Market Roundup
- EU warns Britain it is heading for a no-deal Brexit
- UK inflation falls to lowest since 2016
- Eurozone inflation confirmed at low of 1% in August
- Gold flat ahead of Fed meeting
- Oil steadies after Saudi pledges to restore output
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to an annualized rate of 1.250 million units in August from 1.191 million units in July.
- (0830 ET/1230 GMT) The U.S. building permits are likely to have decreased to a 1.300 million-unit pace in August from a 1.191 million-unit pace in July.
- (0830 ET/1230 GMT) Statistics Canada is expected to report that the annual inflation rate rose 2.0 percent in August, while core consumer price index rose 0.3 percent in July.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending September 13.
Key Events Ahead
- (1400 ET/1800 GMT) The U.S. Federal Reserve concludes its two-day policy meeting and issues monetary policy statement
- (1430 ET/1830 GMT) Federal Reserve Chair will address a news conference
FX Beat
DXY: The dollar index steadied ahead of the outcome of a Federal Reserve meeting where policymakers are widely expected to cut interest rates by a quarter of a percentage point. The greenback against a basket of currencies traded 0.2 percent up at 98.45, having touched a low of 97.86 on Friday, its lowest since August 26.
EUR/USD: The euro declined after data showed Eurozone inflation was stable in August at its lowest level in nearly three years. The bloc’s inflation came in at 1 percent on the year last month, unchanged from the July reading and in line with expectations, while on month basis, inflation rose 0.1 percent, below market expectations of a 0.2 percent rise. The European currency traded 0.2 percent down at 1.1046 having touched a high of 1.1084 on Thursday, its highest since August 29. Immediate resistance is located at 1.1109 (September 13 High), a break above targets 1.1151 (July 26 High). On the downside, support is seen at 1.1030 (September 10 Low), a break below could drag it below 1.0963 (August 30 High).
USD/JPY: The dollar rose, hovering towards a 1-1/2 month peak hit in the previous session, as investors widely expect the U.S. Federal Reserve to cut its benchmark rate for a second time this year to counter risks posed by the U.S.-China trade war. The Bank of Japan's policy meeting is due on Thursday, where it is also expected to ease its policy this year. The major was trading 0.1 percent up at 108.19, having hit a high of 108.37 on Tuesday, its highest since August 1. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. housing starts, building permits and Fed interest rate decision. Immediate resistance is located at 108.53 (July 1 High), a break above targets 108.99 (July 10 High). On the downside, support is seen at 107.51 (10-DMA), a break below could take it lower at 106.78 (21-DMA).
GBP/USD: Sterling plunged, retreating from a near 6-week high recorded in the prior session as consumer prices in Britain rose last month at the slowest rate since December 2016. Moreover, separate data showed British house prices rose in July by just 0.7 percent in annual terms, the smallest rise since 2012. The major traded flat at 1.2494, having hit a high of 1.2526 on Thursday, it’s highest since July 25. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2522 (July 24 High), a break above could take it near 1.2558 (July 18 High). On the downside, support is seen at 1.2415 (5-DMA), a break below targets 1.2363 (10-DMA). Against the euro, the pound was trading 0.1 percent down at 88.64 pence, having hit a high of 88.38 on Tuesday, it’s highest since June 6.
USD/CHF: The Swiss franc tumbled, drifting closer to a 1-1/2 month low hit the day before ahead of the U.S. Federal Reserve’s monetary policy decision, where it is widely expected to cut interest rates. The major trades 0.3 percent up at 0.9943, having touched a high of 0.9968 on Tuesday, it’s highest since August 1. On the higher side, near-term resistance is around 0.9975 (August 1 High) and any break above will take the pair to next level till 0.9999 (June 17 High). The near-term support is around 0.9896 (10-DMA), and any close below that level will drag it till 0.9861 (21-DMA).
