Market Roundup
- EUR/USD consolidates after Thursday's rally, awaits NFP. 1.0956-1.0859.
- EUR/GBP eases from 0.7251 peak, plays 0.7235-0.7181.
- DXY off Thursday 97.591 low. 97.754/98.402 range.
- Germany Oct Industrial Orders 1.8% m/m vs previous -0.7% rvsd. 1.2% expected.
- Swiss Nov CPI -0.1% m/m, -1.4% y/y vs previous 0.1%/-1.4%. 0.0%/-1.3% expected.
- Japan Govt to compile extra stimulus spending worth 3.3-3.4trl yen - Sources.
- Japan real wages rise, offering hope of consumption pick-up.
- Japan to cut planned bond issue this fiscal year by up to $4 bln.
- OPEC set to maintain policy as oil glut worsens.
- UAE Oil Min: OPEC should cooperate with non-OPEC countries, to discussions.
- Brent holding bid after Thursday's 5.3% gain.
- Denmark rejects more EU laws in blow to integration.
- German lower house of parliament approves joining military campaign vs IS in Syria.
Economic Data Ahead
- (0830 ET/1330 GMT) U.S. job growth likely strong in November, holding the jobless rate at a 7-1/2 year low of 5 percent, which would support the case for a December interest rate hike by the Federal Reserve. Nonfarm payrolls probably increased 200,000 last month, according to a survey of economists, but down from October's robust 271,000 jobs growth. It would still be more than enough to keep up with population growth. Private payrolls likely rose 190,000 after recording gains of 268,000 in October. Average earnings are expected to have risen 0.2 pct against a rise of 0.4 pct in prior month.
- (0830 ET/1330 GMT) The U.S. Commerce Department release data for October international trade. The trade gap is likely to fall $40.5 billion, it fell $40.8 bln in September.
- (0830 ET/1330 GMT) Canada's economy is expected to have lost 10,000 jobs in November, holding the unemployment rate at 7.0 percent. The labor market was surprisingly strong in October as it was boosted by temporary hiring related to the federal election.
- (0830 ET/1330 GMT) Canada's trade deficit is expected to have narrowed in October to C$1.70 billion, compared to September's deficit of C$1.73 billion. Analysts will be watching to see whether a recent pick up in exports will be sustained. Growth in exports are seen as key to the Bank of Canada's outlook.
- Bank of Greece releases its annual monetary policy report. Markets will be looking for projections on the Greek economy and comments on progress Greece has made in implementing its bailout, next steps needed to exit the crisis.
Key Events
- (1015 ET/1515 GMT) Philadelphia Fed President Patrick Harker gives welcome remarks before "The New Normal for the U.S. Economy" forum hosted by the Federal Reserve Bank of Philadelphia.
- (1045 ET/1545 GMT) FedTrade Operation 30-year Fannie Mae / Freddie Mac (max $1.750 bn).
- (1200 ET/1700 GMT) The Federal Reserve Bank of New York President William Dudley and European Central Bank President Mario Draghi participate in a meeting of the Economic Club of New York.
- (1545 ET/2045 GMT) The Federal Reserve Bank of St. Louis President James Bullard speaks on "Neo Fisherianism" before "The New Normal for the U.S. Economy" forum hosted by the Federal Reserve Bank of Philadelphia.
- (1610 ET/2110 GMT) The Federal Reserve Bank of Minneapolis President Narayana Kocherlakota speaks on "Monetary Policy Renormalization" in the same forum.
FX Beat
USD: The euro rally knocked the dollar index back to a one-month low of 97.591, from a 12-1/2-year peak of 100.510 hit midweek. The index shed 2.1percent on Thursday, its worst performance since March 2009. It last stood at 98.269.
EUR/USD: The euro slipped on Friday, having recorded its biggest one-day gain in nearly seven years after ECB's easing fell short of market expectations, with focus now turning to the U.S. jobs report. It dropped 0.7 percent against the dollar to trade at $1.0872 after shooting up 3.1 percent on Thursday and recovered till 1.0980. US Economy is expected to have added 200K jobs in last month, the jobs should have been added more than 240K to actually give dollar a boost. Major resistance is around 1.100 and break above targets 1.1035 (200 day MA)/1.1100. On the downside watch out 1.0830 (Resistance turned into support) for further weakness and break below targets 1.0800 /1.0750.
USD/JPY: The pair has recovered after making a low of 122.25, intraday trend is slightly bullish as long as support 122.20 holds. On the higher side minor resistance is around 123.20 and any break above targets 123.70/12. Minor support is at 122.60 and break below targets 122.4/122.20.
