Market Roundup
• U.S. GDP Advance Q3, 3.00%, 2.50% forecast, 3.10% previous.
• U.S. GDP Cons Spending Advance Q3, 2.40%, 3.30% previous.
• U.S. GDP Sales Advance Q3, 2.30%, 2.60% forecast 2.90% previous.
• U.S. GDP Deflator Advance Q3, 2.10%, 1.80% forecast 1.00% previous.
• U.S. PCE Prices Advance Q3, 1.50%, 1.20% forecast 0.30% previous.
• U.S. Core PCE Prices Advance Q3, 1.30%, 1.30% forecast 0.90% previous.
• U.S. U Mich Conditions Final Oct, 116.50, 116.10 forecast, 116.40 previous.
• U.S. U Mich Expectations Final Oct, 90.50, 91.20 forecast, 91.30 previous.
• U.S. U Mich Sentiment Final Oct, 100.70, 100.90 forecast, 101.10 previous.
• U.S. U Mich 1Yr Inf Final Oct, 2.40, 2.30 previous.
• U.S. U Mich 5-Yr Inf Final Oct, 2.50, 2.40 previous.
• Trump leaning toward Powell as next Fed chair –sources.
• ECB should shift focus away from monthly asset buys: policymakers.
• Spain's Rajoy sacks Catalan government, calls snap election.
• UK personal insolvencies hit 5-year high in gloomy sign for the economy.
• Canada posts slightly smaller deficit in Aug, expenses decline.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Retail Sales YY Sep, 2.5% forecast, 1.7% previous (Oct 29)
Looking Ahead - Events, Other Releases (GMT)
• N/A Bank of Japan holds monetary policy meeting (from Oct 30)
Currency Summaries
EUR/USD is likely to find support at 1.1519 levels and currently trading at 1.1601 levels. The pair has made session high at 1.1684 and hit lows at 1.1573 levels. The euro declined against the greenback on Friday and was on track for its biggest weekly loss of the year as the European Central Bank's decision on Thursday to prolong its bond purchases signaled its willingness to stick with an ultra-loose policy stance. The tension between Madrid and Catalonia's secessionists also stoked selling in the single currency after the Catalan parliament on Friday declared independence from Madrid following a secret ballot. On Thursday, the ECB said it will extend its bond purchases into September 2018 while it will reduce its monthly purchases by half to 30 billion euros starting in January. The move raised expectations the ECB would unlikely raise interest rates until 2019 as the U.S. Federal Reserve has remained on its path to hike U.S. rates further. The euro was down 0.6 percent at $1.1579, bringing its weekly loss against the dollar to 1.7 percent, which would be the biggest in 11 months. The Catalan parliament vote revived some safe-haven demand for the yen and Swiss franc. As the euro wobbled this week, the dollar strengthened on upbeat economic data, hopes for a tax-cut plan and speculation about President Donald Trump's selection of someone who favors a faster pace of rate increases than current Fed Chair Janet Yellen, whose term expires in February. The U.S. government reported on Friday that the economy grew at a 3.0 percent annual rate in the third quarter, faster than the 2.5 percent forecast among economists polled.
GBP/USD is supported in the range of 1.3068 levels and currently trading at 1.3128 levels. It reached session high at 1.3126 and dropped to session low at 1.3076 levels. Sterling slipped to a three-week low against a stronger dollar on Friday, as uncertainty over prospects for the British economy dampened bets that a likely Bank of England rate hike next week would signal the start of a sustained tightening cycle. Though a rise in borrowing costs after the next BoE policy meeting on Nov. 2 is largely priced in by the market, the prospect of a dovish hike, one which will not be followed by further rate rises, has put downward pressure on the pound. While the United States is in the midst of rolling back years of record-low interest rates, the likely BoE rate hike will be Britain's first in over a decade. Though rates are expected to double, the move would only reverse measures taken by the Bank to mitigate against the possible impact of Brexit last year. If the BoE does not vote unanimously on the hike, he added, this will indicate to investors that a sustained cycle of tightened monetary policy would be unlikely to follow. Sterling hit its lowest levels against the dollar since Oct. 9 on Friday at $1.3070 but recovered some ground to trade at $1.3114 but was still down 0.3 percent on the day. Further clues about the health of the British economy and outlook for BoE interest rate policy could be provided by two U.K. credit rating reviews, due to be released on Friday by ratings agencies Fitch and Standard & Poor's.
