Market Roundup
- EUR/USD recovery makes it to 1.0619 before easing below figure.
- GBP/USD dips after PMI misses forecasts. 1.5126 to 1.5080. 1.5053 Asia low.
- DXY -0.17%. Backs off from 8-1/2 mth 100.31 peak. 100.26/99.812 today.
- EZ Oct Unemployment Rate 10.7% vs previous 10.8%. 10.8% expected.
- EZ Nov Markit Manufacturing final PMI 52.8 vs previous 52.8. 52.8 expected.
- UK Nov Markit/CIPS Manufacturing PMI 52.7 vs previous 55.2. 53.6 expected.
- Swiss Q3 GDP 0.0% q/q, 0.8% y/y vs previous 0.2%/0.9% revised. 0.2%/0.9% expected.
- Swiss Oct Retail Sales -0.8% y/y vs previous 0.2%.
- Swiss Nov Manufacturing PMI 49.7 vs previous 50.7.
- Swedish FSA: Sharply rising house prices entail growing risk to econ stability.
- PBOC Vice Gov- No basis for yuan to continue to devalue.
- PBOC Vice Gov- SDR inclusion in SDR to make yuan more stable.
- Yuan's inclusion in SDR basket may lead to devaluation- RBI Governor Rajan.
- SWIFT - China yuan becomes 2nd most used ccyy for payments with Japan.
- RBA leaves policy as is as expected, OCR 2%, no change in statement.
Economic Data Ahead
- (0830 ET/1330 GMT) Canada's Q3 GDP report is expected to confirm that the economy pulled out of recession with a growth of 2.4 percent annualized rate. However, monthly figures are likely to show no growth for September.
- (0830 ET/1330 GMT) Brazil's economy probably contracted 1.2 percent in Q3 after seasonal adjustments, following a decline of 1.9 percent between April and June. Theeconomy crippled by a combination of government budget cuts, rising inflation and political gridlock.
- (0945 ET/1445 GMT) Financial firm Markit is set to release its manufacturing PMI for November which is expected to stay unchanged at 52.60.
- (1000 ET/1500 GMT) U.S. factory activity likely picked up in November, after manufacturing being weighed down by a strong dollar and deep spending cuts in the energy sector. The Institute for Supply Management will likely report that its national factory index rose to 50.5 last month from a reading of 50.1 in October, according to a survey of economists. Manufacturing prices paid probably rose to 40.0 from 39.0, while employment index likely inched up to 48.4 from 47.6.
- (1000 ET/1500 GMT) The U.S. Department of Commerce is set to release its construction spending for October, which is expected to have risen 0.5 percent, after gaining 0.6 pct in September.
- (1330 ET/1830 GMT) U.S. Automakers will report sales figures for November. Domestic car sales likely slipped to 5.80 mln from 5.89 mln in Ocotber, truck sales probably fell to 8.52 mln from 8.61 mln and total vehicle sales are expected to have dropped to 18.10 mln from 18.24 mln.
- Canadian auto makers, who expect 2015 to be a record year for the sale of Canadian vehicles, report sales figures for November.
- The closely watched survey of economists by the Mexico central bank, which sheds light on analyst expectations for growth and inflation, is scheduled for release.
Key Events Ahead
- (1045 ET/1545 GMT) FedTrade Operation 30-year Fannie Mae / Freddie Mac (max $1.750 bn).
- (1145 ET/1645 GMT) FRB Chicago's Evans on the economy.
- The Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions and monetary policy before the Lansing Regional Chamber of Commerce Economic Club Luncheon.
FX Beat
USD: The dollar slipped from an 8-1/2-month high as traders prefered to buy back the euro, considering a significant amount of further monetary easing had already been priced into the single currency ahead of ECB meeting. The dollar index slipped to 99.899, that still left it within sight of the 100.39 the index hit in March, its highest in more than 12 years, on expectations U.S. Fed will raise U.S. interest rates later this month. Against the yen, it edged down about 0.1 percent to 122.95.
EUR/USD: The euro bounced off a 7 1/2-month low on concern the ECB may not deliver all the stimulus on Thursday that investors have come to expect. Markets are already pricing in a deposit rate cut and an increase in the size, scope and length of the ECB's trillion-euro bond buying programme. The single currency rose 0.4 percent to $1.0605, up from a 7-1/2-month low of $1.05575 touched on Monday. Major intraday resistance is around 1.06550 (trend line joining 1.08290 and 1.07630) and break above targets 1.0690 (Nov 25th high)/1.0720. On the downside watch out 1.05360 (trend line joining 1.06731 and 1.06168) for further weakness and break below targets 1.0500 /1.04600.
