Market Roundup
• ECB Said to Build Taper Consensus as QE Decision Time Nears-BBG.
• Fed hawk Lacker: strong case to hike, preemptive rises likely needed.
• Euro zone bond yields, euro jump on report of ECB plan for QE tapering.
• Britain should not expect to pre-negotiate on Brexit-German deputy Finance Minister.
• Britain will minimize Brexit risk to financial centre-Minister.
• Brazil's Goldfajn says there is no set time frame for rate cuts.
• IMF says global growth to stay weak, warns of populist fallout.
• IMF says sees weaker 2016 growth in U.S. at 1.6 percent.
• Dairy prices fall, volumes drop at auction –New Zealand's Fonterra.
• Philippine leader tells Obama 'go to hell', says can buy arms from Russia, China.
Looking Ahead - Economic Data (GMT)
• 22:30 Australia AIG Services Index Sep 45-previous
• 00:30 Australia Retail Sales MM Aug 0.20% forecast, 0.00% - previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is supported at 1.1137 levels and currently trading at 1.1203 levels. The pair has made session high at 1.1239 and hit lows at 1.1137 levels. Euro initially declined against the greenback in the US session but rebounded in quick succession erasing most of the earlier losses after media reports surfaced that European Central Bank was planning for tapering its asset-purchase programme. Bloomberg reported that ECB policymakers were building consensus that quantitative easing would need to be wound down gradually when the central bank decides to end the program. Investors are increasingly skeptical that central bank attempts to regenerate growth and inflation will be effective, and worry that asset purchase programs are creating bubbles and distorting market fundamentals. The single currency was down 0.1 percent at $1.1202 after falling to a near two-week low at $1.1135 earlier In the US session. It was up 1.2 percent at 115.14 yen, not far from a three-week peak.
GBP/USD is supported in the range of 1.2700 levels and currently trading at 1.2730 levels. It reached session high at 1.2775 and dropped to session low at 1.2719 levels. British pound declined sharply hit 31 years low against the dollar on Tuesday as the pound was weighted down on fears over Britain's looming exit from the European Union. The dollar broadly strengthened on upbeat economic data and bets on a year-end U.S. interest rate increase. The pound has fallen almost 2 percent since British Prime Minister Theresa May's announcement on Sunday that the formal process to take the nation out of the EU would start by the end of March. Many in the market worry that the British government's stance points to a hard Brexit, in which Britain splits entirely from the single market in favor of retaining control over immigration, which could drive an exodus of banks from London. The sterling was down 0.8 percent at $1.2730 after falling earlier on Tuesday to $1.2720, its weakest since June 1985. It has declined about 15 percent since Britain's June 23 referendum on EU membership.
USD/CAD is likely to find support at 1.3102 levels and is trading at 1.3191 levels. It has made intraday high at 1.3215 and lows at 1.3128 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as upbeat U.S. manufacturing data on Monday stoked expectations that the Federal Reserve will lift interest rates by year-end. Recent U.S. data indicating a strengthening manufacturing sector along with an upward revision to second-quarter gross domestic product has boosted bets of a Fed rate hike by year end. Traders now see above even odds of a rate increase in December. The Canadian dollar was last trading at C$1.3188 to the greenback, or 75.79 U.S. cents, weaker than Monday's close of $1.3110, or 76.28 U.S. cents. Canada's international merchandise trade report for August is due on Wednesday. Investors will be looking to see if exports were as strong as in the previous month. The September employment report is due on Friday.
AUD/USD is supported around 0.7593 levels and currently trading at 0.7625 levels. It hit session high at 0.7666 and made session lows at 0.7608 levels. The Australian dollar declined against US dollar on Tuesday as its U.S counterpart strengthened across the board on recent upbeat U.S. data pushing up the odds of a U.S. interest rate hike before year-end. Forecast-beating U.S. manufacturing data on Monday, combined with Tuesday's comment by Richmond Federal Reserve President Jeffrey Lacker that there was a strong case for raising interest rates, stoked expectations that the Fed will lift rates by year-end .Meanwhile, Australia's central bank left interest rates at 1.5 percent on Tuesday as it weighs the effect of past easing and the biggest-ever boom in apartment building helps underpin economic activity and jobs growth. The Australian dollar held firm near $0.7671 level in the earlier Asian session after Australia's central bank left interest rates unchanged but declined to hit low at 0.7608 in the US session.
Equities Recap
European shares advanced on Tuesday, with Germany's Deutsche Bank hitting a two-week high following steep losses and the world's biggest education company Pearson gaining after encouraging comments by Morgan Stanley.
UK's benchmark FTSE 100 closed up by 2 percent, the pan-European FTSEurofirst 300 ended the day up by 1.11 percent, Germany's Dax ended up by1.2 percent, France’s CAC finished the day up by 1.3 percent.
U.S. stocks fell on Tuesday as investors fretted about Britain's exit from the European Union and the prospect of a Federal Reserve interest rate hike in coming months.
Dow Jones closed down by 0.48 percent, S&P 500 ended down by 0.50 percent, Nasdaq finished the day down by 0.22 percent.
Treasuries Recap
U.S. Treasury prices dropped and yields jumped to almost two-week highs after a report that the European Central Bank may taper asset purchases spooked investors.
Benchmark 10-year notes fell 15/32 in price to yield 1.68 percent, the highest since Sept. 21.
Commodities Recap
Gold slid more than 3 percent and was on track for its biggest one-day drop in nearly 15 months on Tuesday, reaching its lowest price since Britain's shock vote to leave the European Union in June, as the dollar rallied after upbeat U.S. data.
Spot gold was down 3.1 percent at $1,270.31 an ounce by 3:09 p.m. EDT (1909 GMT), while U.S. gold futures for December delivery settled down 3.3 percent at $1,269.70 per ounce.
Oil settled slightly lower in choppy trade on Tuesday as a surging dollar and anticipation of higher U.S. crude stockpiles offset optimism about planned OPEC output cuts that initially took Brent to four-month highs.
Brent crude settled down 2 cents at $50.87 a barrel, after rising earlier to $51.37, its highest since June 10.
U.S. West Texas Intermediate (WTI) crude closed down 12 cents at $48.69. At the session high, it hit $49.13, its highest since July 5.
