Market Roundup
- N. Korea fires missile over Japan that lands far out in the Pacific
- Bank of England paves way for first rate hike in a decade
- ECB must be cautious in exiting extraordinary monetary policy-Schaeuble
- UK customs model unlikely to achieve frictionless post-Brexit trade
- Japan Reuters Tankan Sept mfg index +25, non-mfg +34, Aug +27, +29
- Non-mfg index best since June ’15, Dec mfg index eyed at +21, non-mfg +28
- Japan Inc holds off on floating bonds amidst NoKorea to-do - Nikkei
- Republican unity on U.S. tax overhaul shows sign of fraying
- Bank of Canada open to alternatives to inflation target -Wilkins
- China internet finance body suggests framework to support virtual currencies
- New Zealand home sales drop, house prices holding up -REINZ
- U.S. fund investors rush into money-market funds, Treasuries -Lipper
- Foreign CB US debt holdings +$6.616 bln to $3.372 trln Sept 13 week
- Treasuries +$6.523 bln to $3.046 trln, agencies -$45 mln to $264 bln
Economic Data Ahead
- (0500 ET/0900 GMT) EU Jul Eurostat Trade NSA (Eur), 21.4 bln eyed; last 28.0 bln
Key Events Ahead
- N/A EU finance ministers and central bank governors speak in Tallinn
- N/A ECB's Draghi and speak in Tallinn
- N/A ECB's Constancio speaks in Tallinn
- N/A ECB's Philip Lane speaks in London
- (0415 ET/0815 GMT) ECB's Lautenschlager speaks in Tallinn
- (0450 ET/0850 GMT) BOE's Vlieghe speaks in London
- (0605 ET/1005 GMT) UK Stg1.5/1.0/2.0 bln for 1/3/6 months auction
FX Beat
DXY: The dollar steadied versus the Japanese yen as investors focus shifted on the August U.S. retail sales that are expected to increase just 0.1 percent following a 0.6 percent jump in July. The greenback against a basket of currencies traded up at 92.10, having touched a low of 91.01 last week, its lowest since Jan 2015. FxWirePro's Hourly Dollar Strength Index stood at 24.41 (Neutral) by 0500 GMT.
EUR/USD: The euro declined, reserving some of its previous session gains, as the greenback rose after strong U.S. inflation data raised expectations of another interest rate hike. The European currency traded 0.1 percent down at 1.1911, having touched a low of 1.1838 the day before, its lowest since Aug. 31. FxWirePro's Hourly Euro Strength Index stood at 2.82 (Neutral) by 0500 GMT. Investors’ attention will remain on Eurozone trade balance, ahead of U.S. retail sales, capacity utilization, industrial production, business inventories and Michigan consumer sentiment index. Immediate resistance is located at 1.1936 (10-DMA), a break above targets 1.1951 (5-DMA). On the downside, support is seen at 1.1873 (Sept. 13 Low), a break below could drag it near 1.1823 (August 31 Low).
USD/JPY: The dollar rebounded after falling to an early low of 109.54 in the wake of the latest North Korea missile launch news. Data released overnight in the United States showed consumer price index rose at an annualized rate of 1.9 percent in August, beating expectations of 1.8 percent, which raised the prospects of another Fed rate hike. The major was trading 0.2 percent up at 110.48, having hit a high of 111.03 the prior day, its highest since Aug. 4. FxWirePro's Hourly Yen Strength Index stood at -109.69 (Highly Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. retail sales, capacity utilization, industrial production, business inventories and Michigan consumer sentiment index for further momentum. Immediate resistance is located at 110.67, a break above targets 111.20. On the downside, support is seen at 109.46 (21- DMA), a break below could take it near 109.18 (50.0% retracement of 107.31 and 111.03).
GBP/USD: Sterling rallied to a fresh 12-month high above the 1.3400 handle after the Bank of England hinted it might hike interest rates for the first time in a decade in the coming months. The major traded 0.1 percent up at 1.3408, having hit a high of 1.3413 earlier, its highest since September 2016. FxWirePro's Hourly Sterling Strength Index stood at 127.44 (Highly Bullish) by 0500 GMT. Investors’ focus will remain on the BoE quarterly bulletin report, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3445, a break above could take it near 1.3500. On the downside, support is seen at 1.3294 (78.6% retracement of 1.2852 and 1.3413), a break below targets 1.3200 (61.8% retracement). Against the euro, the pound was trading 0.1 percent up at 88.83 pence, having hit a high of 89.66 pence on Thursday, its highest since Jul. 20.
