Market Roundup
• U.S. wholesale inventories unchanged in July, sales -0.4% v 0.2% forecast, 1.7% previous.
• Stocks slide USD rises as Fed speakers increase bets on September rate hike.
• Fed's Rosengren: Gradual rate hikes appropriate, weakness in GDP growth likely to reverse in H2 ’16.
• Fed’s Tarullo: Doesn’t foreclose the possibility of rate rise this year, still room for employment gains.
• Fed’s Kaplan: Fed can be patient, deliberate raising rates, rate hike path will be very shallow very flat.
• N. Korea's largest nuclear test draws condemnation, threat of more sanctions.
• FRB NY Nowcast stands at 2.8% for Q3 ’16 and 1.7% for Q4 ’16; Q4 was previously at 2%.
• Atlanta Fed’s GDPNow down 0.2% to 3.3% on wholesale trade data.
• U.S. oil drillers add rigs in longest streak in 5 years -Baker Hughes.
• Oil falls more than 3 percent; U.S. crude draw seen as glitch; Oil up nearly 4 percent for the week; first rise in three weeks.
• Iranian oil output stagnates for 3rd month amid OPEC bargaining; Iran asks for much larger ceiling in any OPEC deal.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Corp Goods Price MM Aug forecast -0.2%, 0%-previous
• 23:50 Japan Corp Goods Price YY Aug forecast -3.5%, -3.9%- previous
• 23:50 Japan Machinery Orders MM Jul forecast -3.5%, 8.3%- previous
• 23:50 Japan Machinery Orders YY Jul forecast -0.3%, -0.9%- previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1164 levels and currently trading at 1.1227 levels. The pair has made session high at 1.1237 and hit lows at 1.1197 levels. Euro slipped lower against the dollar on Friday as the euro was weighed down after hawkish comments from Federal Reserve officials that lifted bets on an interest rate hike and after German trade data cast doubt on the strength of the euro zone's largest economy. German exports fell sharply in July, shrinking the overall trade surplus for the fourth consecutive month - something not seen since 1992. Geopolitical jitters added to the sour mix after North Korea conducted its fifth and biggest nuclear test and said it had mastered the ability to mount a warhead on a ballistic missile, ratcheting up a threat that its rivals and the United Nations have been powerless to contain. The dollar index , which tracks the U.S. currency against a basket of six currencies, rose 0.4 percent to 95.41. The euro fell 0.4 percent against the dollar to $1.1229.
GBP/USD is supported in the range of 1.3200 currently trading at 1.3273 levels. It reached session high at 1.3306 and hit low at 1.3236 levels. Sterling declined to hit a one-week low against the dollar on Friday, as the dollar rallied broadly on revived expectations that U.S. interest rates will be hiked soon. The pound went on a winning streak up to Tuesday, when it hit a seven-week high of $1.3445 after rallying more than 4 percent in the previous two weeks, leaving it more than 5 percent up from a three-decade low plumbed in July. But it has since fallen around 1.5 percent, dampened by data showing UK manufacturing posting its biggest drop in a year and after Bank of England Governor Mark Carney kept the option of further monetary easing on the table. It fell 0.4 percent on Friday to hit $1.3237, its lowest in a week, after a U.S. Federal Reserve official said gradual rate increases might be in order and low-interest rates were raising the chance of an overheated economy.
USD/CAD is supported at 1.2964 levels and is trading at 1.3027 levels. It has made session high at 1.3051 and lows at 1.2996 levels. The Canadian dollar declined sharply against U.S. dollar on Friday as a drop in oil prices and increased bets on an impending interest-rate increase by the Federal Reserve offset stronger-than-expected domestic jobs data. Canada's economy added 26,200 jobs in August, recovering some of the positions lost in recent months on increased hiring in the construction and service sectors, data from Statistics Canada showed. Economists had forecast a gain of 15,000 jobs. U.S. crude was down 1.83 percent at $46.75 a barrel. It was still set for its first weekly gain in three weeks, though, after Russia and Saudi Arabia agreed to work together to help rebalance the markets and after a surprisingly large drawdown in U.S. crude stocks. Losses for the loonie came after a more dovish-than-expected statement from the Bank of Canada on Wednesday. The central bank warned that the economy could be weaker than it anticipated just two months ago as exports disappointed.
USD/JPY is supported around 102.29 levels and currently trading at 102.69 levels. It peaked to hit session high at 103.06 and made session lows at 102.51 levels. US dollar rose against Japanese yen on Friday as remarks by Federal Reserve policymakers helped boost investor expectations of a near-term increase in U.S. interest rates. Boston Fed President Eric Rosengren said in a speech on Friday that gradual interest rate increases might be in order with the U.S. economy at full employment and that low-interest rates were increasing the chance of an overheated economy. Rosengren's comments followed the announcement Thursday that U.S. Fed Governor Lael Brainard would give a speech on Monday. The dollar rose against a basket of major currencies after Boston Fed President Eric Rosengren said the U.S. central bank increasingly faces risks if it waits much longer to hike rates, pressuring Japanese yen.
Equities Recap
European stocks fell sharply on Friday, dropping suddenly in afternoon trade following a sell-off on Wall Street as investors reacted to less dovish than expected signals from central bankers on both sides of the Atlantic.
UK's benchmark FTSE 100 closed down by 1.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.27 percent, Germany's Dax ended down by 1 percent, France’s CAC finished the day down by 1.1 percent.
U.S. stocks dropped on Friday, giving the S&P 500 its worst day since June, as investors grew nervous following a nuclear test by North Korea and comments by Federal Reserve officials that hinted at a U.S. interest rate hike.
Dow Jones closed down by 2.13 percent, S&P 500 ended down by 2.44 percent, Nasdaq finished the day down by 2.52 percent.
Treasuries Recap
U.S. Treasury yields rose on Friday, with long-dated maturities reaching more than two-month highs, in line with Japanese government bonds, after reports suggested the Bank of Japan is considering measures to cut short- to medium-term yields, while lifting those of long-term debt.
In late New York trading, benchmark 10-year Treasury notes were down 16/32 in price to yield 1.673 percent, compared with 1.616 percent late on Thursday. Yields rose as high as 1.678 percent, an 11-week high.
The 30-year Treasury bond fell more than a point in price to yield 2.392 percent, compared with 2.322 percent on Thursday.
Commodities Recap
Oil prices fell 4 percent on Friday, paring most of the previous session's rise as traders noted that a tropical storm was behind this week's unexpected slump in U.S. crude inventories.
Brent crude settled down $1.98 at $48.01 a barrel after rising above $50 for the first time in two weeks on Thursday. U.S. crude was down $1.74 at $45.88.
Gold prices fell again on Friday as hawkish comments on U.S. interest rates from a top Federal Reserve official helped lift the U.S. dollar, and as buyers continued to cash in on this week's price rally.
Spot gold was down 0.67 percent at $1,329.02 per ounce by 2:18 p.m. EDT (1818 GMT), while U.S. gold futures for December delivery settled down $7.1, or 0.53 percent, at $1,334.5 per ounce.
