- Specs slash net USD longs to lowest in more than a year, JPY shorts almost flat at 3639 contracts, EUR shorts 62.566 vs 80,576 previous week, GBP and CHF in net positions, NZD players more long.
- PBOC - RRR cut "normal" monetary policy, not same as QE, liberalizing rates key element of financial reform.
- PBOC Yi Gang - CNY stable, will lower RRR at "normal" pace in future, eyes "very normal" 6-7% growth in next 3-5 years.
- China Prem Li - 7% growth goal never set in stone.
- BoJ faces key test to rosy forecast, leaning towards standing pat.
- A global chill in commodity demand hits America's heartland.
- BoE Gov Carney - UK rate hike a possibility, not a certainty.
- SNB Vice Chair Zurbruegg - Negative rates to stay as long as needed.
- Swiss FINMA Branson - Low rates could last decades, not just years.
- BoI Panetta - EZ inflation could stay low for months.
- Moody's changes Austria Aaa rating outlook from stable to negative.
- Emerging currencies' fates looms large in rich world rates policy.
- (0500ET/0900 GMT) Germany October IFO business climate index, 107.8 eyed; last 108.5.
- (0500 ET/0900 GMT) Germany October IFO current conditions index, 113.5 eyed; last 114.0.
- (0500 ET/0900 GMT) Germany October IFO expectations index, 102.4 eyed; last 103.3.
- (0530 ET/0930 GMT) UK September BBA mortgage approvals; last 46.74k.
- (1000 ET/1400 GMT) US September new home sales, 550k AR, -0.4% m/m eyed; last 550k, +5.7%.
- (1030 ET/1430 GMT) US Oct Dallas Fed manufacturing business index; last -9.5.
Key Events Ahead
- New Zealand market closed for Labor Day.
- N/A Germany E1.5 bln 12-mo Bubill, France 3/6-12-month BTF t-note auctions.
- (0645 ET/1045 GMT) ECB Mersch speech at Brussels Belgian Financial Forum.
- (1145 ET/1545 GMT) Buba Dombret speech in Munich.
FX Recap
EUR/USD: Pair is currently trading above $1.10 levels after drastically drop to $1.0996 levels last week. Most of market participants turned bearish again, as the pair broke some key technical supports and the ECB clearly stated it is ready to act and loosen monetary policy further. However, the focus will remain on Wednesday's FOMC meeting. Today Germany IFO business climate data will be main focus for the day. It made intraday high at 1.1039 and low at 1.0996 levels. Initial support is seen around at 1.0972 and resistance at 1.1560 levels.
USD/JPY: The US dollar was a clear winner in the previous days, as it managed to breach the ¥121 mark amid somewhat positive US data and risk-on trading, induced by soaring stocks. The Fed's meeting will be followed by the Bank of Japan, which is not expected to increase its QQE program, although some speculations have been mounting that the BoJ will adjust the pace of bond buying until the end of 2015 to combat deflation and worsening economic conditions. Pair made intraday high at 121.49 and low at 120.99 levels. Initial resistance is seen at 123.20 and support is seen at 118.42 levels.
GBP/USD: The pound is trading slightly upside in the Asian session on Monday around the $1.53 level. An increase in the Bank of England's base interest rate is still a decision to be taken, given the current headwinds flowing against the UK economy, bank Governor Mark Carney said on Sunday. Despite the debt repayment concerns, Carney said the labour market tightening and rises in wages, which he said were still uneven across the whole economy, suggest that interest rates would increase gently and slowly rather than decrease, after being stuck at the rock bottom of 0.5% since March 2009. Pair made intraday high at 1.5339 and low at 1.5304 levels. Initial support is seen at 1.5107 and resistance is seen around 1.5725 levels.
NZD/USD: NZ are out on Labour Day and focus remains with the commodities and US data that comes later in the week, while the RBNZ will have the final say as to the direction of the bird. The RBNZ is not likely to act, according to the general market consensus, but there is the possibility of a rate cut with lower q/q inflation and based upon the recent statement from Wheeler when he said, "Some further easing in the OCR seems likely, but this will continue to depend on the emerging flow of economic data." Pair made intraday high at 0.6792 and low at 0.6737 levels. Initial support is seen at 0.6235 and resistance at 0.6896 levels.
AUD/USD: Asian and antipodean currencies rallied strongly on the back of the People's Bank of China's (PBoC) announcement last week that it had cut interest rates again and lowered the reserve requirement ratio in an effort to boost the ailing economy. Focus remains on China as it's Fifth Plenum begins today and the key elements of China's 13th Five Year Plan are expected to be fleshed out over the four-day meeting. Pair made intraday high at 0.7264 levels and low around 0.7207 levels. Initial support is seen at 0.6908 and resistance at 0.7438 levels.
Equity Recap
The stocks on the Asian bourses extend rally from the previous session and kicked-off the week on a stronger footing, as Asian traders welcome the Chinese rate cut news from Friday and rejoice more easing money flooding into markets.
The Japanese stocks extend the solid performance, despite a stronger yen versus the US dollar, as cheap money backed by China rate cut news and ECB hinting at further easing in Dec continues to boost the corporate sector. The PBOC cut both the one-year lending rate and the deposit rate by 25bps, marking the sixth rate cut since last November. The index jumps +1.18% to 19,037 points.
The Australian benchmark, the S&P/ASX trades marginally higher at 5,356, with banking and mining stocks supporting the index.
Stocks on the Chinese indices also take the positive lead from the Wall Street and extend the rally, with the mainland's China's Shanghai Composite index, up 0.72% at 3,437.
Hong Kong's Hang Seng gains 0.26% to 23,211.
Australia's S&P/ASX 200 index closes down 0.09 pct at 5,346.60 points.
Tokyo's Nikkei average closes up 0.65 pct at 18,947.12.
Treasury Recap
BOJ offers to lend Y2 trln of JGBs on spot basis through 10/27 as a secondary source of JGBs.
The New Zealand dollar stood at $0.6758, having skidded more than a full cent from Friday's peak. It ended last week 0.8 percent lower after attempts to break above 69 cents failed. Support was found at $0.6750, then $0.6644.
Trading was thinned due to a holiday in New Zealand.
Australian government bond futures slipped, with the three-year bond contract off 4 ticks at 98.170. The 10-year contract dropped 6.5 ticks to 97.2950, while the 20-year contract fell 4.5 ticks to 96.7750.
Thailand 8.9 bln baht, 182-day Treasury bill average accepted yield 1.46978 pct. Thailand 15 bln baht, 28-day Treasury bill average accepted yield 1.43749 pct.
10-year US treasury yield at 2.076 percent vs US close of 2.083 percent on Friday.
Commodity Recap
Gold steadied after a three-day losing streak on Monday, but was hovering close to its lowest in nearly two weeks, hurt by a strong dollar and fears the Federal Reserve could raise U.S. interest rates this year. A rally in global equities also kept buying interest subdued for the metal, which has been weighed down all year by uncertainty over the timing of a U.S. rate hike. Spot gold was little changed at $1,164.05 an ounce by 0335 GMT. The metal had dropped to $1,158.77 on Friday, it's lowest since Oct. 13, after earlier rising 1 percent in the session, following China's move to cut interest rates for the sixth time in less than a year.
Oil prices rose slightly on Monday after booking huge losses over last week, as the global supply glut and weak demand are still the main worries for the oil market. Futures for WTI rose 0.16% to trade at $44.67 per barrel, while Brent futures were traded 0.13% higher at $48.05 per barrel.
