- USD/JPY boosted by SSEC rally. Tests 120.23 from 118.85.
- EUR/JPY rallied from 132.99 to 134.35.
- EUR/USD plays 1.1154 to 1.1230 then back to 1.1157.
- GBP extends bounce from 4 month low to new 1.5390 high.
- Chinese stocks turn sharply higher as govt steps help stabilise market.
- SSEC closes up 2.9% at 3,170 points.
- DAX up 2.15% to 10333 high. Nearing 10380/10382 double top.
- Euro Zone Q2 GDP revised 0.4% q/q, 1.5% y/y vs previous 0.5% (revised)/1.2%. 0.3%/1.2% expected.
- Switzerland August Unemployment rate unadjusted 3.2% vs 3.1%, 3.1% expected. Adjusted 3.3% vs 3.3%, 3.3% expected.
- China econ planner says approves 70bln Yuan worth of infrastructure projects.
- Swedish Central Bank Jochnick- Room to increase govt bond buying if needed.
- (1000 ET/1400 GMT) US September employment trends index; last 127.9.
- (1500 ET/1900 GMT) US July consumer credit, $18.5 bln eyed; last $20.74 bln.
Key Events Ahead
- (1715 ET/2115 GMT) Federal Reserve Bank of Minneapolis President Narayana Kocherlakota speaks on "Outlook for U.S. Monetary Policy" before the Advanced Workshop for Central Bankers, in Evanston, Illinois.
FX Recap
EUR/USD is supported below 1.1200 levels and currently trading at 1.1159 levels. It has made intraday high at 1.1229 and low at 1.1153 levels. The euro climbed against the dollar as expectations that the U.S. Fed will hike rates next week faded amid global growth worries. It was 0.1 pct higher at $1.1182. The main currency pair lost footing and falls back in to the negative terrain amid absolute risk-on moods driven by bouncing European equities, diminishing bids for safe-havens such as Euro. Meanwhile, traders completely moved past poor Chinese trade data and now digest the latest Euro zone Q2 GDP revision. GDP in the euro zone for Q2 remained at 0.4%, while the yearly change improved to 1.5% from 1.0% previously, Eurostat suggested on Tuesday. Looking ahead, the major will be influenced by the moves in the European indices amid lack of fresh economic updates as the US calendar also offers nothing of relevance except the labour market conditions data. Initial support is seen around at 1.1015 and resistance at 1.1363 levels. Option expiries are at 1.1100 (972M), 1.1245-50 (370M).
USD/JPY is supported above 120.00 levels and posted a high of 120.22 levels. It has made intraday low at 118.85 and currently trading at 120.11 levels. The US dollar was well bid as a positive mood returned to currency markets. The pair rocketed higher, fighting for the ¥120 resistance on Tuesday, gaining more than 0.6% on the day. Data from Tokyo on Tuesday showed Japan's current account surplus expanded from ¥558.6 billion in June to ¥1.81 billion in July, which was stronger than the forecast surplus of ¥1.75 trillion. Moreover, Demand for safe-haven currencies increased on Tuesday after Chinese data showed exports continued to decline in August, raising yet more concerns about the health of the world's second largest economy. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.00 (544M), 120.15 (350M), 120.40-45 (1.1BLN).
GBP/USD is supported above $1.5300 levels. It made an intraday high at 1.5404 and low at 1.5268 levels. Pair is currently trading at 1.5379 levels. Sterling rose on the improved risk sentiment in global markets and news that a Japanese insurer was buying a British company. It hit a 1-week high of $1.5390, recovering from the 4-month low of $1.5163 struck on Friday. Against the low-yielding euro, it was trading 0.4 pct firmer at 72.84 pence. Sterling rose against most of its major peers and halted a 9-day slump, as hopes of renewed stability on stocks markets in China helped to improve investors' moods ahead of the BoE meeting later this week. Moreover, investors are looking forward to a new monetary policy decision at the upcoming meeting of the Bank of England later this week. Initial support is seen at 1.5185 and resistance is seen around 1.5436 levels.
