Market Roundup
- Aussie hits 6-week high, best weekly gains since end-2011.
- Dollar index set for 2nd week of losses after Fed minutes.
- EUR/USD rises to 1.1348 from 1.1268. 1.1328 was Thurs high.
- GBP/USD highest since Sept 22, plays 1.5347/1.5382.
- UK Aug construction output -4.3% m/m, biggest fall since Dec 2012. Jul -1.0%.
- UK Aug global goods trade balance -11.149bln vs prev -12.203bln rvsd. -10.0bln expected.
- ONS: Combined total UK trade deficit in Jul/Aug already twice as big as in all of Q2.
- Japan not willing to renegotiate TTP trade pact.
- Norway Sept core CPI rises to 3.1% y/y.
Economic Data Ahead
(0830 ET/1230 GMT) The U.S. Labor Department will release import and export prices for September. Import prices are expected to have fallen by 0.5 percent and export prices by 0.2 percent last month.
(0830 ET/1230 GMT) The Canadian economy is expected to have added 10,000 jobs in September to bring the unemployment rate down to 6.9 percent from 7.0 percent in August. Despite a mild recession in the first half of the year and layoffs in the oil patch, the labor market has been relatively resilient.
(1000 ET/1400 GMT) The Commerce Department will release data on wholesale inventories in August, which are expected to have been steady at 0.0 pct. Wholesale sales are also likely unchanged at -0.3 pct.
The Bank of Canada will publish the business outlook survey, a summary of interviews with management at about a hundred companies, watched by investors to get a sense of how the central bank sees the progression of the economy.
Key Events Ahead
(0910 ET/1310 GMT) Federal Reserve Bank of Atlanta President Dennis Lockhart will speak before the Society of American Business Editors and Writers Fall Conference in New York.
(1100 ET/1500 GMT) FRB New York's Dudley to discuss inflation, risks to global outlook, pending rate hike.
(1145 ET/1545 GMT) FedTrade operation 30-yr Ginnie Mae (max $1.125 bn).
(1330 ET/1730 GMT) Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions and monetary policy before the CFA Society Milwaukee "Economics and Monetary Policy Update" in Milwaukee, Wisconsin.
The annual meetings of the International Monetary Fund and World Bank open with the plenary session in Lima, Peru. The day will feature speeches by IMF Managing Director Christine Lagarde, World Bank President Jim Yong Kim and United Nations Secretary Ban Ki-moon as well as a host of discussions.
FX Beat
Commodity and growth-linked currencies like the Aussie climbed on Friday, and were on track to end the week on a high note on the back of a risk rally that put safe-haven yen under pressure. The Australian dollar rose to $0.7300, its highest since Aug. 24 and up 3.4 percent for the week. The Canadian dollar was trading near its highest since August, while the New Zealand dollar was up 0.5 percent on the day.
USD: The dollar index was set for its second week of losses, after the minutes of the Federal Reserve's September meeting reinforced investors' expectations that the U.S. central bank was unlikely to raise interest rates well into 2016. The dollar was up 0.2 pct against the yen at 120.11 yen while the euro was up 0.5 percent.
EUR/USD was trading at the level highest since 21 September after the FOMC minutes, ignoring wider US/EU 2y IRS spread (71bp) before returning below 1.13. The pair has broken major resistance around 1.1340 and this confirms short term bullishness, a jump till 1.1370/1.14365 is possible. On the downside major support is around 1.12300 and break below targets 1.1200/1.1750. Overall bullish invalidation is only below 1.1130. The pair's minor support is around 1.1260. It is good to buy at dips around 1.1270-75 with SL around 1.1230 for the TP of 1.1370/1.1436. Large €768mln 1.1300 option expiry today.
USD/JPY is trading under pressure due to the risk rally of commodity currencies, it was stuck in narrow range between 120.60 and 119.60. Any break below 119.60 confirms short term weakness, decline till 119.20/118.60 is possible. Overall bearishness can be seen only below 118.60. On the higher side minor resistance is around 120.60 and break above would extend gains till 121.20. Major resistance is around 121.30. It is good to buy at dips around 119.60 with SL around 119.20 for the TP of 120.60/121.20.
USD/CHF has broken a major support at 0.9620 which confirms short term weakness , a decline till 0.9560/0.9525 is possible. Short term bullishness can be seen only above 0.9680 and break above targets 0.9720/0.9745. It is good to sell on rallies around 0.9640-45 with SL around 0.9680 for the TP of 0.9680.
