Market Roundup
- RBA's Debelle: Floor for Australian interest rates at 0-0.5%
- Gold steady as markets seek clarity on trade war
- Yen gains as traders temper optimism over U.S.-China trade deal
Economic Data Ahead
- No major economic data releases
Key Events Ahead
- (0800 ET/1200 GMT) BoE Tenreyro's Speech
- (0800 ET/1200 GMT) ECB De Guindos' speech
FX Beat
DXY: The dollar index slightly eased after U.S. President Donald Trump flagged the possibility of a trade deal with China and said he believed Beijing was sincere in its desire to reach an agreement. The greenback against a basket of currencies traded 0.05 percent down at 97.97, having touched a low of 97.17 on Friday, its lowest since August 9.
EUR/USD: The euro consolidated within narrow ranges, amid concerns escalating trade disputes were pushing the German economy toward a recession. The European currency traded flat at 1.1099, having touched a high of 1.1163 on Monday, its highest since August 14. Investors’ attention will remain on ECB De Guindos' speech, ahead of the U.S. housing price index and consumer confidence. Immediate resistance is located at 1.1119 (38.2% retracement of 1.1230 and 1.1051), a break above targets 1.1162 (61.8% retracement). On the downside, support is seen at 1.1079 (August 21 Low), a break below could drag it below 1.1051 (August 23 Low).
USD/JPY: The dollar declined as benchmark 10-year U.S. Treasury yields fell to 1.5232 percent, while the yield curve was inverted as 2-year yields traded at 1.5267 percent, which is commonly considered a sign of an impending economic recession. The major was trading 0.4 percent down at 105.64, having hit a low of 104.44 on Monday, its lowest since November 2016. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. housing price index and consumer confidence. Immediate resistance is located at 106.58 (21-DMA), a break above targets 107.09 (August 6 High). On the downside, support is seen at 105.26 (August 9 Low), a break below could take it lower at 105.05 (August 12 Low).
GBP/USD: Sterling steadied after falling from a near 4-week peak as investors reassessed whether British Prime Minister Boris Johnson had made any progress in convincing the European Union to renegotiate the Brexit agreement. The major traded flat at 1.2215, having hit a high of 1.2293 on Friday, it’s highest since July 29. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2331 (61.8% retracement of 1.2522 and 1.2079), a break above could take it near 1.2417 (78.6% retracement). On the downside, support is seen at 1.2149 (10-DMA), a break below targets 1.2108 (August 22 Low). Against the euro, the pound was trading flat at 90.84 pence, having hit a high of 90.28 on Thursday, it’s highest since July 29.
AUD/USD: The Australian dollar plunged after Reserve Bank of Australia Deputy Governor Guy Debelle said that the floor for the country's benchmark cash rate was likely around 0-0.5 percent, though he hoped policymakers never have to get down to those levels. The Aussie trades 0.3 percent down at 0.6757, having hit a low of 0.6689 on Monday, it’s lowest since August 7. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6677 (August 7 Low), a break below targets 0.6630. On the upside, resistance is located at 0.6799 (August 2 1 High), a break above could take it near 0.6822 (August 8 High).
NZD/USD: The New Zealand dollar eased as some investors tempered their optimism about the chances for a quick resolution to the U.S.-China trade war. The Kiwi trades 0.3 percent down at 0.6368, having touched a low of 0.6340 on Monday, its lowest level September 2015. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6436 (38.2% retracement of 0.6590 and 0.6340), a break above could take it near 0.6465 (50.0% retracement). On the downside, support is seen at 0.6333, a break below could drag it below 0.6300.
Equities Recap
Asian shares surged after U.S. President Donald Trump flagged the possibility of a trade deal with China, days after both sides announced new tariffs.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent
Tokyo's Nikkei surged 0.9 percent to 20,456.08 points, Australia's S&P/ASX 200 index rallied 0.5 percent to 6,471.20 points and South Korea's KOSPI gained 0.2 percent to 1,920.95 points.
Shanghai composite index rose 1.4 percent to 2,904.05 points, while CSI 300 index traded 1.5 percent up at 3,822.02 points.
Hong Kong’s Hang Seng traded 0.3 percent lower at 25,613.69 points. Taiwan shares added 0.3 percent to 10,387.23 points.
Commodities Recap
Crude oil prices surged after U.S. President Donald Trump predicted a trade deal with China after positive comments by Beijing. International benchmark Brent crude was trading 0.3 percent higher at $58.99 per barrel by 0501 GMT, having hit a low of $58.29 on Friday, its lowest since August 16. U.S. West Texas Intermediate was trading 0.4 percent up at $53.98 a barrel, after falling as low as $52.95 on Monday, its lowest since August 9.
Gold prices steadied after easing from an over 6-year peak hit in the previous session, as U.S. President Donald Trump predicted a trade deal with China and calmed global markets that have been rattled by new tariffs. Spot gold was trading 0.1 percent up at $1,528.12 per ounce by 0504 GMT, having touched a high of $1,555.10 on Monday, its highest since August 2013. U.S. gold futures were flat at $1,537.50 an ounce.
Treasuries Recap
The benchmark 10-year U.S. Treasury yield was at 1.523 percent, pulled back from a three-year low of 1.443 percent reached on Monday.
The Japanese 10-year government bond yield was up 2.5 basis points at minus 0.255 percent after plumbing minus 0.285 percent on Monday, its lowest since July 2016.
The Australian government bonds suffered during Asian session of the second trading day of the week as risk sentiments improved overnight on hopes of developments in the Sino-American trade war. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped nearly 3 basis points to 0.920 percent, the yield on the long-term 30-year bond surged 3-1/2 basis points to 1.556 percent and the yield on short-term 2-year also gained nearly 3-1/2 basis points to 0.740 percent.
