Market Roundup
- Japan’s central bank splits over easing program, some on the BOJ’s board think its extensive bond-buying needs to be more flexible, adding uncertainty to a radical experiment in monetary stimulus – Wall Street Journal.
- BoJ may push back rate cut until later date: Goldman’s Baba – Bloomberg.
- Japan FinMin Aso – Up to BoJ to decide specific policy, coordinating closely with BoJ to defeat deflation, fiscal policy to play role too - Reuters.
- Reuters survey – Japan Inc sees BoJ stimulus failing to spur inflation.
- Foreign CB US debt holdings -$19.519 bln to $3.164 trln September 14 week, Treasuries -$19.731 bln to $2.841 trln, agencies +$136 mln to $262.99 bln.
- NY Fed – Swaps with foreign CBs $6 mln Sept 14 week, ECB $5 mln, BoJ $1 mln.
- Lipper – US stock funds post largest weekly outflows since September ’15.
- Non-residents held 63.6% of NZ govt securities in August, July 63.9%.
- New Zealand Sept ANZ/RM consumer confidence index 121.0, Aug 117.7, highest since Jan.
- New Zealand Aug ANZ job adverts +3.1% m/m, +12.1% y/y, July +1.4% m/m.
Economic Data Ahead
- (0400 ET/0800 GMT) Italy Jul trade balance – global/EU; last E4.66 bln, E1.2 bln surpluses.
- (0500 ET/0900 GMT) Eurozone Q2 labor costs, wages; last +1.7%, +1.8% y/y.
- (0830 ET/1230 GMT) United States Aug CPI, +0.1% m/m, +1.0% y/y eyed; last unch, +0.8%, index 240.65.
- (0830 ET/1230 GMT) United States Aug –core, +0.2% m/m, +2.2% y/y eyed; last +0.1%, +2.2%, index 247.71.
- (0830 ET/1230 GMT) United States Aug real weekly earnings; last +0.6%.
- (1000 ET/1400 GMT) United States Sep U.Mich sentiment index – prelim, 90.8 eyed; last 89.8.
- (1130 ET/1530 GMT) United States Aug Cleveland Fed CPI; last +0.2%.
Key Events Ahead
- Holidays across Asia – China, Taiwan, Hong Kong, So. Korea, Malaysia.
- N/A EU Bratislava Summit (sans UK), Brexit main topic of discussion.
- (0530 ET/0930 GMT) BoE MPC Forbes in Paris panel discussion.
- (0600 ET/1000 GMT) UK DMO GBP1.5/1.5/3.0 bln 1/3/6-month treasury bill auctions.
- (0830 ET/1230 GMT) Canada July cross-border securities transactions data.
- (1600 ET/2000 GMT) United States Treasury July int’l capital flows data (TIC), last $202.8 bln outflow.
FX Beat
DXY: The dollar index against a basket of currencies steadied at 95.31, after declining to a low of 95.08 on Thursday following series of downbeat U.S. economic data.
EUR/USD: The euro consolidates between a narrow range as investors were reluctant to take positions ahead of Federal reserves policy meeting next week. On Thursday, the major rose to a near 1-week high of 1.1283 as the dollar weakened after disappointing U.S. economic data reduced the prospects of an interest rate hike next week. The European currency traded lower at 1.1240, within the sight of a low of 1.1219 touched in the previous session. Investor’s attention will remain on Eurozone's labor cost report, ahead of U.S. consumer price index for further momentum on the pair. Immediate resistance is located at 1.1260, break above could take it till 1.1300. On the lower side, support is seen at 1.1220, break below could drag it near 1.1200.
USD/JPY: The dollar declined, extending losses for the third consecutive session after weak U.S. economic data further trimmed down already-low expectations of a Federal Reserve interest rate hike next week. Data released on Thursday showed U.S. retail sales tumbled more than expected in August amid weak purchases of automobiles and a series of other goods. The major traded 0.1 percent lower at 101.99, having hit an early low of 101.73 and was on track to drop about 0.8 percent this week. It will be driven by developments surrounding BoJ and Fed policy outlook, amid fresh bout of global risk aversion. Markets will closely watch U.S. CPI data for clues on the pair's direction in the near-term. Immediate resistance is located at 102.31 (10-DMA), break above targets 103.75/ 103.00. On the downside, support is seen at 101.73 (Session Low), break below could take it near 101.55.
