- Dollar rallies after Yellen keeps 2015 rate hike door open.
- DXY index rise to 96.664 fm Thursday's 95.458 base.
- USD/JPY back above 120.00, plays in between 120.02/121.12.
- EUR/USD falls to 1.1116 from 1.1234. 1.1296 high hit yesterday.
- GBP on track for worst week in 6 months as dollar rallies.
- GBP/USD off 1.5201 Thursday low but holds at softer levels.
- EM currencies holding recoveries after Thursday pain, ZAR leads.
- DAX up 2.9% to 9732. 9362 was the low Thursday. FTSE 100 up 2.4%. Ibex up 2.2%.
- SSEC closes down 1.6% at 3092.35 pts. Flat for the week.
- Euro zone August M3 annual growth 4.8% vs previous 5.3% revised. 5.3% expected.
- Euro zone August private loans 1.0% vs previous 0.9%. 1.1% expected.
- China Stats Bureau spokesman: Fluctuation in economic growth will be limited in Q3.
- Japan PM Abe not thinking of compiling extra budget for stimulus spending.
- Finance Minister Aso- Economy is emerging from deflation.
- (0830 ET/1230 GMT) US Real GDP (final Q2) consensus +3.7% q/q AR, previous +3.7% q/q AR.
- (0830 ET/1230 GMT) US Real Final Sales (final Q2) consensus +3.5% q/q AR, previous +3.5% q/q AR.
- (0830 ET/1230 GMT) US Core PCE Deflator (final Q2) consensus +1.8% q/q AR, previous +1.8% q/q AR.
- (0945 ET/1345 GMT) US Markit Services PMI (flash September) consensus 55.6, previous 56.1.
- (1000 ET/1400 GMT) US UOM Consumer Sentiment Index (final September) consensus 86.7, previous 85.7.
- (1000 ET/1400 GMT) UOM Current Conditions Index (final September) consensus 100.6, previous 100.3.
- (1000 ET/1400 GMT) UOM Index (final September) consensus 77.0, previous 76.4.
Key Events Ahead
- (0915 ET/1315 GMT) FRB St. Louis's Bullard on "New Directions in Monetary Policy".
- (1145 ET/1545 GMT) Fed Trade operation 30-year Ginnie Mae (max $975 mn).
- (1325 ET/1725 GMT) FRB Kansas City's George on economic conditions and monetary policy.
FX Recap
USD: The dollar rallied after U.S. Fed's Janet Yellen kept the door open to a rate hike later this year, the dollar index rose half a percent to 96.502 on Friday, turning around from a slide to 95.458 the previous day, and taking its gains for the week to 1.7 pct. Against the safe-haven yen, the dollar firmed 0.4 pct to 120.61, from the low of 119.21 before Yellen's comments.
EURUSD: The euro extended overnight losses and hit a fresh daily low, as the USD dollar was driven higher by comments from the Fed's Yellen, reiterating it is likely that the US central bank will increase its benchmark short-term rates before the end of the year. Poor results in Euro land today have shown Private Loans and M3 Money Supply coming in below expectations at 1.0% YoY and 4.8% on a year to August, although the more relevant data await across the pond with US Q2 GDP Annualized and speeches by Fed's Bullard and George. Meanwhile, markets now await German Bundesbank President Weidmann's speech ahead of the crucial Q2 GDP data from the US due later tonight. It made intraday high at 1.1233 and low at 1.1159. Initial support is seen around at 1.1015 and resistance at 1.1560 levels. Option expiries are at 1.1100 (1.2BLN), 1.1200 (820M), 1.1250 (862M), 1.1275 (445M), 1.1300 (679M).
USDJPY: Japan's core inflation gauge slipped into negative territory for the first time since April 2013 last month, putting the Bank of Japan back at square one with inflation and placing greater pressure on the bank to act soon. The national core CPI fell 0.1% year-on-year in August after showing no change in July, according to data published by the Statistics Bureau on Friday. Japan's core CPI measure which excludes both fresh fruit and energy prices was up 0.8% year-on-year in August, coming in stronger than the forecast of a 0.7% increase, while Tokyo's CPI measure - released one month ahead of the other measures - fell 0.2% year-on-year in September, as expected. Pair made intraday high at 121.11 and low at 119.99 levels. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.00 (330M), 120.00 (536M), 120.20 (230M), 120.60 (250M).
