Market Roundup
• US Markit Comp Flash PMI Oct, 55.7, 54.8 previous.
• US Markit Mfg PMI Flash Oct, 54.5, 53.5 forecast, 53.1 previous.
• US Markit Svcs PMI Flash Oct, 55.9, 55.6 forecast, 55.3 previous.
• U.S. mortgage supply is seen falling in 2018 – MBA.
• Trump began talks with Republican senators to build consensus for proposed tax cuts.
• Canada to unveil smaller budget deficit, hopes will shift focus.
• UK sees swift deal on Brexit transition outline, still at odds with EU on trade.
• Oil up 1 pct on Saudi comments, forecast of U.S. inventory drop.
• Eurozone inflation expectations hit a seven-month high.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand Trade-Imports Sep, 4.92B previous
• 21:45 New Zealand Trade-Exports Sep, 3.69B previous
• 21:45 New Zealand Trade-Balance Sep, -1,235 previous
• 00:30 Australia Import Prices Q3, -0.1% previous
• 00:30 Australia Export Prices Q3, -5.7% previous
Looking Ahead - Events, Other Releases (GMT)
• 07:00 Swedish central bank holds monetary policy meeting, Stockholm
• 14:00 Bank of Canada key policy Interest rate announcement, Ottawa
Currency Summaries
EUR/USD is likely to find support at 1.1739 levels and currently trading at 1.1770 levels. The pair has made session high at 1.1793 and hit lows at 1.1752 levels. The euro strengthened against the greenback on Tuesday as traders were cautious about possible fresh leadership at the U.S. Federal Reserve and bets that a tax cut package is on track to be enacted. U.S. President Donald Trump told reporters on Monday he is "very, very close" to deciding who should lead the Federal Reserve after interviewing five candidates for the position. His possible nominees include current Fed Chair Janet Yellen, whose term expires in February, as well as Fed Governor Jerome Powell, Stanford University economist John Taylor, Trump's chief economic advisor Gary Cohn, and former Fed Governor Kevin Warsh. Hopes that Congress will pass a package of tax cuts have helped to strengthen the dollar and pushed U.S. stocks to record highs, although skepticism has persisted in the absence of details on the overhaul and perceived discord between Trump and top Republican lawmakers. The gauge that tracks the greenback against a group of six currencies was little changed on the day at 93.918.The euro increased 0.2 percent to $1.1772 ahead of the European Central Bank's policy meeting on Thursday. Traders have expected the ECB to signal a gradual removal of monetary stimulus as eurozone economic growth has improved.
GBP/USD is supported in the range of 1.3085 levels and currently trading at 1.3126 levels. It reached session high at 1.3171 and dropped to session low at 1.3110 levels. Sterling declined to a two-week low against the dollar on Tuesday as sterling was pressured by growing uncertainty over whether the Bank of England will raise interest rates next week for the first time in over a decade. But although that is the consensus view, comments from BoE policymakers that markets have interpreted as dovish have generated scepticism among investors. And most economists said that after November's hike, they expected no action from the central bank for the whole of next year. BoE Deputy Governor Jon Cunliffe again raised doubt about whether he would back a rate rise next week, describing it as an "open question" in an interview published by a Welsh newspaper on Monday. Sterling slipped as much as two-thirds of a percent to $1.3110, close to a two-week low of $1.3087. Despite getting a modest boost from signs of progress in talks over Britain's departure from the European Union in recent days, longer-term worries about the UK's economy and political stability have pre-empted any major gains for the pound. Investors are now eyeing third-quarter GDP data for Britain due on Wednesday for clues on the health of the economy and any doubts that may lead to about an interest rate hike. Preliminary data is expected to show that GDP grew by 0.3 percent in the third quarter, the same slow quarterly growth as in the previous three months.
