0.16 percent down at 1.2232, having declined to a low of 1.2209 on Thursday following Donald Tusk comments. Cable is facing major resistance at 1.2338 and any violation above confirms minor trend reversal, a jump till 1.2400/1.2480 is possible. On the lower side, any break below 1.2200 will drag the pair down till 1.2150/1.20896 in the short term. Against the euro, the pound rose 0.1 percent to 89.90 pence, having touched a high of 88.87 pence, it’s highest since Oct. 7.
USD/CHF: The Swiss franc declined to a 7-month low, as the greenback strengthened across the board following ECB-induced weakness in the euro. The dollar trades 0.2 percent higher at 0.9942, having touched a high of 0.9959, its highest since March 3. On the higher side, any close above 0.9920 will take the pair till 0.9960/1.000. The short-term weakness can be seen only below 0.9875 (10- day MA) and any break below targets 0.9845/0.9780.
AUD/USD: The Australian dollar gained after declining from a 6-week high on Thursday following weaker-than-expected employment report that spurred the risk of further rate cuts. However, the major trimmed gains as the greenback strengthened after Federal Reserve official William Dudley's comments revived expectations of an eventual Fed rate hike action later this year. Moreover, the rising speculations of possible further RBA monetary easing will continue to weigh on the Aussie. The major trades 0.1 percent up at 0.7629, after rising to an early high of 0.7650. On the higher side, major resistance is around 0.7680 and any break above will take the pair till 0.7730/0.7760/0.7800. The major support is around 0.7620 (21- day MA) and a break below will drag it till 0.7580/0.7530.
NZD/USD: The New Zealand dollar slumped, extending previous session losses as Federal Reserve New York President William Dudley's hawkish speech renewed hopes of an eventual Fed rate hike action by the end of this year. Moreover, rising expectations of further rate cut by RBNZ at its November meeting also undermined the bid tone around the Kiwi. The major trades 0.4 percent lower at 0.7166, drifting away from more than 2-week high of 0.7265. Immediate resistance is located at 0.7220, break above targets 0.7250/ 0.7290. On the downside, support is seen at 0.7134 (10-DMA), a break below could drag it near 0.7100.
Equities Recap
European shares gained, supported by strong earnings reports from companies, while the dollar rose to its highest since March, as the euro weakened after the ECB slashed speculations of tapering its asset-buying program.
The pan-European STOXX 600 index increased 0.1 percent at 344.60 points, while the FTSEurofirst 300 index edged up 0.1 percent at 1,360.39 points.
Britain's FTSE 100 trades 0.1 percent higher at 7,036.35 points, while mid-cap FTSE 250 was flat at 17,937.70 points.
Germany's DAX rose 0.12 percent at 10,714.40 points; France's CAC 40 trades 0.1 percent up at 4,543.12 points.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 percent, hit by a drop in oil prices.
Tokyo's Nikkei tumbled 0.30 percent at 17,184.59 points, Australia's S&P/ASX 200 index fell 0.30 percent to 5,445.60 points and South Korea's KOSPI shed 0.37 percent at 2,033.00 points.
Shanghai composite index gained 0.2 percent at 3,090.94 points, while CSI300 index added 0.3 percent at 3,327.74 points.
Commodities Recap
Crude oil prices steadied, supported by signs that physical energy markets were tightening after two years of oversupply. Global benchmark Brent crude was trading 0.3 percent higher at $51.52 per barrel at 0922 GMT, after declining to a 1-week low of $51.11 earlier in the session. U.S. West Texas Intermediate crude rose 0.2 percent at $50.67 a barrel, pulling away from an early low of $50.31.
Gold edged down as the dollar strengthened to a 7-week high, but was on course for its first weekly gain in four weeks on steady physical buying from China and exchange-traded funds. Spot gold was down 0.1 percent at $1,264.04 an ounce at 0927 GMT and was heading for a weekly gain of 1 percent. U.S. gold futures fell 0.2 percent to $1,264.40.
Treasuries Recap
The U.S. Treasuries saw mixed performance following stronger than expected results from Philadelphia Fed manufacturing and existing home sales releases, contrasted by a rebound in jobless claims back towards the 260k mark. The yield on the benchmark 10-year Treasury note hovered around 1.75 percent, the yield on long-term 30-year Treasury fell 1/2 basis point to 2.49 percent and the yield on short-term 2-year note climbed 1 basis point to 0.836 percent.
The UK gilts traded narrowly mixed as investors remain sidelined in any big deal ahead of the third quarter gross domestic product (GDP) data, which is scheduled to be released on October 27. The yield on the benchmark 10-year gilts fell nearly 1 basis point to 1.1071 percent, the super-long 40-year bond yield dipped 1 basis point to 1.563 percent and the yield on short-term 2-year bond jumped 2 basis points to 0.232 percent.
The German 10-year bund yields fell below zero percent mark for the first time in last two weeks after the ECB in its new survey of professional forecasters trimmed inflation estimate to 0.2 percent for 2016. The yield on the benchmark 10-year bond hovered around 0 percent mark (currently at -0.003 percent), the yield on long-term 30-year note fell nearly 1 basis point to 0.59 percent and the yield on short-term 2-year bond remained steady at -0.66 percent.
The Japanese government bonds traded nearly flat amid very thin trading activity. The benchmark 10-year bond yield hovered around -0.06 percent mark, the yield on long-term 30-year Treasury remained steady at 0.50 percent and the yield on short-term 2-year note stood flat at -0.26 percent.
The New Zealand government bonds closed narrowly mixed ahead of the long weekend as markets will remain closed Monday on account of Labour Day. The yield on the benchmark 10-year bond fell 1/2 basis point to 2.615 percent, the yield on 7-year note ended steady at 2.29 percent and the yield on short-term 2-year note rose 1 basis point to 1.96 percent.
The Australian government bonds traded nearly flat, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 2.30 percent mark, the yield on 15-year note remained steady at 2.66 percent and the yield on short-term 2-year stood flat at 1.67 percent.
