Market Roundup
- ECBs credibility at risk if inflation target is missed - Praet.
- ECB Minutes of Gov Council Meeting: Negative risks to inflation have increased since Sept projections.
- ECB Minutes: Downward revision of inflation outlook "potentially worrisome", rebound in underlying inflation stalling.
- Germany's Merkel says no need for tax hikes despite great challenges we face.
- UK Oct Retail Sales yy decreases to +3.8 % (forecast 4.2 %) vs previous 6.5 %, mm decrease to -0.6 % (forecast -0.5 %) vs previous 1.9 %.
- UK Oct Retail Sales ex-fuel yy decreases to +3.0 % (forecast 3.9 %) vs previous 59 %, m/m decrease to -0.9 % (forecast -0.5 %) vs previous 1.7 %.
- UK Nov CBI Trends - Orders increases to -11 (forecast -10 ) vs previous -18.
- Swedish C.Bank Governor Ingves says inflation is now moving in the right direction.
- Eurozone Sep Current Account sa, eur* increases to 29.4 bln eur vs previous 17.7 bln eur.
- Eurozone Sep Net Investment Flow,eur* decreases to -10.5 bln eur vs previous 32.6 bln eur.
- Swiss Trade Surplus 4,156 mln sfr in Oct vs revised 3,250 mln sfr in previous month.
- Swedish seasonally adjusted Unemployment 7.2 pct in October - Statistics Office.
- Swedish FSA Chief Thedeen says household debt levels worrying.
- Russia w/e CBank Weekly Reserves* decreases to $364.1 bln vs previous $366.1 bln.
- Brazil Nov IPC-15 mid-month CPI increases to 0.85 % (forecast 0.83 %) vs prev 0.66 %.
- Brazil Oct Unemployment rate* increases to 7.9 % (forecast 7.60 %) vs previous 7.60 %.
Economic Data Ahead
- (0830 ET/1330 GMT) New applications for U.S. jobless benefits likely to have slipped last week to 271,000 from 276,000, pointing to a steadily firming labor market, according to a survey of economists. The continuing jobless claims for the week ending Nov 6 probably fell to 2.170M from 2.174M.
- (0830 ET/1330 GMT) The Federal Reserve Bank of Philadelphia will release the Manufacturing Business Outlook Survey for November.
- (0830 ET/1330 GMT) The value of Canadian wholesale trade is likely to have gained 0.3 percent in September, according to a survey of economists, after its unexpected fall of 0.1 percent in August.
- (1000 ET/1500 GMT) The Conference Board's Leading Economic Index is expected to have gained 0.5 percent in October after a drop of 0.2 percent in September.
- (1030 ET/1530 GMT) EIA Natural Gas Storage Change (Nov 13), previous 49B.
- (1100 ET/1600 GMT) The Federal Reserve Bank of New York releases its Household Debt and Credit Report for the third quarter of 2015, an updated snapshot of household trends in borrowing and indebtedness, including data about mortgages, student loans, credit cards, auto loans and delinquencies.
Key Events Ahead
- (1030 ET/1530 GMT) Bank of Canada Review.
- (1230 ET/1730 GMT) The Federal Reserve Bank of Atlanta President Dennis Lockhart will be speaking before the "Economic Outlook and Financial Impact 2016" event hosted by the DeKalb Chamber of Commerce.
- (1645 ET/2145 GMT) The Federal Reserve Vice Chairman Stanley Fischer is scheduled to speak on "Emerging Asia in Transition," before the Asia Economic Policy Conference hosted by the Federal Reserve Bank of San Francisco.
FX Beat
USD: The dollar struggled to capitalize on signal that Fed is ready to move, against a basket of currencies it dropped 0.3 percent at 99.326 and away from a 7-month high. It also fell against the yen to 123.25, after touching a three-month peak of 123.67.
EUR/USD: The euro edged up to $1.07172, off a 7-month trough around $1.0615 and slightly retreated from that level and was trading around 1.06945. Its minor support is around 1.0660 and break below will drag the pair further down till 1.0630/1.0600 level. It is facing major resistance around 1.0720 and break above targets 1.0770/1.0830. Overall bearish invalidation is only above 1.0830.
USD/JPY: The Japanese yen gained almost half a percent against the dollar after the Bank of Japan kept policy steady. The pair has made a high of 123.75 and retreated till 123.09 from that level and was trading at 123.15. Overall trend is neutral and any break below 122.80 confirms minor weakness, decline till 122 is possible. On the higher side major resistance is around 123.75 and break above targets 124.13/125.
