Market Roundup
- CFTC IMM CTA data - Specs reduce USD bets for fourth week, USD longs lowest in seven week, GBP net shorts at fresh record high, JPY net longs highest since early July – Reuters.
- Central bankers, stuck at zero, unite in plea for help from governments – Reuters.
- Fed’s Yellen sees stronger case for interest rate hike – Reuters.
- Harvard paper- Fed should keep trillions in bonds to provide stability
- Ricardo Reis - Fed could use reserves payments to stimulate US economy
- BoJ Gov Kuroda – Data suggests inflation expectations not yet anchored, BoJ will continue to examine risks, act decisively with more easing as needed, NIRP has limits but 10 bps far from it – Reuters.
- ECB Coeure – Rates to stay low unless other policy areas contribute, half-baked government reforms not helping ECB outlook – Reuters.
- SNB Maechler – Committed to NIRP, CHF would be stronger without NIRP, rules out helicopter money – Sonntagsblick.
- German FinMin Schaeuble – ECB’s low interest rates harmful – FAZ.* BoJ, GPIF biggest stakeholders in quarter of Japan’s listed firms - Nikkei.
- Orders recovering for Japanese chipmaking gear – Nikkei.
- CNY opens in Asia at weakest level vs USD in more than one month.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Jul retail sales; last -0.6% m/m, +3.2% y/y.
- (0330 ET/0730 GMT) Sweden Jul trade balance; last SEK1.8 bln surplus.
- (0400 ET/0800 GMT) Italy Aug business confidence index, 102.5 forecast; last 103.1.
- (0400 ET/0800 GMT) Italy Aug consumer confidence index, 110.5 forecast; last 111.3.
- (0830 ET/1230 GMT) United States Jul personal income, +0.4% m/m forecast; last +0.2%.
- (0830 ET/1230 GMT) United States Jul personal consumption, +0.3% m/m sa; last +0.4% sa, +0.3% nsa.
- (0830 ET/1230 GMT) United States Jul PCE price index; last +0.1% m/m, +0.9% y/y.
- (0830 ET/1230 GMT) United States Jul – core, +0.1% m/m forecast; last +0.1% m/m, +1.6% y/y.
- (1030 ET/1430 GMT) United States Aug Dallas Fed mfg business index; last -1.3.
- (1300 ET/1700 GMT) United States Jul Dallas Fed PCE; last +1.0%.
Key Events Ahead
- (0500 ET/0900 GMT) Italy E6 bln 6-month BOT auction.
- (0850 ET/1250 GMT) France 3/6/12-month BTF note auctions.
- (0800 ET/1200 GMT) SARB DepGov Mminele, Buba Dombret presser in Jo-burg on cooperation.
FX Beat
DXY: The dollar index, against a basket of currencies trades higher at 95.51, extending post-Yellen speech gains and touched a high of 95.61, its strongest level since Aug. 16.
EUR/USD: The euro opened down on a bearish gap, however, it edged up to trade 0.1 percent higher at 1.1206. The major slumped below the 1.1200 handle on Friday, as the dollar strengthened across the broad following Federal Reserve Chair Janet Yellen's upbeat comments on the U.S. economy, which boosted prospects of an imminent interest rate increase as early as next month. The recovery in the major will remain fragile as markets continue to digest Fed Yellen's hawkish comments. Investor’s attention now shifts towards U.S. personal consumption expenditure figures, ahead of nonfarm payrolls release at the end of this week. Immediate resistance is located at 1.1233, break above could take it till 1.1250/ 1.1300. On the lower side, support is seen at 1.1153, break below targets 1.1100.
USD/JPY: The greenback extended gains led by Fed Yellen's hawkish comments on Friday, opening up on a bullish gap above the 102 handle. At the Fed's annual gathering for global central bankers in Jackson Hole, Wyoming, Yellen stated that in recent months, the labor market and economy have improved, strengthening the case for an interest rate hike. However, she offered no clues on the timing of any hike. The major trades 0.5 percent higher at 102.24, hitting 2-weeks high at 102.28. Investors will continue to track overall market sentiment, ahead of US personal spending and income report due later today. Immediate resistance is located at 102.50, break above targets 103.00. On the lower side, support is seen at 101.78 (Aug-9 Low), break below could take it near 101.50.