NZDUSD is supported below 0.6300 levels and trading at 0.6279 levels and made intraday low at 0.6257 and high at 0.6301 levels. The Kiwi also tracks the higher and rebounds from fresh six and a half year lows, still keeping range below 0.63 handle as markets remain cautious ahead of Chinese CPI and RBNZ cash rate statement due later this week for further direction. Moreover, Thursday's, RBNZ cash rate statement may also be closely watched as markets widely anticipate a rate cut in order to counter the effects of the recent China fears. Initial support is seen at 0.6195 and resistance at 0.6511 levels.
AUD/USD is supported below 0.7000 levels and trading at 0.6976 levels. It has made intraday high at 0.6986 levels and low at 0.6923 levels. The Australian dollar shot higher against the greenback on Tuesday after a business survey revealed a sharp rise in conditions last month in Australia. However, some economists see further downside for the currency as fears over China persist. National Australia Bank's (NAB) Business Conditions Index surged from 6 in July to 11 last month, the strongest reading since October, where a reading above zero signals an improvement in conditions. Initial support is seen at 0.6908 and resistance at 0.7122 levels.
Equities Recap
Shares rose in Europe and Asia on Tuesday while the dollar lost ground against the euro after trade data from China and Germany highlighted the divergent outlooks of the two heavyweight economies.
The pan-European FTSEurofirst was up1.5 percent while Germany's DAX index gained 1.7 percent. Britain's FTSE 100 index climbed 1.5 percent in the eary trades.
In early trades, Asian shares broke a six-day losing streak. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.33 percent but remained within six points of a three-year low hit two weeks ago. The Nikkei 225 index closed down 2.4 percent, taking it into negative territory for the year.
China's Shanghai Composite index ended 2.9 percent higher, albeit on the lowest volume since late February. The CSI 300 index rose 2.6 percent.
The dollar strengthened against the safe-haven Japanese yen last trading up 0.7 percent at 120.09 yen, but the euro gained 0.1 percent to $1.1182, rising for a third consecutive day. The dollar index which measures the greenback against a basket of currencies, fell 0.2 percent.
Commodities Recap
Oil prices stabilised on Tuesday as strong German economic data and a year-on-year increase in Chinese crude imports balanced concerns about Asia's economic growth and global oil oversupply. Brent crude futures rose 0.7 percent to $47.94 after a 3.7 percent fall on Monday. They still traded below the 50 percent retracement of their rally late August to $54.32 from 1/2-year low of $42.23.
Gold held steady at around $1,121 an ounce after a four-day losing streak as the dollar eased, but the metal was not too far from a 2-1/2-week low as it struggled to find direction amid uncertainty over a looming U.S interest rate hike. Spot gold was little changed at $1,119.40 an ounce. U.S. gold eased 0.3 percent to $1,118.30.
Treasuries Recap
Japanese government bonds firmed on Tuesday, underpinned by slumping equities and decent demand at a 30-year sale. The benchmark 10-yr JGB yield was steady on the day at 0.365 percent, down from 0.375 percent earlier in the session, while the 5-year yield was also flat at 0.065 percent, its lowest level since late April. The 30-year yield fell 1.5 basis points, to 1.355 percent, down from 1.385 percent earlier. The 10-year JGB futures price ended up 0.13 point at 148.30 after earlier rising as high as 148.31, its highest level since late January.
UK Gilts opened 3 ticks higher than the settlement of 118.47, as predicted, as core markets remained elevated by ongoing Chinese growth concerns.
Yields on German government bonds, the euro zone benchmark, rose. 10-yr Bunds were yielding 0.69 percent, up 2 basis points.
New Zealand government bonds eased, nudging yields 2 basis points higher across the curve.
Australian government bond futures were a touch softer, with the three-year bond contract off one tick at 98.210. The 10-year contract was down half a tick to 97.3050.
