Market Roundup
•All eyes on Fed policy decision on Wednesday
•Fed expected to raise rates by 75 bps on Wednesday
•US indexes down: Dow 1.01%, S&P 1.13%, Nasdaq 0.95%
•Canada Median CPI (YoY) -0.3%, 5.0% forecast, 5.0% previous
•Canada Common CPI (YoY) 5.7%,5.5% forecast, 5.5% previous
•Canada Trimmed CPI (YoY) 5.2%,5.5% forecast, 5.4% previous
•Canada Aug CPI (MoM) -0.3%,-0.1% forecast, 0.1% previous
•US Aug Building Permits 1.517M,1.610M forecast, 1.685M previous
•US Aug Housing Starts 1.575M, 1.445M forecast,1.446M previous
•Canada Aug CPI (YoY) 7.0%,7.3% forecast, 7.6% previous
•US Aug Housing Starts (MoM) 12.2%,-9.6% previous
•US Aug Core CPI (MoM) 0.0%,0.5% previous
• US Aug Core CPI (YoY) 5.8%,6.1% previous
• US Redbook (YoY) 10.5%, 11.4% previous
• Global Dairy Trade Price Index 2.0%,4.9% previous
Looking Ahead - Economic Data (GMT)
•00:30 Australia MI Leading Index (MoM) -0.2%
•03:00 New Zealand Credit Card Spending (YoY) 4.9% previous
Looking Ahead - Economic events and other releases (GMT)
• 02:00 Australia RBA Assist Gov Bullock Speaks
Currency Summaries
EUR/USD: The euro edged lower against dollar on Tuesday as investors braced for a hefty U.S. Federal Reserve interest rate hike this week to combat inflation. The Federal Reserve is expected to raise its policy rate by at least 75 basis points on Wednesday, while investors are also awaiting the U.S. central bank's future policy projections. ECB Chief Economist Philip Lane said last week the central bank could raise interest rates into next year, and a recession could not be ruled out. The exact number of further interest rate increases by the ECB will depend on upcoming macroeconomic data, ECB Vice-President Luis de Guindos said on Monday. Immediate resistance can be seen at 1.0005(11DMA), an upside break can trigger rise towards 1.0074 (38.2%fib).On the downside, immediate support is seen at 0.9957(23.6%fib), a break below could take the pair towards 0.9902(Lower BB).
GBP/USD: The British pound edged lower against the dollar on Tuesday ahead of expected interest rate hikes from the Bank of England (BoE) and Federal Reserve (Fed). In what is expected to be a big week for the pound, it also faces a fiscal event from British finance minister Kwasi Kwarteng, expected on Friday, where he is due to deliver more details on the size of the government’s energy support package. Money markets fully price in a half-point rate hike from the BoE on Thursday, with around a 75% chance of a larger 75 basis point rate rise. The pound was last trading down against the dollar at 1.1374, just above last week’s 37-year low of $1.1351. Immediate resistance can be seen at 1.1423(5DMA), an upside break can trigger rise towards 1.1493(38.2%fib).On the downside, immediate support is seen at 1.1343 (23.6%fib), a break below could take the pair towards 1.1316(Lower BB).
USD/CAD: The Canadian dollar weakened to its lowest level in nearly two years against its U.S. counterpart on Tuesday as the greenback broadly climbed and domestic data showed inflation easing more than expected in August. Canada's annual inflation rate slowed to 7.0% in August, below analyst forecasts of 7.3% and down from 7.6% in July. Much of the deceleration was due to lower gasoline prices and slower gains in the shelter index, but all three core measures of inflation also eased slightly. The Canadian dollar touched its weakest since October 2020 at 1.3374 per U.S. dollar, down 0.9% on the day. Since the start of 2022, the currency has lost 5.5%.Immediate resistance can be seen at 1.3374 (23.6%fib), an upside break can trigger rise towards 1.3406 (Higher BB).On the downside, immediate support is seen at 1.3295 (5DMA), a break below could take the pair towards 1.3261(38.2%fib).
USD/JPY: The dollar edged up against the Japanese yen on Tuesday as the Federal Reserve geared up for a hefty rate hike to tame inflation pressures. The Fed at the conclusion of its two-day policy meeting on Wednesday will likely deliver its third straight super-sized 75 basis point interest rate hike. The Bank of Japan also meets this week but is widely expected to keep its ultra-easy stimulus settings unchanged including pinning the 10-year yield near zero -- to support a fragile economic recovery. The yen has taken a kicking due to this policy and the dollar was last up 0.27% on the Japanese currency at 143.59, continuing a week-long consolidation after climbing as high as 144.99 on Sept. 7 for the first time in 24 years. Strong resistance can be seen at 143.90 (23.6%fib), an upside break can trigger rise towards 144.88(Sep 14th high). On the downside, immediate support is seen at 143.39 (5DMA), a break below could take the pair towards 142.01 (38.2%fib).
Equities Recap
European stocks closed notably lower on Tuesday amid rising concerns that aggressive monetary tightening by central banks to fight inflation might result in a global economic recession.
UK's benchmark FTSE 100 closed down by 0.61 percent, Germany's Dax ended down by 1.03 percent, France’s CAC finished the day down by 1.35 percent.
Wall Street ended Tuesday lower as the eve of a U.S. Federal Reserve meeting expected to bring another large interest rate hike brought further evidence of the impact on corporate America from the inflation that the U.S. central bank wants to tame.
Dow Jones closed down by 1.01 percent, S&P 500 ended down by 1.13 percent, Nasdaq finished the down by 0.95 percent.
Treasuries Recap
The yield on two-year U.S. Treasury notes, a rough gauge of interest rate expectations, rose to almost a 15-year high on Tuesday, a day before the Federal Reserve is likely to hike rates by 75 basis points as it continues to fight inflation.
Yields on the benchmark 10-year Treasury shot to 3.604% before paring some gains. They were up 8.6 basis points to 3.575% after topping 3.5% for the first time in 11 years on Monday. The two-year yield rose 2.5 basis points to 3.971%.
Commodities Recap
Gold prices dropped as much as 1% on Tuesday as the dollar and Treasury yields firmed, and investors squared positions ahead of a widely expected large interest rate hike by the U.S. Federal Reserve this week.
Spot gold was down 0.7% at $1,664.19 an ounce by 1:46 p.m. ET (1746 GMT), lingering near a 29-month low hit last week.U.S. gold futures settled 0.4% lower at $1,671.10.
Oil prices dipped on Tuesday, following other risk assets lower, as the dollar stayed strong and investors anticipated more central bank interest-rate hikes designed to quell inflation.
Brent crude futures settled down $1.38, or 1.5%, to $90.62 a barrel, while U.S. West Texas Intermediate crude for October delivery ended at $84.45, down $1.28, on the day of its expiration. The more active November contract settled down $1.42 to $83.94 a barrel.Both Brent and WTI are on track