USD/JPY: The pair has made a high of 123.34 at the time of writing and slightly declined from that level. Intraday trend is slightly bullish as long as support 122.60 holds.On the higher side minor resistance is around 123.60 and any break above targets 124.15/125. Minor support is at 122.60 and break below targets 122.4/122.20.
GBP/USD: Sterling slipped from its highest in almost a week on Tuesday after a survey showed manufacturing growth slowed last month from the rapid pace recorded in October. Sterling rose almost 0.4 percent at $1.5101 before the data, fell back to $1.5083 afterwards. Technically the pair is facing strong resistance around 1.5130 and break above will take the pair to new level. On the downside minor support is around 1.5050 and break below targets 1.5000/1.4980. It was flat against the euro for the day at 70.22 pence.
USD/CHF: It has declined till 1.0258 after making a 5-year high around 1.03284. It was trading at 1.03100 and intraday support is around 1.02580 (resistance turned into support) and break below will drag the pair till 1.0200/1.0140. Overall bullish invalidation is only below 1.0140. Major resistance is around 1.03280 and break above targets 1.03500/1.0400.
AUD/USD: Antipodean currencies were the biggest gainers from the dollar's weakness in developed markets, with the Aussie hitting its highest in five weeks and the Kiwi climbing over 1 percent, after the Reserve Bank of Australia declined to cut interest rates further. The Bank held rates steady at 2 percent at its policy meeting. The Aussie rose about 0.9 percent after the decision, to $0.7292. Its major support is around 0.7150 and break below targets 0.7100/0.7070. Overall bullishness can be seen only above 0.7310 and break above targets 0.7380. Short term bullish invalidation only below 0.7150. The euro dropped to 5-month lows against the Australian dollar on expectations of looming policy easing by the ECB. The Aussie also powered up to 89.47 yen.
NZD/USD: The New Zealand dollar jumped over 1 percent to a one-month high of $0.6660. It also climbed to 6-month highs versus the euro and a 1-month peak versus the yen.
Equities Recap
The stock markets edged up on clues that a slowdown in China's economy may be levelling, European stocks followed Asian shares higher, bond yields also inched higher.
The FTSEurofirst 300 edged up 0.5 pct, Britain's FTSE 100 climbed 0.7 pct, while Germany's DAX and France's CAC 40 both rose 0.1 pct in early trades.
Japan's Nikkei ended up 1.3 percent, closing above the 20,000 level for the first time since August. While MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.8 percent. Australian shares rallied 1.9 percent, extending gains, after trade data showed Australia's economy gained last quarter from a rebound in resource exports.
China's CSI300 Index closed up 0.7 pct at 3,591.70 points, HK's Hang Seng Index ended up 1.8 pct at 22,381.35 points and Shanghai Composite Index finished the day 0.3 pct higher at 3,456.31 points.
Commodities Recap
Crude oil prices were higher as USD eased slightly, but concerns about supply glut remained front of mind with OPEC expected to keep its output target unchanged at a policy meeting on Friday. U.S. crude edged up 34 cents at $41.99 a barrel, but was still down more than 10 percent since the start of November. Internationally traded Brent rose 34 cents at $44.95 a barrel.
Gold surged nearly 1 pct, stretching gains above a near 6-year low on short covering and as the dollar dipped from multi-month highs. Spot gold rose to a session high of $1,074.34 an ounce, before giving up some gains to trade up 0.7 percent at $1,071.60 by 0643 GMT.
Treasuries Recap
U.S. 10-year Treasury Yield stood at 2.225 pct versus U.S. close of 2.218 pct on Monday.
German and Italian government bonds dropped as a report showed the euro-area unemployment rate unexpectedly fell to the lowest level in nearly four years in yield on German 10-year bunds rose 3 bps to 0.50 percent as at 10:34 a.m. London time. The yield on similar-maturity Italian bonds rose 1 bp to 1.43 percent.
JGB prices closed the day marginally mixed, with the 5s/10s curve flattening modestly by 0.5bp on the day. 7-yr to 20-yr JGBs finished slightly firmer, with yields down 0.5bp from yesterday, after the MoF published sold results of today's monthly JPY2.4tn 10-yr JGB auction at 03:45 GMT.
UK Gilts started 23 ticks lower than the settlement of 117.73, as expected, as markets started the last month of the year with a risk-on bias.
New Zealand government bonds eased slightly, pushing yields 1 bp higher in the middle of the curve. Australian government bond futures were mixed, with the 3-year bond contract down 2 ticks at 97.880. The 10-year contract was 2 ticks stronger at 97.1300, while the 20-year contract gained 2.5 ticks to 96.6400.
