Market Roundup
- USD/JPY -0.14%, EUR/USD +0.11%, GBP/USD -0.15%
- DXY -0.05%, DAX + 0.5%, Brent -0.4%, Iron +1.9%
- Switzerland Aug Trade Bal. CHF 3025 mln vs 2930 mln previous
- Germany Aug Producer Prices -1.6% y/y vs -2.0% previous, -1.6% expected
- Swiss Govt sees 2016 GDP at 1.5% vs 1.4% previous estimate
- RBA minutes don’t shed any fresh light on the CB’s intentions
- BoJ may rattle global bond market as Fed seen on hold
- BoJ may shift policy focus to rates as monetary firepower wanes
- Japanese easing policy almost ready for face-lift – Nikkei
- Japan FinMin Aso – Specific monetary policy steps BoJ prerogative
- Japan PM Abe sees TPP jump-starting Japan's growth – Nikkei
- Moody’s Probability of downgrade for SA less than 50%
- China Prem Li – Yuan to remain basically stable at reasonable-balanced level
- Li no basis for sustained devaluation – Xinhua
- Australian coal prices hit fresh high as Asia power demand soars
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Department of Commerce is likely to report that housing starts declined to a seasonally adjusted annual pace of 1.194 million-unit rate in August from 1.21 million units in July,
- (0830 ET/1230 GMT) The U.S. building permits are likely to have increased to 1.178 million unit rate in August from 1.152 million units in July.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
- (1845 ET/2245 GMT) The statistics New Zealand will release visitor arrivals report for the month of August. The indicator posted an annualized gain of 14.4 percent in the prior month.
- (1950 ET/2350 GMT) Japan's Ministry of Finance is expected to report that merchandise trade balance decreased to Y 202.3 billion in the month of August from Y 513.5 billion in July.
- (1950 ET/2350 GMT) Japan's imports and exports of good and services for July are likely to decline 17.8 percent and 4.8 percent, respectively.
Key Events Ahead
- (1245 ET/1645 GMT) Bank of Canada Governor Stephen Poloz will give a speech in Quebec City on the topic of "Living With Lower for Longer", followed by a press conference.
- (1300 ET/1700 GMT) The U.S. Federal Open Market Committee begins a two-day meeting on interest rate policy.
- N/A The United Nations begins the General Assembly where world leaders are scheduled to speak.
FX Beat
DXY: The dollar index against a basket of currencies traded flat at 95.92, as investors nervously await BoJ and Fed policy decision outcome due tomorrow.
EUR/USD: The euro rallied above the 1.1200 handle largely on the back of broader weaker sentiment surrounding the greenback. However, the major trimmed gains after German's producer price index for the month of August posted a decline of 1.6 percent y/y against estimates of 1.5 percent drop. The European currency traded flat at 1.1174, having touched an intra-day high of 1.1213. Slight bullishness can be seen only above 1.1245 (daily Kijun-Sen). On the lower side, any break below 1.1145 (200- day MA) will drag it till 1.1100/1.1045. The resistance is around 1.1218 (21-day MA) and any break above targets 1.1250/1.12840 (Sep 15th 2016 high). The short term trend reversal is only above 1.1366.
USD/JPY: The Japanese yen touched a 1-week high against the dollar, as investors highly doubted that the Bank of Japan will cut interest rates further into negative territory and speculated that the U.S. Federal Reserve will not hike interest rates on Wednesday. The major trades flat at 101.94, retreating from a low of 101.53, its lowest since Sept 13. The short term trend is slightly bearish as long as resistance 103.40 holds. The major resistance is around 103.40 and break above targets 103.80/104.60. On the lower side, major support is around 101.80 and any break below 101.80 will drag the pair till 101.20/100.55/100.
GBP/USD: Sterling hit fresh 1-month low, below the 1.3000 handle as investor wary on Britain's negotiations to leave the European Union could have a negative impact on the economy and on further easing by the Bank of England this year. The major also weakened on the back of aggressive selling seen in the UK Gilt yields. Sterling trades 0.5 percent lower at 1.2963, having touched a low of 1.2954, its lowest since August 16. Any break above 1.3095 will take the pair to next level till 1.3155 (daily Kijun-Sen) /1.32011(21- day MA). On the lower side, any break below 1.29940 will drag it down till 1.2900/1.28650. Against the euro, the pound trades 0.5 percent lower at 86.21 pence, having struck fresh 4-week low of 86.27 pence.
USDS/CHF: The Swiss franc gained, against a broadly weaker dollar as investors remained cautious ahead of U.S. and Japanese central bank meetings. The major trades 0.1 percent lower at 0.9784, pulling away from a 2-week peak of 0.9818 touched in the previous session. Data released earlier showed Switzerland's trade balance declining to 3025 million sfr in August against projection of 3270 million sfr and previous 2806 million sfr. On the higher side, any break above 0.9820 will take the pair till 0.9845/0.9880. The short-term weakness can be seen only below 0.9735 and any break below targets 0.9680/0.9635.
AUD/USD: The Australian dollar rose as the greenback weakened since investors scale back expectations for a rate hike from the Fed this week. However, the gains in the major were limited as lower oil prices softened the bid tone around the Aussie. The pair trades 0.1 percent up at 0.7542, hovering near a high of 0.7573, it’s highest since Sept. 9. On the higher side, any break above 0.7569 (21- day MA) will take it till 0.7620/0.7700. The major support is around 0.7440 and break below will drag the pair till 0.7390 (200- day MA).