GBP/USD: Sterling dropped from 3-month highs against the euro after the UK posted subdued retail sales growth which supports expectations that interest rates are likely to stay lower for longer. The pound dropped 0.2 percent against the euro to trade at 70.15 pence per euro, having traded at 70 pence before data. Against the dollar, sterling pared gains to trade at $1.5248, having traded at $1.5255 before the data. It is facing strong support around 1.5220 (55 4H EMA) and any break below targets 1.5150/1.5080. Short term bullishness is only above 1.5305 any above 1.5305 will take the pair to 1.5350/1.5395.
USD/CHF: The pair has broken 1.0170 level (17th Nov high) and jumped till 1.0220. It has slightly retreated from level till 1.0154 at the time of writing and was trading at 1.01774. On the downside minor support is around 1.0120 and break below targets 1.0075/1.0040. The major support is around 0.9980 and break below will drag the pair till 0.9950/0.9930. The resistance is around 1.0220 (18th Nov high) and break above targets 1.0300.
AUD/USD: The Australian dollar rose almost 1 percent on the day, it touched a high of $0.7144 from $0.7097 as investors favoured risk assets such as equities. Resistance was found around around 0.7180 (200 day 4 HMA) and break above confirms minor bullishness, a jump till 0.7225 is possible. On the lower side minor support is around 0.7150 and break below targets 0.7115/07080. Overall bullish invalidation is only below 0.7020.
NZD/USD: New Zealand dollar also gained almost 1 percent, having bounced from a seven-week trough of $0.6430 on Wednesday.
Equities Recap
Global shares and risk assets rallied on Thursday, after the U.S. Fed signaled a rate hike next month, but also an intention to take things slow and steady after that.
European stocks were stronger at the open with the FTSEurofirst 300 rising to a 3-month high by more than 1 percent. UK's FTSE rose 0.55 pct, France's CAC inched higher 0.74 pct and Germany's DAX was up 0.9 pct in early deals.
Tokyo's Nikkei finished the day up 1.07 pct at 19,859. China's CSI300 Index closed up 1.6 pct at 3,774.97 points, while Shanghai Composite Index ended up 1.4 pct at 3,617.06 points. Australia's S&P/ASX 200 Index rose 2.00 pct and MSCI's broadest index of Asia-Pacific shares outside Japan rose 2 percent.
The MSCI Emerging Markets Index rallied 1.4 percent as a gauge of Chinese mainland companies in Hong Kong advanced to the highest level in a week. The 45-country All World equivalent was up for a fourth straight day.
Treasuries Recap
US 2-year yields rose 3 basis points, 30-year paper dropped a basis point.
Bond yields were lower across most of Europe and Asia. The premium offered by U.S. two-year debt over its German counterpart yawned out to 124 basis points, the fattest margin since 2006 and a positive for the dollar.
JGB futures ended the day at 148.54 for the third day in a row after trading in a tighter range. But given the slight firmness in long-dated cash and better receiving in swaps, futures looked top-heavy. Futures moved in a narrower 5-tick (148.53-148.58) range before finishing at 148.54 for the third day in a row. Yesterday's range was 6 ticks.
UK Gilts opened 14 ticks higher than the settlement of 117.58, as predicted, as Gilts tracked a Eurozone supported by thoughts of more easing. Buyers are respecting support on 10-year cash yields from former highs at 1.90%, but pressure is mounting. The yield gap between the 2-year UK gilt and its German counterpart has widened to its highest in nearly eight years.
New Zealand government bonds dropped, sending yields 1.5 basis points higher across the curve. Australian government bond futures were a touch softer, with the 3-year bond contract down 2 ticks at 97.870. The 10-year contract dropped 1 tick to 97.0650, while the 20-year contract shed 2 ticks to 96.5200.
Commodities Recap
Oil prices were slightly higher with some investors keen to buy at what they perceive to be bargain levels, but persistent gluts of crude and refined fuel kept gains slight. Brent crude futures rose 23 cents at $44.37 a barrel by 0908 GMT. Brent was down more than 10 percent this month and 22 percent this year, having slumped from as high as $115 in 2014.
Gold prices recovered from their lowest in more than five years the previous session as the dollar dropped back, releasing its stranglehold on commodities and making gold more affordable for buyers paying with other currencies. Spot gold rose 0.7 percent at $1,077.91 an ounce by 0628 GMT. U.S. gold climbed 0.8 percent to $1,077 an ounce.