USD/CAD is supported at 1.2619 levels and is trading at 1.2680 levels. It has made session high at 1.2691 and lows at 1.2641 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as investors braced for a Bank of Canada interest rate decision on Wednesday. After back-to-back interest rate increases, the Bank of Canada can stay on the sidelines for longer than first anticipated, with tighter mortgage rules slowing the housing market and uncertainty about the North American Free Trade Agreement clouding the outlook for the economy. Chances of a rate increase this week have sunk to about 25 percent from nearly 50 percent in mid-September, the overnight index swaps market indicates. Prices of oil, one of Canada's major exports, rose after top exporter Saudi Arabia said it was determined to end a supply glut. The Canadian government will release its economic and fiscal update later in the day. After a smaller-than-expected budget deficit in the previous fiscal year and recent strong economic growth, analysts expect the government's finances to be in a better position than it projected in its budget earlier this year. The Canadian dollar was last trading down 0.2 percent at C$1.2680 to the greenback. The currency's strongest level of the session was C$1.2622, while it touched its weakest since Aug. 18 at C$1.2691.
NZD/USD is supported around 0.6879 levels and currently trading at 0.6901 levels. It hit session high at 0.7006 and made session lows at 0.6884 levels. The New Zealand dollar declined against the dollar on Tuesday as the kiwi suffered a fresh setback after the country's incoming Labour government outlined its left-leaning priorities, including a clamp-down on foreign buyers of local housing. The kiwi dollar shed all its early gains to slip to $0.6900, having briefly been as high as $0.6940 at one point. The currency has sunk over three cents in as many sessions after the Labour Party secured power following an election last month. Signing a power-sharing deal with the nationalist New Zealand First party, Prime minister-elect Jacinda Ardern laid out policies that some investors worry could threaten the country's strong economic track record. These include cutting back on immigration, raising the minimum wage and altering the mandate of the Reserve Bank of New Zealand to include employment and not just inflation. Analysts suspect the latter shift could mean interest rates stay lower for even longer than the RBNZ has currently predicted, with markets already not pricing in a hike until 2019.
Equities Recap
Shares of Apple suppliers were boosted by robust results from chipmaker AMS on Tuesday, but European shares were mixed as investors awaited the European Central Bank meeting later this week.
UK's benchmark FTSE 100 closed up by 0.1 percent, the pan-European FTSEurofirst 300 ended the day down by 0.23 percent, Germany's Dax ended up by 0.2 percent, France’s CAC finished the day up by 0.2 percent.
U.S. stock indexes rose on Tuesday, led by the Dow, as stronger-than-expected results and forecasts from companies including 3M, Caterpillar and General Motors fueled optimism about strength in the economy.
Dow Jones closed up by 0.72 percent, S&P 500 ended up 0.17 percent, Nasdaq finished the day up by 0.17 percent.
Treasuries Recap
U.S. benchmark 10-year Treasury note yields rose to their highest in more than five months on Tuesday, in line with gains in the European bond market, with a strong U.S. equity performance also adding to overall risk appetite.
The 10-year U.S. Treasury note prices were down 9/32, yielding 2.408 percent, up from Monday's 2.375 percent. Earlier, 10-year yields rose to 2.414 percent, the highest since mid-May.
U.S. 30-year bond prices fell 21/32, with a yield of 2.923 percent, down from 2.89 percent late on Monday. Thirty-year yields had risen to a three-week high of 2.931 percent.
Commodities Recap
Gold prices dipped on Tuesday as investors anxiously awaited news on the next head of the U.S. Federal Reserve, while strong share markets and a calmer geopolitical environment sapped safe-haven demand.
Spot gold down 0.4 percent at $1,276.73 an ounce by 2:28 p.m. EDT (1828 GMT), after hitting its lowest since Oct. 6 at $1,271.86 in the previous session.
U.S. gold futures for December delivery settled down $2.60, or 0.2 percent, at $1,278.30 per ounce.
Brent oil rose 1 percent on Tuesday after top exporter Saudi Arabia said it was determined to end a supply glut, while prices also drew support from forecasts of a further drop in U.S. crude inventories as well as nervousness over tensions in Iraqi Kurdistan.
Brent crude, the global benchmark, settled up 96 cents or 1.7 percent to $58.33 a barrel. U.S. crude settled up 57 cents or 1.1 percent to $52.47.