GBP/USD: Sterling bounced back from a 5-week low against the euro having suffered its steepest daily losses in more than seven years the previous day after the ECB's less-than-expected easing. The single currency gained almost 1.7 percent against the pound on the day, hitting 72.51 pence, its strongest since late October. Sterling clawed back a little of that lost ground on Friday, up 0.4 percent at 71.985 pence, though it was still on track for its worst week in seven months versus the euro. Against the dollar the pound hit a 10-day high of $1.5160 in early Asian trading, before easing back to $1.5131, down 0.1 percent on the day. Cable breaks minor resistance 1.5060 and jumped till 1.5130 level. Short term trend is bearish as long as resistance 1.5200 holds. Major support is at 1.5050 and break below will drag the pair to new level 1.5000/1.4980. On the higher side major resistance is around 1.5160 and break above targets 1.5200/1.5220.
USD/CHF: The pair has recovered after making a low of 1.01794 and is currently trading around 1.02344. Overall trend is bullish as long as support 1.0140 holds. Any break below 1.0140 will drag the pair further down till 1.0100/1.00500. On the higher side any break above 1.0243 will take the pair to next level at 1.0300/1.03280.
AUD/USD: The Australian dollar was trading near recent peaks on Friday with further easing from the ECB putting it on track to end the week sharply higher against the greenback. It held at $0.7332, having climbed to an 8-week peak of $0.7365 on Thursday. The pair's major resistance is around 0.7380 and break below targets 0.7420/0.7460. On the lower side minor support is around 0.7280 and any break below will target 0.7230/0.7170. Short term bullish invalidation is only below 0.7170. The Aussie is up 1.9 percent this week, partly due to its attractive government bond yields which compare with negative rates in Germany and France on the short end of the curve. The euro was last at A$1.4890, having surged from a five-month trough of A$1.4368 on Thursday. .
NZD/USD: The New Zealand dollar slipped to $0.6675 from a 1-month high of $0.6706 set the previous session. It was on track with a weekly gain of 2.1 percent. The euro also rallied hard on the kiwi to reach NZ$1.6363, having gained 2.3 percent overnight.
Equities Recap
There was no respite on Friday for investors still reeling from the disappointment of the ECB's stimulus package the day before, as they geared up for the latest U.S. employment data and a key OPEC meeting of oil producers.
Europe's index of 300 leading shares was down 0.5 percent at 1,456 points. Britain's FTSE 100, France's CAC40 and Germany's DAX all plunged 0.4 pct in early trades.
Earlier in Asia, Japan's Nikkei tumbled 2.2 pct, down 1.9 pct for the week, the most in 3 months, MSCI's broadest index of Asia-Pacific shares outside Japan slipped 1 pct, China's CSI300 index ended down 1.9 pct at 3,677.59 points, HK's Hang Seng Index finished down 0.8 pct at 22,235.89 points and Shanghai Composite Index closed down 1.7 pct at 3,524.99 points.
Commodities Recap
Crude oil prices climbed as OPEC ministers met in Vienna, while USD hovered near 1-month lows a day after staging its largest one-day fall in nearly seven years. Brent crude oil futures were last up 65 cents at $44.49 a barrel, having fallen earlie this week to a low of $42.43, within cents of August's 6-1/2 year trough. U.S. crude futures rose 55 cents at $41.63.
Gold clung to overnight gains and looked set to snap a 6-week losing streak as a slump in the dollar buoyed the metal above 2010 lows ahead of the key U.S. non-farm payrolls data later in the session. Spot gold was steady at $1,061.60 an ounce and was headed for a 0.3 pct gain for the week.
Treasuries Recap
The 2-year German yield was steady at -0.30 pct and the U.S. 10-year yield eased back a couple of basis points to 2.287 pct. The gap between 10-year yields U.S. and German yield spreads stood at about 164 bps - its tightest since early November. Yields on 10-year euro zone government bonds were flat to 1 bps higher, with German Bund yields up steady at 0.65 percent, having briefly touched a three-week high at 0.715 percent.
JGB prices closed the day slightly lower, pushing yields up 1bp on the day in the 5-yr to 30-yr zone. A sharp rise in yields on German Bunds and US TSY bonds overnight had negative impact on JGBs, but compared to the magnitude of German/US yields (20bp/13bp in 10s respectively), the impact on JGBs was limited.
UK Gilts started 5 ticks higher than the settlement of 117.35, as expected, as the market tracked core markets bouncing a touch after yesterday's ECB induced sell off.
New Zealand government bonds eased, sending yields between 3 and 4.5 bps higher. Australian government bond futures dropped in a bearish steepening of the curve, with the 3-year bond contract falling 6 ticks at 97.820. The 10-year contract shed 11 ticks to 97.0200, while the 20-year contract lost 11 ticks to 96.5200.