NZD/USD: The New Zealand dollar rallied, hitting fresh 1-week high as the major benefited from weaker sentiment surrounding the greenback on fading expectations of Fed interest rate hike on Wednesday. The RBNZ will also announce its monetary policy decision during early Asian session on Thursday and is likely to leave interest rates on hold, however, it is expected to signal further easing. The Kiwi trades 0.7 percent higher at 0.7340, having touched a peak of 0.7356, it’s highest since Sept. 13. Immediate resistance is located at 0.7380, break above targets 0.7400. On the downside, support is seen at 0.7268 (Aug 24 Low), break below could drag it near 0.7250.
Equities Recap
European shares steadied, supported by a rally in chemical stocks which offset losses in weaker energy shares amid persisting cautious tone in the market.
The pan-European STOXX 600 index increased 0.2 percent at 341.94 points, while the FTSEurofirst 300 index added 0.2 percent at 1,345.48 points.
Britain's FTSE 100 trades 0.5 percent up at 6,848.70 points, while mid-cap FTSE 250 gained 0.23 percent at 17,930.18 points.
Germany's DAX rose 0.52 percent at 10,427.79 points; France's CAC 40 trades 0.27 percent higher at 4,406.22 points.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1 percent.
Tokyo's Nikkei shed 0.16 pct at 16,492.15 points, Australia's S&P/ASX 200 index edged up 0.05 percent at 5,297.50 points and South Korea's KOSPI advanced 0.49 percent at 2,025.71 points.
Shanghai composite index dropped 0.1 percent at 3,023.00 points, while CSI300 index lost 0.2 percent at 3,257.40 points. Hong Kong's Hang Seng index fell 0.1 percent at 23,530.86 points.
Commodities Recap
Crude oil prices nudged lower after an expected rise of 2.3 million barrels in U.S. crude oil stocks last week and Venezuelan comments that the oil market remains oversupplied by 10 percent, weighed on market sentiments. Global benchmark Brent crude oil was trading 0.3 percent lower at $45.73 per barrel at 1012 GMT, pulling closer to a 2-week low of $46.38 touched on Friday. U.S. West Texas Intermediate crude rose 1.04 percent at $43.64 a barrel.
Gold edged up, extending gains for a second straight session as investors nervously await BoJ and Federal Reserve monetary policy meeting outcome that will both conclude on Wednesday. Spot gold was up 0.1 percent at $1,314.32 an ounce by 1015 GMT, hovering away from a 2-week low of $1,306.21 hit on Friday. U.S. gold futures rose 0.1 percent at $1,319.1 an ounce.
Treasuries Recap
The US Treasuries were little changed during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 1.68 percent mark, the yield on 5-year bond also dipped 1/2 basis point to 1.20 percent and the yield on short-term 2-year note remained steady at 0.77 percent.
The Eurozone periphery bonds strengthened as Japanese investors poured into Europe and United States debt market following the Bank of Japan monetary policy speculations. The French 10-year bond yields fell 3 basis points to 0.224 percent, Irish 10-year bonds yield fell 3 basis points to 0.448 percent, Italian equivalent also dipped 6 basis points to 1.261 percent, Netherlands 10-year bonds yield inched 2-1/2 basis points lower to 0.101 percent, Portuguese equivalents tumbled 11 basis points to 3.274 percent and the Spanish 10-year bonds yield slid 5 basis points to 0.992 percent.
The UK gilts gained ahead of the 30-year bond auction worth 2.5 billion pounds by the Debt Management Office. The yield on the benchmark 10-year gilts fell 2-1/2 basis points to 0.851 percent, the super-long 40-year bond yield also dipped 2-1/2 basis points to 1.452 percent and the yield on short-term 2-year bond slid 1-1/2 basis points to 0.125 percent.
The German bunds rallied after recent data showed that the country’s producer price index fell for the first time in August after relishing continued 6-months of gains. The yield on the benchmark 10-year bond fell 1-1/2 basis points to 0.002 percent, the yield on long-term 30-year note dipped 4 basis points to 0.596 percent and the yield on short-term 2-year bond slid ½ basis point to -0.654 percent.
The Japanese government bonds gained as investors covered previous short positions following strong demand from the Bank of Japan’s bond buying operation. The benchmark 10-year bond yield fell nearly 2 basis points to -0.052 percent, the super-long 30-year note yield dipped 5-1/2 basis points to 0.513 percent and the short-term 2-year JGB yield slid ½ basis point to -0.264 percent.
The New Zealand government bonds traded modestly lower ahead of the Reserve Bank of New Zealand’s monetary policy decision, which is scheduled to be held on September 21. The yield on the benchmark 10-year bond rose 1-1/2 basis points to 2.625 percent, the yield on 7-year note also ended 1-1/2 basis points higher at 2.285 percent and the yield on short-term 2-year note climbed 1 basis point to 2.00 percent.
The Australian government bonds traded narrowly mixed as investors remained focused on the Fed and BoJ’s monetary policy decisions scheduled to be released on Wednesday. The yield on the benchmark 10-year Treasury note fell ½ basis point to 2.177 percent, the yield on long-term 15-year note dipped 1 basis point to 2.559 percent and the yield on short-term 2-year jumped more than 2 basis points to 1.655 percent.
