Market Roundup
- EUR/USD sidelined as loss consolidation continues in 1.0730/63 range.
- GBP/USD steady, plays 1.5092/1.5124. EUR/GBP probes lower to 0.7104.
- USD/JPY corrects back from Mon's 2-1/2 mth high. 123.03/123.39 range.
- European shares lower - commodities, Portugal uncertainty weigh.
- DAX -0.5%, pulling away from Fri's 11055 peak.
- UK Cameron: EU needs to change, become more competitive.
- Cameron: There will be no other renegotiation or referendum.
- ECB Weidmann: Have concerns about monpol too loose for too long.
- ECB Liikanen: Gov council is willing/able to act by using all instruments available.
- UK Oct BRC retail sales -0.2% y/y vs previous 2.6%.
- Swiss Oct unemploy rate unadjusted 3.3% vs prev 3.2%. Adj 3.4% vs prev 3.4%.
- Norway Oct CPI +2.5% y/y. Core CPI +3.0% y/y.
Economic Data Ahead
- (0830 ET/1330 GMT) The US Labor Department is set to release the data on import and export prices for October. Economists expect import prices to have dropped 0.1 percent last month, while export prices to have slid 0.2 pct.
- (1000 ET/1500 GMT) U.S. wholesale inventories are expected to have remained flat at 0.0 pct in September against a slight rise of 0.1 pct in August. While wholesale sales likely rose 0.1 pct from a drop of 1 pct in August.
Key Events Ahead
- (1045 ET/1545 GMT) FedTrade 30-year Fannie Mae / Freddie Mac (max $1.900 bn).
- (1615 ET/2115 GMT) U.S. Federal Reserve Bank of Chicago President Charles Evans and U.S. Treasury acting Assistant Secretary Seth Carpenter are panelists at Chicago Booth School's Initiative on Global Markets, "The $13 Trillion Question: Managing the U.S. Government's Debt," in Chicago.
- U.S. Treasury Secretary Jack Lew will participate in a moderated conversation before the 2015 Annual Meeting of Securities Industries and Financial Markets Association in Washington.
FX Beat
USD: The dollar rose towards a 7-month peak against a basket of major currencies as widening rate differentials were in favor of U.S. Treasuries on expectations the Fed will raise interest rates next month. The dollar index rose 0.1 percent to 99.072, moving back toward Friday's peak of 99.345, a high not seen since mid-April. Against the yen, the dollar was buying 123.35 yen, up 0.2 percent on the day and not far from the previous day's 2-1/2-month high of 123.60.
EUR/USD: The euro traded at $1.0750 in the Asian session, not far from Friday's 7-month low of $1.07045, having lost 2.3 percent so far this month. The bearish bias is intact on market talk of Dec ECB deposit rate cut. Political developments in Portugal and Spain also weigh. The pair is consolidating between 1.07070 and 1.0800 and has recovered till 1.07889. Intraday trend is still weak as long as resistance 1.0830 holds, major support is around 1.0700 and break below targets 1.0660/1.0600. On the higher side minor resistance is around 1.0830 and any break above targets 1.0850/1.0900.
USD/JPY: The pair is continuing the uptrend intact for the seventh day thanks to rising UST/JGB yield advantage in favour of the USD. 10y UST/JGB yield spread broke the 200bp barrier (at 202bp) for the first time since Sep-14. It has retreated till 122.97 after making a high of 123.60 and was trading around 123.21. Overall trend is bullish and is expected to reach 124.10 ins short term, its weakness can be seen only below 122.50 and break below 122.50 will targets 122/121.49. The major support is around 121.25 and bullish invalidation is only below 120.
USD/CHF: The pair is consolidating between 1.0076 and 0.99967 for past two trading sessions. It is currently trading around 1.00430, and the short term trend is bullish as long as support 0.9980 holds. On the downside any break below 0.9980 (Resistance turned into support) will drag the pair further down till 0.9950/0.9930 level. Overall weakness can be seen only 0.9930.