GBP/USD: Sterling edged down after the Bank of England kept interest rates on hold at their record lows on Thursday and indicated that it would cut them further to just above zero later this year. The central bank's latest minutes showed that a majority of policymakers are likely to support another rate cut in near term meetings, despite initial hit from Brexit shock vote was proving less severe than it had expected just last month. Sterling trades lower at 1.3233, having touched a low of 1.3179 in the previous session. In absence of relevant data from the U.K, investors’ will track overall market sentiment. Immediate resistance is located at 1.3285 (10-DMA), break above could take it over 1.3300. On the downside, support is seen at 1.3200, break below targets 1.3180/ 1.3150. Against the euro, the pound trades down at 84.92 pence, pulling away from a high of 84.68 pence touched in the previous session.
AUD/USD: The Australian dollar edged up, extending overnight gains above the 0.7500 handle, largely on the back of a weak U.S. dollar. However, the recovery mode appears fragile as investors are likely to remain on the sidelines ahead of a series of policy decisions next week. The Aussie trades flat at 0.7513, having retreated from a low of 0.7446 in the previous session. The major will continue to track broad based market sentiment amid a lack of fresh fundamental triggers. Investors will closely watch U.S. consumer price index, especially after the release of series of downbeat US economic data a day before. Immediate support is seen at 0.7498 (Session Low), break below could drag it near 0.7462/ 0.7450. On the upside, resistance is located at 0.7540, break above targets 0.7570.
NZD/USD: The New Zealand dollar edged down, after recovering from a low of 0.7241 on Thursday following downbeat U.S. economic data. The major extended its overnight rally above the 0.7300 handle earlier in the session, however, it reversed gains as a fall in crude oil prices triggered fresh bout of risk aversion. The Kiwi trades lower at 0.7310, attempting to sustain gains above the 0.7300 level. The Reserve Bank of New Zealand will announce its policy decision after the Bank of Japan and the Fed meeting next week. The pair is likely to trade in a narrow range ahead of the US CPI data. Immediate resistance is located at 0.739 (10-DMA), break above targets 0.7380/ 0.7400. On the downside, support is seen at 0.7286 (Aug- 25 Low), break below could drag it till 0.7250.
Equities Recap
Asian shares steadied after weak U.S. economic fundamentals slashed the already low probability of an interest rate hike by the Federal Reserve at next week's meeting.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, but it was on course for a loss of 2.4 percent for the week.
Tokyo's Nikkei gained 0.70 pct at 16,519.29 points and Australia's S&P/ASX 200 index rose 1.02 pct at 5,293.40 points.
South Korean, Chinese, Taiwanese and Hong Kong’s markets are closed for holidays.
Commodities Recap
Crude oil prices nudged down on growing concerns that U.S. rig counts would continue to increase and that returning Libyan and Nigerian exports would add on to a global supply glut. Global benchmark Brent crude oil was trading 0.13 percent down at $46.32 per barrel at 0406 GMT, having climbed to a high of $46.97 on Thursday. U.S. West Texas Intermediate crude declined 0.11 percent at $43.63 a barrel, hovering near a low of $43.24 hit in the previous session.
Gold prices edged down, hovering near 2-week low hit in the previous session and was on track for its first weekly loss in three as markets remained cautious ahead of BoJ and Fed policy meeting next week. Spot gold was little changed at $1,313.44 an ounce by 0413 GMT and was set to end the week down nearly 1 percent. U.S. gold futures was flat at $1,317.80 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.6891 percent lower by 0.014, while 5-year was at 1.1771 percent down by 0.011 bps.
The Japanese government bonds remained little changed during a relatively quiet session that witnessed data of little significance. The benchmark 10-year bond yield remained steady at -0.031 percent, the super-long 30-year note yield hovered around 0.568 percent and the short-term 2-year JGB yield stood flat at -0.265 percent.
The Australian government bonds traded mixed during a relatively quiet session that witnessed data of little significance as investors remained focused on the Federal Reserve and Bank of Japan’s monetary policy decision scheduled next week. The yield on the benchmark 10-year Treasury note remained steady at 2.165 percent, the yield on long-term 15-year note also dipped 1/2 basis point to 2.552 percent and the yield on short-term 2-year slid 4 basis points to 1.583 percent.
The New Zealand government bonds closed modestly higher as investors remained cautious ahead of the Reserve Bank of New Zealand’s monetary policy decision, which is scheduled to be held on September 21. The yield on the benchmark 10-year bond fell 1 basis point to 2.580 percent, the yield on 7-year note also ended 1 basis point lower at 2.245 percent and the yield on short-term 2-year note dipped 1 basis point to 1.965 percent.
Canadian government bond prices were mixed across the yield curve. The 2-year price rose 2 Canadian cents to yield 0.575 percent, while the benchmark 10-year fell 12 Canadian cents to yield 1.200 percent. The curve steepened as the spread between the 2- and 10-year yields widened by 2.4 basis points to 62.5 basis points, indicating underperformance for longer-dated bonds.