GBP/USD gave back all of its early gains on Friday after the data showed larger-than-expected U.K. trade deficit in August, and sinking construction output. By 0843 GMT, sterling was trading flat on the day at $1.5351. It was 0.4 pct weaker at 73.72 pence per euro. it was trading above 200 day MA (1.5317) after making a low of 1.5265. The pair should close above 1.5320 for further bullishness. It has made high of 1.5832 today and declined from that level. Intraday support is around 1.5320 and any break below targets 1.5280/1.5250. The major resistance is around 1.5385 and break above targets 1.5440. It is good to sell on rallies around 1.5370 with SL around 1.5400 for the TP of 1.5280.
AUD/USD is on track to post its biggest weekly gain in two years. The Aussie, while flat on the day at $0.7268, was sporting a handsome gain of 3.0 pct on the week. If sustained, that would be its biggest weekly gain since September 2013. A break above key resistance at $0.7280 - its September peak - will take it to highs last seen in late August. It has broken major resistance 0.7280 and this confirms short term bullishness, a jump till 0.7400/0.7435 is possible. Intraday weakness can be seen only below 0.7275 and break below targets 0.7250/0.7195. It is good to buy at dips 0.7275 with SL around 0.7240 for the TP of 0.7330/0.7400.
NZD/USD last traded at $0.6670, having reached a near two-month high of $0.6700 overnight. It too was flirting with major resistance at $0.6708, a peak set in the week, the kiwi was up a plump 3.4 percent, a magnitude not seen since September 2013.
Equities Recap
Global stocks climbed on Friday, and are on track to post their biggest weekly gains in four years after minutes of the U.S. Fed showed the central bank is in no rush to raise interest rates.
The FTSEuroFirst300 Index was up 0.8 pct on the day and up 5 pct on the week. Germany's DAX and France's CAC 40 were also trading higher 1 percent in early trading, while U.K's FTSE100 rose 0.8 pct.
Japan's Nikkei closed up 1.64 percent at 18,438.67, Asia MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.4 pct, on track for a robust weekly gain of 6.5 pct, its best week in four years. The MSCI world equity index was up 0.6 percent. That was the eighth rise in a row, and put the index up 4.3 pct on the week, its best performance since late 2011. China's CSI300 Index and Shanghai Composite Index ended up 1.3 pct.
Commodities Recap
Oil extended gains on Friday and is on track to post its biggest weekly gains in over six years, after U.S. Fed minutes suggested there was no hurry to raise interest rates and an influential forecaster predicted a price rally. Brent crude was up 60 cents at $53.65 a barrel at 0844 GMT, on track to rise 11 pct this week alone. U.S. crude was up 77 cents at $50.20 a barrel after rising as far as $50.58, the highest level in more than two months.
Gold climbed about 1.1 pct to session high of $1,150.80/oz. On Thursday, prices had rallied only briefly after the Fed minutes before closing down 0.6 pct despite a softer dollar. Three-month zinc futures were up 9 pct on the London Metal Exchange at $1,818 a tonne after Glencore said it will cut production by 500,000 tonnes, equivalent to 4 percent of the world's output.
Treasuries Recap
The 10-year U.S. Treasury yield slipped a couple of basis points to 2.09 percent, as did the 30-year yield to 2.92 percent.
JGB prices ended the day steady to slightly higher, with the 20-yr tenor outperforming the rest of the curve. JGBs shrugged off weaker US Treasury overnight and stronger Tokyo stocks today, as the BoJ bought JPY240bn of JGBs in the 10-yr to 25-yr zone and JPY140bn of JGBs in the 25-yr to 40-yr zone, including the new 30s, under its massive JGB purchase program after yesterday's monthly JPY800bn 30-yr JGB auction. The BoJ also purchased JPY1.5tn of T-bills, JPY400bn of JGBs in the 1-yr to 3-yr zone, and JPY400bn of JGBs in the 3-yr to 5-yr zone under the program.
German 10-year Bund yields were up 2 bps at 0.61 pct, a 10 bp rise in a week in which below-forecast economic data strengthened the case for further monetary policy measures.
UK Gilts opened 27 ticks lower than the settlement of 118.67, as predicted, after core fixed income markets trended lower after the dovish FOMC minutes drove equities higher. Recent ranges are being observed on 10-year cash yields with resistance of the 61.8% Fibo from June highs and September lows holding at 1.863%. Screens were last at 1.843%.
Following a negative lead from U.S. Treasuries, New Zealand government bonds and Australian bond futures fell. Australia's 3-year futures contract shed 4 ticks to 98.160, while the 10-year contract lost 6 ticks to 97.2900.
