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Asia Roundup: Kiwi at 3-month peak as unemployment rate declines, greenback eases as Democrats likely to gain U.S. House majority, Asian shares surge - Wednesday, November 7th, 2018

Market Roundup

  • Democrats capture U.S. House majority in rebuke to Trump
     
  • Democrats pick up U.S. governorships but lose Florida, Ohio
     
  • India central bank governor could resign on Nov 19 - report
     
  • Smaller UK factories expect dip in output before Brexit - CBI
     
  • New Zealand HLFS Unemployment Rate, 3.9%, 4.5% f'cast, 4.5% prev
     

Economic Data Ahead

  • N/A China Forex Reserves (monthly), 3.060 trln f’cast, 3.087 trln prev
     
  • (0200 ET/0700 GMT) Germany Industrial Output (m/m), 0.1% f'cast, -0.3% prev
     
  • (0330 ET/0830 GMT) Great Britain Halifax House Prices (m/m), 0.3% f'cast, -1.4% prev
     
  • (0500 ET/1000 GMT) EZ Retail sales (y/y), 0.7% f'cast, 1.8% prev
     

Key Events Ahead

  • N/A U.S. Federal Reserve's Federal Open Market Committee begins its two-day meeting in Washington
     
  • N/A ECB governing council non-monetary policy meeting in Frankfurt
     
  • (1130 ET/1630 GMT) Riksbank Deputy Governor Martin Flodén
     
  • (1500 ET/2000 GMT) Reserve Bank of New Zealand announces Official Cash Rate in Wellington
     
  • (1850 ET/2350 GMT) Bank of Japan releases a summary of Oct 30-31 meeting
     

FX Beat

DXY: The dollar index slumped to a 2-week low as results from the U.S. midterm elections showed Republicans close to losing their hold on Congress.  The greenback against a basket of currencies trades 0.3 percent down at 96.02, having touched a low of 95.90, its lowest since October 23. FxWirePro's Hourly Dollar Strength Index stood at -126.65 (Highly Bearish) by 0400 GMT.

EUR/USD: The euro surged to a 2-week peak after the EU's economics commissioner stated that the European Commission could impose sanctions on Italy as the last resort if they cannot reach an agreement over Rome's rule-breaking budget, however, Brussels wants to avoid that alternative. The European currency traded 0.3 percent up at 1.1464, having touched a high of 1.1473, its highest since October 24. FxWirePro's Hourly Euro Strength Index stood at 76.53 (Slightly Bearish) by 0400 GMT. Investors’ attention will remain on a series of data from the Eurozone economies and EZ retail sales, ahead of the U.S. consumer credit change data. Immediate resistance is located at 1.1493 (October 23 High), a break above targets 1.1550 (October 22 High). On the downside, support is seen at 1.1382 (10-DMA), a break below could drag it till 1.1302 (October 31 Low).

USD/JPY: The dollar retreated from a 1-month peak as investor turned caution ahead of the U.S. midterm election results for implications on Washington's broader economic and political agenda. The major was trading 0.2 percent down at 113.20, having hit a high of 113.81, its highest since October 8. FxWirePro's Hourly Yen Strength Index stood at -111.22 (Highly Bearish) by 0400 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. consumer credit change data. Immediate resistance is located at 114.10 (October 5 High), a break above targets 114.55 (October 4 High). On the downside, support is seen at 112.35 (October 22 Low), a break below could take it lower 112.01 (October 17 Low).

GBP/USD: Sterling rallied to a 3-week peak on growing hopes of a Brexit deal breakthrough after a cabinet meeting. The major traded 0.3 percent up at 1.3142, having hit a high of 1.3148 earlier; it’s highest since October 17. FxWirePro's Hourly Sterling Strength Index stood at 59.47 (Bullish) 0400 GMT. Investors’ attention will remain on the UK Halifax House prices, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3181 (October 15 High), a break above could take it near 1.3257 (October 12 High). On the downside, support is seen at 1.3011 (October 19 Low), a break below targets 1.2936 (October 23 Low). Against the euro, the pound was trading 0.1 percent up at 87.27 pence, having hit a high of 87.11, it’s highest since May 30.

AUD/USD: The Australian dollar advanced to a 2-1/2 month peak as investors are awaiting the Reserve Bank of Australia's (RBA) quarterly statement on monetary policy due on Friday, where it will also issue updated forecasts for growth and inflation. The Aussie trades 0.4 percent up at 0.7269, having hit a high of 0.7272; it’s highest since September 26. FxWirePro's Hourly Aussie Strength Index stood at 128.97 (Highly Bullish) by 0400 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7164 (October 13 Low), a break below targets 0.7112 (October 16 Low). On the upside, resistance is located at 0.7275 (September 19 High)., a break above could take it near 0.7300.

NZD/USD: The New Zealand dollar rose to a 3-month peak, as the country's unemployment rate unexpectedly dropped to a 10-year low and reduced the already-low chance of a rate cut. The Kiwi trades 0.5 percent up at 0.6773, having touched a high of 0.6778, its highest level since August 2. FxWirePro's Hourly Kiwi Strength Index was at 155.16 (Highly Bullish) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6792 (August 2 High), a break above could take it near 0.6832 (July 31 High). On the downside, support is seen at 6687 (July 3 Low), a break below could drag it below 6634 (August 30 Low).

Equities Recap

Asian shares surged, while the greenback eased as investors expect the Democrats to gain a majority in the House and, as a result, remain skeptical about Trump's agenda.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.3 percent.

Tokyo's Nikkei gained 0.6 percent to 22,270.25 points, Australia's S&P/ASX 200 index advanced 0.3 percent to 5,893.00 points and South Korea's KOSPI surged 0.4 percent to 2,098.28 points.

Shanghai composite index rose 0.3 percent to 2,666.28 points, while CSI300 index traded 0.4 percent up at 3,256.62 points.

Hong Kong’s Hang Seng traded 1.2 percent higher at 26,427.31 points. Taiwan shares added 0.8 percent to 9,902.70 points.

Commodities Recap

Crude oil prices surged despite rising output and U.S. sanction waivers that allow Iran's biggest buyers to keep buying from Tehran. International benchmark Brent crude was trading 0.4 percent up at $71.94 per barrel by 0411 GMT, having hit a low of $71.16 on Tuesday, its lowest since August 16. U.S. West Texas Intermediate was trading 0.3 percent up at $61.89 a barrel, after falling as low as $61.34 on Tuesday, its lowest since Mar. 19.

Gold prices rebounded amid a weaker dollar, with investors waiting for the outcome of U.S. midterm elections that could see Republicans lose their grip on Congress. Spot gold was 0.2 percent up at $1,228.65 per ounce at 0415 GMT, having touched a low of $1,222.93 earlier, its lowest since Nov. 1. U.S. gold futures climbed 0.3 percent to $1,229.7 per ounce.

Treasuries Recap

The Australian government bond futures eased, with the three-year bond contract and the 10-year contract each down 1 tick at 97.845 and 97.255 respectively.

The New Zealand government bonds slipped as investors pared the already-slim chance of a rate cut, sending yields about 9 basis points higher across the curve.

The Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries.The two-year fell 2 Canadian cents to yield 2.356 percent and the 10-year declined 15 Canadian cents to yield 2.535 percent.

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