GBPUSD: Sterling tumbled against a stronger dollar and facing its worst week in six months after Janet Yellen's comments, it was 0.1 pct down on the day at $1.5224, close to a 4-month low of $1.5164 touched earlier in September. It was down 2 pct for the week, its biggest fall since early March. The Bank of England sees increased risks stemming from the emerging markets as spreads on the sovereign and corporate bonds in those economies have risen while currencies have fallen, the FPC statement showed on Friday. After bottoming out in the 1.5200 neighbourhood on Wednesday, spot has staged a sort of comeback and is now supported above 1.5200 levels, amidst empty docket or scheduled events in the UK economy. The US session is anticipated with releases of US GDP, the University of Michigan's consumer sentiment gauge and a services PMI gauge. Pair made intraday high at 1.5260 and low at 1.5205 levels. Initial support is seen at 1.5185 and resistance is seen around 1.5725 levels.
NZDUSD: The New Zealand dollar was one of the worst performing majors on Friday, after Federal Reserve Chair Janet Yellen indicated that the first US rate hike was still likely to occur in 2015. The NZD/USD pair fell 0.40% to $0.6326 on Friday afternoon in Wellington, from $0.6353 at the close of trade in New York on Thursday, when the cross was up some 1.3% for the day. It made intraday high at 0.6353 and low at 0.6295 levels. Market now awaits US macroeconomic data for the further direction. Initial support is seen at 0.6195 and resistance at 0.6511 levels. Option expiry is at 0.6325 (300M).
AUDUSD: The Australian dollar slides victim to a stronger greenback on Friday, following some fairly hawkish comments from Federal Reserve Chair Janet Yellen. The AUD/USD pair fell more than 50 pips to $0.6978 on Friday morning in Sydney, from $0.7021 ahead of Yellen's speech, before regaining a little strength to trade at $0.6985. It made intraday high at 0.7042 and low at 0.6978 levels. Looking ahead for the day, markets focus on US GDP data due later today. Initial support is seen at 0.6908 and resistance at 0.7245 levels. Option expiries are at 0.6780 (619M), 0.7100 (461M), 0.7135 (316M), 0.7200 (330M).
Equities Recap
Global shares rose on Friday after Fed's Janet Yellen signaled a possible rate hike in 2015. European markets jumped sharply at the open, recovering from Thursday's losses.
Europe's FTSEurofirst 300 rose 3 pct to 1,377 points, Britain's FTSE 100 was up 2.4 pct, Germany's DAX inched higher 2.8 pct and France's CAC 40 climbed 3.3 pct.
Japan's Nikkei ended a volatile session up 1.8 pct, but still gave up more than 1 pct in a holiday-shortened 2-day trading week. MSCI's broadest index of Asia-Pacific shares outside Japan gave up early gains and was down about 0.2 pct. China's CSI300 Index closed down 1.6 pct at 3,231.95 points, while Shanghai Composite Index ended down 1.6 pct at 3,092.35 points.
Commodities Recap
Oil prices rose as strong seasonal demand from China outweighed weak consumer data from Japan, although analysts said that the slowing global economic outlook meant that oil prices would likely remain low for months to come. Globally traded Brent futures were at $48.54 per barrel at 0639 GMT, up 37 cents from their last close. U.S. West Texas Intermediate (WTI) futures were at $45.32 a barrel, up 41 cents.
Gold dropped from its highest in a month as the dollar rallied on an assurance from Fed's Yellen about rate hikes this year. Spot gold fell 0.5 pct to $1,147.40 an ounce by 0642 GMT, below a 1-month high of $1,156.30 reached on Thursday.
Treasuries Recap
JGB prices finished the day steady to slightly higher in very quiet trading, sending yields down by 0.5bp to 1bp across the curve on the day. JGB yields moved in a very narrow range of 1bp or less in thin trading before finishing the afternoon session at their intraday lows. Yields on the current 5-yr JGBs ended at 0.05%, their lowest level since Feb 2 (0.05%), while the 10s finished at 0.32%, their lowest level since March 25 (0.32%). Lead Dec JGB futures also ended at 148.34, their highest level since Jan 27 (148.50).
German 10-year Bund yields rose 6 bps to 0.65 percent on Yellen's comments, having hit one-month lows on Thursday. Spanish 10-year yields were up 3 bps at 2.02 pct, almost a quarter of a percentage point above their Italian counterparts.
UK Gilts opened weaker than expected after Janet Yellen intimated that the US will likely hike rates before year end. A sharp sell-off was seen in Gilts with Dec Gilt down 84 ticks at 118.51 from yesterday's settlement of 119.36. Unsurprisingly, 02s/10s curve is 2.5bp steeper at 117.5bp but this is a lot less steeper than the expected as the short end equally suffers on rate hike fears.
New Zealand government bonds dipped, sending yields 4 bps higher along the curve. Australian government bond futures also retreated, with the 3-year bond contract off 5 ticks at 98.120. The 10-year contract was down 3.5 ticks to 97.2750.