USD/CAD is supported at 1.2808 levels and is trading at 1.2830 levels. It has made session high at 1.2916 and lows at 1.2848 levels. The Canadian dollar weakened to a more than three-month low against a broadly firmer greenback on Friday as the country’s yields on government bonds fell further below those of U.S. Treasuries. The gap between Canada's two-year yield and its U.S. counterpart widened by 2.3 basis points to a spread of -18.5 basis points, its widest since July 12, when the Bank of Canada raised interest rates for the first time in nearly seven years. The central bank also hiked in September, but it left its benchmark interest rate unchanged at 1 percent on Wednesday. In cautiously considering another rate move, the bank said it would observe how the economy adjusts to higher interest rates, tighter mortgage rules and uncertainty about U.S. trade policy. Perceived chances of another hike by the end of the year have fallen to 24 percent from 37 percent before the rate decision, the overnight index swaps market shows. The Canadian dollar was last trading at C$1.2830 to the greenback, down 0.10 percent.
AUD/USD is supported around 0.7623 levels and currently trading at 0.7666 levels. It hit session high at 0.7671 and made session lows at 0.7624 levels. The Australian dollar slipped to a fresh 3-1/2 month trough on Friday after the country's government lost its one-seat majority in the lower house, after the High Court ruled the deputy prime minister ineligible to remain in parliament. The currency went as low as $0.7623, a level not seen since July 11. It was last off 0.26 percent at $0.7668. For the week, the Aussie is down 2.3 percent, the most since November 2016.The government may regain its razor-thin majority if former Deputy Prime Minister Barnaby Joyce wins a by-election expected on December 2. The Reserve Bank of Australia (RBA) has kept rates at a record low 1.50 percent for more than a year now and rates futures imply the next move might not be until November 2018.The Aussie also took a beating after two major central banks struck a surprisingly dovish tone this week. First, the Bank of Canada indicated it was finished with raising rates after two hikes this year. That was followed by a European Central Bank meeting on Thursday in which policymakers assured markets they would extend its bond-buying programme as necessary. That sent the euro sliding against the U.S. dollar. That means the U.S. Federal Reserve is one of the few central banks seen continuing to tighten its monetary policy, keeping the greenback buoyant.
Equities Recap
European shares reached a five-month high overall on Friday, but Spanish stocks fell after Catalonia's parliament declared independence.
UK's benchmark FTSE 100 closed up by 0.3 percent, the pan-European FTSEurofirst 300 ended the day up by 0.59 percent, Germany's Dax ended up by 0.7 percent, France’s CAC finished the day up by 0.8 percent.
The Dow industrials, S&P 500 and the Nasdaq Composite notched record closing highs on Wednesday after the Federal Reserve kept interest rates unchanged and on strong earnings reports from Boeing and AT&T.
Dow Jones closed up by 0.13 percent, S&P 500 ended up 0.79 percent, Nasdaq finished the day up by 2.18 percent.
Treasuries Recap
U.S. Treasury yields fell on Friday as Catalonia'sparliament declared independence from Spain and as reports emerged that PresidentDonald Trump favored Federal Reserve Governor Jerome Powell to lead the U.S. central bank.
In late trading, U.S. two-year note yields fell to 1.595 percent, from Thursday's 1.619 percent. Earlier, two-year yields rose to a nine-year peak of 1.639 percent after the GDP data.
U.S. 10-year U.S. Treasury yields were at 2.419 percent, down from 2.454 percent late Thursday. Earlier in the session, 10-year yields hit a new seven-month peak of 2.477 percent.
U.S. 30-year bond yields were also down at 2.930 percent, from 2.961 percent on Thursday.
Commodities Recap
Gold edged higher on Friday, reversing earlier losses after the Catalonian parliament's independence declaration from Spain led investors to seek safety from political upheaval.
Spot gold was up 0.3 percent at $1,270.36 an ounce by 2:02 p.m. EDT (1802 GMT), heading for its second consecutive weekly decline. Gold had earlier dropped to a three-week low of $1,263.35.
U.S. gold futures for December delivery settled up $2.20, or 0.2 percent, at $1,271.80 per ounce.
Oil prices jumped about 2 percent on Friday, with global benchmark Brent crude rising above $60 per barrel, on support among the world's top producers for extending a deal to rein in output and as the dollar retreated from three-month peaks.
Brent futures rose $1.14, or 1.9 percent, to settle at $60.44 a barrel after hitting a session peak of $60.53, the highest since July 2015 and more than 35 percent above 2017 lows touched in June.
U.S. West Texas Intermediate crude oil (WTI) ended the session up $1.26, or 2.4 percent, at $53.90 after reaching a session peak of $53.98 a barrel, the highest since early March.