GBP/USD: Sterling steadied after hitting a 1-week low, as the U.S. dollar gained across the broad on Federal Reserve chair Janet Yellen comments. The major touched a 3-week high on Friday, supported by upbeat UK growth and business investment data, however, it reversed gains declining to a low of 1.3122 following Yellen’s speech. Data released on Friday showed British economy grew by 0.6 percent in the second quarter and was up by 2.2 percent compared with the same period last year, in line with preliminary readings and projections. Sterling trades lower at 1.3120, attempting to sustain gains above the 1.3100 handle. Immediate resistance is located at 1.3164, break above could take it near 1.3200. On the downside, support is seen at 1.3100, break below targets 1.3072/1.3150. Against the euro, the pound trades 0.2 percent lower at 85.37 pence.
AUD/USD: The Australian dollar extended losses, pulling away from a high of 0.7691 touched in the previous session. The major weakened largely on the back of strong U.S. dollar across the broad and weak domestic new homes sales figures. Data released by the Housing Industry Association showed that Australia's new home sales declined 9.7 percent in August, after gaining 8.2 percent in the previous month. The Aussie trades 0.1 percent lower at 0.7549, having touched a near 4-week low of 0.7525 earlier in the session. Investors will continue to track broad market sentiment ahead of U.S. economic data. Immediate support is seen at 0.7500, break below could drag it near 0.7480/ 0.7450. On the upside, resistance is located at 0.7575, break above targets 0.7600.
NZD/USD: The New Zealand dollar steadied after declining from a fresh 15-month high hit in the previous session. On Friday, the major rose to a high of 0.7380 following a downward revision of the US GDP growth, however, retreat to close out at 0.7220 as the U.S dollar rallied on Fed Yellen's comments. The Kiwi trades 0.2 percent higher at 0.7245, pulling away from a 1-week low of 0.7210 touched earlier in the session. The major will be driven by overall market sentiment ahead of set of U.S. economic data and New Zealand's building permit figures. Immediate resistance is located at 0.7271 (10-DMA), break above targets 0.7300. On the lower side, support is seen at 0.7200, break below could drag it near 0.7164.
Equities Recap
Asian shares lost ground while the U.S. dollar extended gains after Federal Reserve Chair Janet Yellen strengthened the prospects of U.S. interest rate hike this year.
MSCI's broadest index of Asia-Pacific shares outside Japan extended losses to 1 percent.
Tokyo's Nikkei gained 2.30 pct at 16,737.49, Australia's S&P/ASX 200 index declined 0.94 pct at 5,463.40 points and South Korea's KOSPI was trading 0.3 percent lower at 2,031.20 points.
Shanghai composite index shed 0.2 percent at 3,064.99 points, while CSI300 index was trading 0.1 percent down at 3,303.18 points.
Hong Kong’s Hang Seng was trading 0.4 percent lower at 22,818.53 points. Taiwan shares dropped 0.2 pct at 9,110.17 points.
Commodities Recap
Crude oil prices declined as Iraq's production increased and Iran stated that it would only cooperate in output freeze talks at the upcoming meeting if fellow exporters accepted its right to fully regain market share. International Brent crude oil was trading 0.5 percent lower at $49.36 per barrel at 0401 GMT, having rose above the $50 a barrel mark, to a high of $50.72 in the previous session. U.S. West Texas Intermediate crude oil was down 4 percent at $47.04 a barrel.
Gold edged lower for the seventh consecutive session, as the dollar strengthened after hawkish comments from Federal Reserve Chair Janet Yellen boosted the case of imminent U.S. interest hike as early as next month. Spot gold had dipped 0.2 percent to $1,317.54 per ounce at 0405 GMT, hitting fresh 1-month low of $1,314.99 and pulling further away from a high of $1,341.98 touched in the previous session. U.S. gold futures dropped 0.48 percent to $1,319.60.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.6159 percent down by 0.017 bps, while 5-year was at 1.2284 percent lower by 0.01 bps.
The Australian government bonds slumped as investors drove out of safe-haven buying after the Federal Reserve Chair Janet Yellen spoke at the annual Jackson Hole Symposium on Friday, hinting that the possibilities of increasing policy rates have strengthened in recent months. The yield on the benchmark 10-year Treasury note rose nearly 2 basis points to 1.942 and the yield on short-term 3-year climbed 2 basis points to 1.472 percent.
The New Zealand government bonds closed modestly higher as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil. The yield on the benchmark 10-year bond fell 1/2 basis point to 2.300 percent and the yield on 7-year note ended 1 basis point lower at 1.985 percent and the yield on short-term 2-year note also slid 1 basis point to 1.825 percent.