AUD/USD: The Australian dollar edged down as the greenback gained following better than expected U.S. inflation figures. Moreover, news of the latest North Korea missile launch triggered a fresh bout of risk aversion, sending investors seeking safety into safe haven assets. The Aussie trades down 0.7999, having hit a low of 0.7956 the day before, it’s lowest since Sept. 5. FxWirePro's Hourly Aussie Strength Index stood at- 39.59 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7968 (38.2% retracement of 0.7871 and 0.8124), a break below targets 0.7931 (23.6% retracement of 0.7871 and 0.8124). On the upside, resistance is located at 0.8017 (5-DMA), a break above could take it near 0.8060.
NZD/USD: The New Zealand dollar rose, reversing most of its previous session losses, as investors braced for the outcome of a looming general election. The Kiwi trades 0.4 percent up at 0.7247, having touched a high of 0.7337 last week, its highest level since Aug. 21. FxWirePro's Hourly Kiwi Strength Index was at -15.77 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7262 (Previous Session High), a break above could take it near 0.7303. On the downside, support is seen at 0.7211 (Session Low), a break below could drag it till 0.7131 (August 31 Low).
Equities Recap
Asian shares declined after North Korea fired another missile over Japan into the Pacific Ocean, while the dollar steadied against the yen following better-than-expected U.S. inflation report.
MSCI's broadest index of Asia-Pacific shares outside Japan slightly declined 0.4 percent.
Tokyo's Nikkei rose 0.6 percent to 19,920.90 points, Australia's S&P/ASX 200 index declined 0.8 percent to 5,695.00 points and South Korea's KOSPI climbed 0.2 percent to 2,381.48 points.
Shanghai composite index eased 0.7 percent to 3,347.44 points, while CSI300 index was trading 0.1 percent down at 3,826.26 points.
Hong Kong’s Hang Seng was trading 0.1 percent lower at 27,741.95 points. Taiwan shares added 0.3 percent to 10,580.41 points.
Commodities Recap
Crude oil prices steadied and were on course for weekly gains, as the clean-up after hurricanes in the United States gathered pace and the outlook for demand strengthened. International benchmark Brent crude was trading flat at $55.27 per barrel by 0451 GMT, having hit a high of $55.96 on Thursday, its strongest since Apr. 13. U.S. West Texas Intermediate was trading 0.1 percent up at $49.74 a barrel, after rising as high as $50.47 the day before, its highest since May. 25.
Gold prices rose, extending previous session gains, as North Korea's latest missile launch over Japan triggered safe-haven buying, however, the upside remained capped as strong U.S. inflation data raised expectations of another interest rate hike. Spot gold edged up 0.1 percent to $1,329.56 an ounce by 0459 GMT, after falling to its lowest since Aug. 31 at $1,315.74 in the previous session. U.S. gold futures for December delivery gained 0.4 percent to $1,334.80 an ounce.
Treasuries Recap
The 10-year U.S Treasury yield stood at 2.182 percent lower by 0.016 bps, while 5-year yield was 0.008 bps down at 1.780 percent.
The Australian bonds continued to incur losses, albeit at a slower pace after U.S. Treasury yields rose in the overnight session, with the two-year yield hitting a seven-week peak as domestic consumer prices rose, rekindling bets that the Federal Reserve would raise interest rates for the third time this year. The yield on the benchmark 10-year Treasury note rose 1-1/2 basis points to 2.75 percent, the yield on the 15-year note climbed 1 basis point to 3.05 percent and the yield on short-term 2-year traded 2 basis points higher at 1.95 percent.
The New Zealand bonds closed on the downside on the last trading day of the week as investors wait to watch the country’s second-quarter gross domestic product (GDP), scheduled to be released on September 20 amid a silent trading session that lacked data of vital economic significance. At the time of closing, the yield on the benchmark 10-year Treasury note jumped 7-1/2 basis points to 2.93 percent, the yield on 7-year note surged 6-1/2 basis points to 2.79 percent and the yield on short-term 2-year ended 3-1/2 basis points higher at 2.06 percent.
The Canadian government bond prices were mixed across a flatter yield curve, with the two-year down 2 Canadian cents to yield 1.578 percent and the 10-year adding 9 Canadian cents to yield 2.058 percent. The 10-year yield touched its highest intraday since October 2014 at 2.105 percent before pulling back.