GBP/USD: Cable steadies above 1.5100 in Asia. Tight range likely to prevail ahead of labor market data tomorrow. GBP/JPY was back above 185.97 (200dma level). The pair has recovered till 1.5128 after making a low of 1.5027 level, Its minor resistance is around 1.5130 and break above will take the pair to 1.5185/1.5225. On the downside any break below 1.5016 targets 1.4950/1.4900 in short term, overall bullishness can be seen only above 1.5225.
AUD/USD: The Australian and New Zealand dollars were off one-month lows on Tuesday, but remained vulnerable to expectations that the US Fed will raise interest rates in December. The Aussie has made a low of 0.7023 and slightly recovered from that level. It is facing minor resistance around 0.7070 and above that it can reach till 0.7100/0.7125. Overall bullishness can be seen only above 0.7170 and break above targets 0.7225/0.7300. On the lower side minor support is around 0.7020 and break below targets 0.6935/0.0.6900. The New Zealand dollar stumbled at $0.6528, having dipped just below 65 cents last week. It elicited support ahead of 0.6510 in early European trade.
Equities Recap
Asian stock markets dropped and European shares turned lower with the pan-European FTSEurofirst 300 index falling less than 0.1 percent while the euro zone's blue-chip Euro STOXX 50 index moved marginally higher. Britain's FTSE 100 gained 0.46 percent in early deals, France's CAC rose 0.59 pct, Germany's DAX was up 0.46 pct.
Tokyo's Nikkei closed up 0.15 pct at 19,671.26, Shanghai composite index ended down 0.2 pct at 3,640.49 points, while CSI300 index finished the day down 0.2 pct at 3,833.24 points. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1 percent. South Korea's Kospi fell 1.6 percent and Hong Kong's Hang Seng shed 1.2 percent. Taiwan stocks closed down 1.2 pct at 8,536.90 points.
Treasuries Recap
U.S. 10-year Treasury yield stood at 2.334 percent vs close of 2.342 percent on Monday.
UK Dec Gilts opened up 15 ticks at 116.58, and were continued to push higher to 116.68 currently as European government bond yields dropped.10-year Gilts are under-performing as their yield fell 2.5bps. 10-year core/non-core European government bond yields are around 4bp lower.
JGB prices finished the day higher, sending yields lower by 1bp to 2bp form yesterday's afternoon close. The current 10-yr, 20-yr, 30-yr and 40-yr JGBs turned firmer across the curve after lunch, sending yields down 2bp from their intraday highs. JGB prices advanced in very thin trading after lunch, on the back of intermittent dip-buying amid a lack of aggressive sellers, before the BoJ will buy JGBs in its massive JGB purchase program tomorrow and Friday, according to JGB traders.
German 2-year yields dropped 2.5 bps to -0.34 pct, their lowest in almost two weeks, widening the spread with their U.S. counterparts to about 121 basis points. The 10-year Bund yield fell 1.1 bps to around 0.67 pct, down from Monday's eight-week high of 0.72 percent. The yield on 10-year Portuguese government bonds fell 6 bps to 2.81 percent, helping pull other peripheral bond yields lower.
New Zealand government bonds dropped in line with U.S. Treasuries, sending yields as much as 8 basis points higher. Australian government bond futures edged up from 3-month lows, with the 3-year bond contract up 1 tick at 97.950. The 10-year contract also added 1 tick to 97.0750, while the 20-year contract gained 2 ticks to 96.5450.
Commodities Recap
Oil prices inched higher after the head of OPEC forecast a more balanced market next year and the U.S. energy department said domestic output is likely to fall further, though gains were limited as the overall picture of a market in glut remains. U.S. crude rose 23 cents to $44.10 a barrel by 0639 GMT, after falling about 1 percent on Monday to $44.15 for a fourth consecutive decline. Brent crude was up 9 cents at $47.28 a barrel.
Gold was trading near a 3-month low on expectations the U.S. Fed was well on track to raise interest rates before the end of the year. Spot gold was little changed at $1,092.35 an ounce by 0646 GMT. U.S. gold for December delivery gained 0.4 percent to $1,092.10 an ounce.