Equities Recap
European shares slumped, weighed down by losses in luxury goods, while investors remained cautious ahead of an expected cut in U.S. borrowing costs by the Federal Reserve.
The pan-European STOXX 600 index rallied 0.1 percent at 389.73 points, while the FTSEurofirst 300 surged 0.1 percent to 1,531.09 points.
Britain's FTSE 100 trades 0.1 percent up at 7,329.38 points, while mid-cap FTSE 250 gained 0.1 to 20,068.55 points.
Germany's DAX rose 0.1 percent at 12,388.98 points; France's CAC 40 trades 0.2 percent higher at 5,624.21 points.
Commodities Recap
Crude oil prices steadied after Saudi Arabia said it will restore by the end of the month production lost in weekend attacks on its facilities. International benchmark Brent crude was trading 0.5 percent higher at $64.28 per barrel by 1056 GMT, having hit a high of $69.64 on Monday, its highest since May 30. U.S. West Texas Intermediate was trading 0.2 percent up at $58.89 a barrel, after rising as high as $63.33 on Monday, its highest since May 21.
Gold prices consolidated as investors awaited news on the U.S. central bank’s stance on monetary policy. Spot gold traded flat at $1,501.32 per ounce by 1058 GMT, having touched a low of $1,483.22 last week, its lowest since August 13. U.S. gold futures were 0.3 percent lower at $1,509.10 per ounce.
Treasuries Recap
The U.S. Treasury yields slumped during the afternoon session ahead of the Federal Reserve’s monetary policy meeting, scheduled to be held today by 18:00GMT, where it is widely expected to cut interest rates by 25bp, although prospects for more easing further out are less clear. The meeting will be followed by the central bank’s policy statement, updated economic forecasts and dot-plot charts, as well as Chair Jerome Powell’s post-meeting press conference, which will be closely watched for insight into the near-term policy path. The yield on the benchmark 10-year Treasury yield plummeted over 4 basis points to 1.772 percent, the super-long 30-year bond yield also plunged 4 basis points to 2.241 percent and the yield on the short-term 2-year suffered 2-1/2 basis points to 1.713 percent.
The United Kingdom’s gilts jumped during European trading hours, after the country’s consumer price inflation (CPI) for the month of August, released early today disappointed market investors, also declining from that in July. Also, the Bank of England’s (BoE) monetary policy meeting, due to be held on September 19 by 11:00GMT will provide further direction in the debt market. The yield on the benchmark 10-year gilts, plunged nearly 4 basis points to 0.659 percent, the 30-year yield slumped 3 basis points to 1.110 percent and the yield on the short-term 2-year remained flat at 0.516 percent.
The German bunds surged during European trading session after the eurozone’s consumer price inflation (CPI) for the month of August, remained unchanged, also meeting market expectations. The German 10-year bond yield, which move inversely to its price, suffered nearly 2-1/2 basis points to -0.499 percent, the yield on 30-year note plunged 3 basis points to 0.022 percent and the yield on short-term 2-year traded 1-1/2 basis points down to -0.712 percent.
The Japanese government bonds gained during close of Asian trading session despite a better-than-expected improvement in the country’s trade balance for the month of August, albeit still in deficit. Investors will now eye the Bank of Japan’s (BoJ) monetary policy meeting, scheduled to be held on September 19 for further direction in the debt market. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, plunged 30 basis points to -0.182 percent, the yield on the long-term 30-year suffered 2 basis points to 0.344 percent and the yield on short-term 2-year also slumped 24 basis points to -0.264 percent.
The Australian government bonds remained mixed during Asian trading session ahead of the country’s employment report for the month of August, scheduled to be released on September 19 amid ongoing geopolitical tensions in the Middle East and upcoming Fed’s monetary policy meeting later today. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, hovered around 1.136 percent, the yield on the long-term 30-year bond edged barely 1 basis point higher to 1.723 percent and the yield on short-term 2-year slipped 1 basis point to 0.871 percent.
