Market Roundup
- DXY +0.05%, DAX -0.15%, Brent +0.17%, Iron +1.0%
- USD/JPY+0.16%, EUR/USD +0.05%, GBP/USD -0.55%
- Saudi made oil output proposal to Iran ahead of OPEC meet
- Riksbank’s Ohlsson-more important question if to continue asset buys
- FT website-Whitehall and BoE believe Carney will serve full term to 2021
- ECB’s Constancio- monetary policy has leeway but it’s not infinite
- France Final Q2 GDP -0.1% vs +0.6% previous, 0.0% expected
- Germany Sept flash Mfg PMI 54.3 vs 53.6 previous, 53.1 expected
- Germany Sept flash Service PMI 50.6 vs 51.7 previous, 52.1 expected
- Eurozone Sept flash Mfg PMI 52.6 vs 51.7 previous, 51.5 expected
- Eurozone Sept flash Service PMI 52.1 vs 52.8 previous, 52.8 expected
- OPEC in new push to clinch first deal to curb output since 2008
Economic Data Ahead
- (0830 ET/1230 GMT) The Statistics Canada is likely to report that annual inflation rate rose to 1.4 percent in August from 1.3 percent in July, bringing it closer to the Bank of Canada’s 2 percent target.
- (0830 ET/1230 GMT) Canadian retail sales for July are expected to have edged up 0.1 percent after declining 0.1 percent in the prior month.
- (0900 ET/1300 GMT) Mexican retail sales are likely to have gained 0.4 percent in July after rising 1.0 percent in the previous month.
- (0945 ET/1345 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of September. The index is likely to edge down to 51.9, after posting a final reading of 52.0 in the previous month.
- (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count.
Key Events Ahead
- (0900 ET/1300 GMT) U.S. Treasury Secretary Jack Lew and Treasury Deputy Secretary Sarah Bloom Raskin participate in the Freedman Bank Forum, hosted by the Treasury Department.
- (0945 ET/1345 GMT) FedTrade ops 30-year Ginnie Mae max $1.550 bln.
- (1100 ET/1500 GMT) Minneapolis Fed President Neel Kashkari will host an open #AskNeel Twitter Q&A to answer questions on the bank's search for a new first vice president and on other topics.
- (1130 ET/1530 GMT) Dallas Federal Reserve Bank President Robert Kaplan gives his post-Fed-meeting views on the economic outlook and the appropriate path for interest rates in a speech at the Texas Oil and Gas Association's Lone Star Energy Forum in Houston.
- (1200 ET/1600 GMT) Philadelphia Fed President Patrick Harker, Cleveland Fed President Loretta Mester and Atlanta Fed President Dennis Lockhart participate in "Presidents' Perspectives: The Fed's Role in Our Communities" closing plenary before the "Reinventing Our Communities: Transforming Our Economies" conference hosted by the Federal Reserve Bank of Philadelphia.
FX Beat
DXY: The dollar rose but on track for its worst week in a month after BoJ Japan altered its monetary policy framework and the Fed trimmed its long-term interest rate expectations. The dollar index against a basket of currencies trades 0.1 percent up at 95.43, retreating from a low of 95.05 hit on Thursday, its lowest since Sept. 12.
EUR/USD: The euro rose, extending gains for the third consecutive session, following mixed reading from Eurozone’s Markit preliminary manufacturing and services PMIs for the month of September. The economy’s manufacturing PMI rose to 52.6, surpassing consensus of 51.5, while service PMI and composite PMI declined to 52.1 and 52.6, respectively. The European currency trades 0.1 percent up at 1.1215, attempting to extend gains above the 1.1200 handle. Investors will closely watch U.S preliminary manufacturing data, ahead of Fed official's speeches for further cues on the U.S. monetary policy outlook. On the lower side, support stands at 1.119 (55- day EMA)/1.1149 (200- day MA)/1.1120 (Sep 21st low). The short-term weakness below 1.1120 level. The major resistance is around 1.12930 (trend line joining 1.16163 and 1.13663) and break above targets 1.13660, while minor resistance is around 1.1245 (daily Kijun-Sen).
USD/JPY: The dollar initially rose above the 101.00 handle as intervention talks by the Japanese government officials weighed on the yen. However, the major trimmed gains since the BoJ has failed to regain markets’ confidence in its ability to stimulate inflation expectations, and thus achieving the 2 percent target. The pair trades 0.1 percent up at 100.82, having touched an early high of 101.25. Investors now await speeches by Philly Fed P.Harker, Atlanta Fed D.Lockhart and Cleveland Fed L.Mester for insight on FOMC's stance at Wednesday’s meeting. The major resistance is around 102 and break above targets 102.80/103.40. On the lower side, major support is around 100 and any break below 100 will drag it till 98.80.
GBP/USD: Sterling tumbled below the 1.3000 handle, as investors continue to worry over Britain's exit from the European Union, keeping pressure on the currency. On Thursday, the major rose above 1.3100 handle after Bank of England policymaker Kristen Forbes stated that she saw no reason for a further cut in interest rates, having already cut them to a record low of 0.25 percent in August. However, it trimmed gains and continues to struggle after British Foreign Secretary Boris Johnson said the formal separation proceedings between Britain and the EU is likely to commence early next year, and that two years may not be required to negotiate a deal. Sterling trades 0.7 percent lower at 1.2985, while against the euro it stood at 86.36 pence, down by 0.8 percent. On the higher side, major resistance is around 1.3040 (hourly Kijun-Sen) any break above will take it to next level till 1.3090/1.3120/1.3195 (50% retracement of 1.3445 and 1.29450). The intraday support stands at 1.2945 and any violation below will drag it down till 1.2900/1.2865.
USD/CHF: The Swiss franc edged down against the dollar, pulling away from a 2-week high touched in the previous session. The major trades 0.1 percent up at 0.9701, recovering from a low of 0.9659, it’s weakest since Sept. 8. On the higher side, any break above 0.9745 will take the pair till 0.9800/0.9820. The short-term weakness can be seen only below 0.9630 and any break below targets 0.9580/0.9530.
AUD/USD: The Australian dollar attempted a minor recovery, trimming early session losses as oil prices rebounded from recent lows after Saudi Arabia proposed to reduce output if Iran freezed production at current levels. The Aussie trades flat at 0.7637, retreating from an early low of 0.7609. In the week, the major strengthened after the Reserve Bank of Australia governor gave an upbeat assessment of the economy, combined with weakness in the U.S. dollar following FOMC policy outcome. On the higher side, any break above 0.7680 will take it till 0.7700/0.7735. The major support is around 0.7580 and break below will drag it till 0.7530/0.7470/ 0.7440.
NZD/USD: The New Zealand dollar slumped below the 0.7300 handle, extending its reversal from 2-weeks high for the second straight day. The major failed to benefit from higher oil prices as speculations of further interest rate cut by RBNZ at its November meeting weakened the bid tone around the Kiwi. The pair trades 0.6 percent lower at 0.7263, having touched an early low of 0.7242, it’s lowest since Sept. 15. Immediate resistance is located at 0.7330 (Sept 16 High), break above targets 0.7380. On the downside, support is seen at 0.7230, break below could drag it near 0.7200.
Equities Recap
European shares tumbled, retreating from 2-week highs hit the previous session after the Federal Reserve signaled less aggressive path for future interest rate hikes.
The pan-European STOXX 600 index decreased 0.7 percent at 345.42 points, while the FTSEurofirst 300 index shed 0.69 percent at 1,359.93 points.
Britain's FTSE 100 trades 0.31 percent down at 6,891.08 points, while mid-cap FTSE 250 dropped 0.82 percent at 17,840.99 points.
Germany's DAX fell 0.28 percent at 10,643.39 points; France's CAC 40 trades 0.69 percent lower at 4,479.25 points.
MSCI's broadest index of Asia-Pacific shares outside Japan was steady and within the range of its highest levels since July 2015 that it touched early September.
Tokyo's Nikkei lost 0.32 percent at 16,754.02 points, Australia's S&P/ASX 200 index climbed 1.06 percent at 5,431.30 points and South Korea's KOSPI added 0.21 percent at 2,054.07 points.
Shanghai composite index declined 0.3 percent at 3,033.90 points, while CSI300 index tumbled 0.5 percent at 3,275.67 points. Hong Kong's Hang Seng index shed 0.3 percent at 23,686.48 points.
Commodities Recap
Crude oil prices rose, extending gains for the fourth consecutive day following news that after Saudi Arabia proposed to reduce output if Iran agreed to freeze production at current levels of 3.6 mln bpd. International benchmark Brent crude was trading 1.16 percent higher at $47.98 per barrel at 1043 GMT, having touched session high of $48.23, its highest since Sept. 13. U.S. West Texas Intermediate crude rose 0.5 percent at $46.30 a barrel, after hitting fresh 2-week high of $46.53.
Gold was little changed, within the sight of its 2-week high struck in the previous session and was on track for its biggest weekly gain in nearly two months. Spot gold traded flat at $1,336.01 an ounce by 0949 GMT, having touched a high of $1343.56, on Thursday, and was set for a weekly gain of nearly 2 percent, the highest since end-July. U.S. gold futures slipped 0.4 percent to $1,339 an ounce.
Treasuries Recap
The US Treasuries saw mixed performance as markets continued to digest the September FOMC statement, coupled with relatively mixed economic data, highlighted by further improvement in jobless claims that came alongside weaker than expected existing home sales and leading economic indicators release. The yield on the benchmark 10-year Treasury note fell 2 basis points to 1.61 percent, the yield on 5-year bond dipped 1-1/2 basis points to 1.159 percent and the yield on short-term 2-year note remained steady at 0.77 percent.
The UK gilts slumped as crude oil prices rebounded after Saudi Arabia made a proposal to Iran ahead of Algiers OPEC meeting for a production cut. The yield on the benchmark 10-year gilts rose 2 basis points to 0.731 percent, the super-long 40-year bond yield climbed 1 basis point to 1.31 percent and the yield on short-term 5-year bond bounced 2 basis points to 0.102 percent.
The German bunds 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 bond hovered around -0.086 percent mark, the yield on long-term 30-year note remained steady at 0.478 percent and the yield on short-term 2-year bond stood flat at -0.664 percent.
The Japanese government bonds gained following the prices of German bunds and United States Treasuries. The benchmark 10-year bond yield, which moves inversely to its price, fell 2-1/2 basis points to -0.047 percent, the super-long 30-year note yield dipped 4 basis points to 0.475 percent.
New Zealand government bonds closed higher as investors poured into safe-haven assets after the Reserve Bank of New Zealand in its monetary policy statement hinted at lowering its key interest rate further due to persistent weak consumer inflation. The yield on the benchmark 10-year bond fell 7 basis points to 2.410 percent, the yield on 7-year note ended 5 basis points lower at 2.135 percent and the yield on short-term 2-year note slid 1 basis point to 1.890 percent.
The Australian government bonds traded narrowly mixed in subdued trade as no major economic data was to be released throughout the day. The yield on the benchmark 10-year Treasury note fell 4 basis points to 2.058 percent, the yield on long-term 15-year note also dipped 4 basis points to 2.420 percent and the yield on short-term 2-year bounced 1-1/2 basis points to 1.619 percent.
