Market Roundup
- USD/JPY -0.15%, EUR/GBP +0.1%, GBP/USD +0.07%
- DXY +0.02%, DAX -0.4%, Brent -1.3%, Iron +0.5%
- UK Unfl. Exp for yr ahead 2.2% in Aug vs 2.0% May – BoE/TNS
- UK Jul Trade Bal. –GBP11.76 bln vs revised -12.92 bln previous, -11.75 bln exp
- Germany Jul Trade Bal. +EUR19.4 bln vs revised 21.54 bln previous, 22.00 bln exp
- Switzerland Aug Jobless adj 3.4% vs 3.3% previous, u/adj 3.2% vs 3.1%
- North Korea suspected to have conducted nuclear test – Various media
- U.S D.Dept- N.Korea Nuc tst if confirmed would represent serious provocation
- BoJ Gov Kuroda – No special instructions from PM Abe after meeting
- Tensions emerge as US allows Japanese rules for some swaps
- China Aug CPI +0.1% m/m, +1.3% y/y, +0.3% and +1.7% eyed
- China y/y inflation slowest since October 2015
Economic Data Ahead
- (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp is expected to report that housing starts for August slightly decreased at a seasonally adjusted annualized rate of 190,000 units, compared with 198,400 in July.
- (0830 ET/1230 GMT) The Statistics Canada is expected to report that unemployment rate stayed unchanged at 6.9 percent in August.
- (1000 ET/1400 GMT) The U.S. wholesale inventories are likely to have remained unchanged at 0.3 percent in July.
Key Events Ahead
- (0815 ET/1215 GMT) Federal Reserve Bank of Boston President Eric Rosengren speaks before the South Shore 7:44 Chamber Breakfast and Economic Forecast in Quincy, Massachusetts.
- (0930 ET/1330 GMT) Federal Reserve Bank of Dallas President Robert Kaplan participates in moderated Q&A before the Mission Capital Conference in Austin, Texas.
- (1115 ET/1515 GMT) New York Fed GDP Nowcast Q3 prev +2.8% q/q AR
- (1145 ET/1545 GMT) FedTrade ops30-year Fannie Mae/Freddie Mac max $2.050 bln
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent up at 95.13, pulling away from a 2-week low of 94.46 in the previous session.
EUR/USD: The euro edged up, extending previous session gains, however, the upside was capped as Draghi stated that no additional stimulus was required at the moment, leaving the door open to further easing in the future. The major trades flat at 1.1264, after rising to an early high of 11284. The pair is facing strong resistance at 1.13660 and any break above 1.13660 will take it to next level till 1.1400/ 1.14350. On the lower side, any violation below 1.1220 will drag the pair till 1.1200 (100-day MA)/ 1.11400. The short term weakness is only below 1.1045.
USD/JPY: The dollar recovered from early losses and currently trades higher extending previous session gains. The pair is mainly driven by expectations of further monetary easing by the BoJ and chances of a Fed rate-hike action in September. The major trades 0.3 percent higher at 102.83, retreating from an early low of 101.96. The short term trend is slightly bullish as long as resistance support 101.20 holds. The major resistance is around 103.15 (55-day EMA) and break above targets 103.80/104.60. On the lower side major support is around 101.20 and any break below 101.20 will drag it till 100.55/100.
GBP/USD: Sterling gained against the dollar, as investors trimmed bets against the currency after data showed Britain's overall trade deficit narrowing in July. The country's trade deficit contracted to 11.764 billion pounds from 12.40 billion pounds as exports outpaced imports, broadly in line with consensus. Sterling trades 0.2 percent higher at 1.3314 and was on track for its fourth straight week of gains, but well below a 7-week high of 1.3445 hit on Tuesday. Any break above 1.3480 confirms major trend reversal, a jump till 1.3770 is possible. On the lower side, major support is around 1.327 (9- day MA) and break below targets 1.3220 (10- day MA). Against the euro, it was flat at 84.63 pence, having hit a 1-week low of 84.95 pence in the previous session after ECB's Draghi disappointed some investors by saying the central bank policymakers had not discussed an extension of its asset purchase plan
USD/CHF: The Swiss franc extended losses as the dollar attempted a minor recovery across the broad. The greenback trades 0.1 percent up at 0.9730, pulling away from a 2-week low of 0.9649 hit in the previous session. On the higher side, any break above 0.9750 will take the pair till 0.9770/0.9830. Any break below 0.9700 will take the pair to next level till 0.9670. The short term weakness can be seen only below 0.9630.
AUD/USD: The Australian dollar slumped below the 0.7600 handle, extending losses for the third consecutive session. The major sharply reversed from multi-week highs touched on Thursday largely on the back of softer Chinese inflation and weaker Australia's home loan figures. However, it came under renewed selling pressure as the greenback gained across the board. The Aussie trades 0.5 percent lower at 0.7598, retreating from a high of 0.7732 struck in the previous session. On the higher side, any break above 0.7650 will take the pair till 0.7700/0.7760. The major support is around 0.7580 and break below will drag the pair till 0.7520.
NZD/USD: The New Zealand dollar extended losses after rising as high as 0.7484 earlier in the week. The Kiwi trades 0.5 percent lower at 0.7361, having touched an early high of 0.7413. The major came under pressure as oil prices rebounded after rising more than 4 percent on surprisingly large drawdown in U.S. crude stocks. Immediate resistance is located at 0.7425, break above targets 0.7450. On the downside, support is seen at 0.7350, break below could drag it till 0.7300.
Equities Recap
European shares declined as downbeat German trade figures raised doubt on the strength of the euro zone's largest economy and lingering disappointment following the European Central Bank's policy meeting outcome.
The pan-European STOXX 600 index shed 0.4 percent at 347.99 points, while the FTSEurofirst 300 index declined 0.3 percent at 1,370.01 points.
Britain's FTSE 100 trades 0.30 percent down at 6,839.82 points, while mid-cap FTSE 250 slumped 0.61 percent at 18,082.01 points.
Germany's DAX dropped 0.26 percent at 10,647.17 points; France's CAC 40 trades 0.25 percent lower at 4,530.88 points.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1 percent, its biggest fall in over a month, after touching a 13-month peak on Thursday.
Tokyo's Nikkei edged down 0.04 percent at 16,965.76 points, Australia's S&P/ASX 200 index fell 0.70 percent at 5,348.20 points and South Korea's KOSPI shed 1.25 percent at 2,037.87 points.
Shanghai composite index and CSI300 index both lost 0.6 at 3,078.85 points and 3,318.04 points, respectively. Hong Kong's Hang Seng index rose 0.8 pct at 24,099.70 points.
Commodities Recap
Crude oil prices declined by more than 1 percent on profit-taking after rising above the $50 a barrel mark a day earlier, following an unexpectedly large drawdown in U.S. crude stocks as Gulf Coast imports dropped to a record low. Global benchmark Brent crude oil was trading 1.0 percent lower at $49.14 a barrel by 1044 GMT, hovering away from a high of $50.10 hit in the previous session. U.S. West Texas Intermediate crude was at $46.83, down by 0.99 percent.
Gold declined for a third consecutive day as buyers cashed in on this week's rally to near 3-week highs, however, it was on track for a second straight weekly gain as expectations for an imminent U.S. interest rates hike faded away. Spot gold was down 0.3 percent at $1,333.46 an ounce at 1049 GMT, having touched a peak of $1,352.40 an ounce earlier this week after rallying 1.8 percent on Tuesday. U.S. gold futures for December delivery were $2 lower at $1,339.60.
Treasuries Recap
The US Treasuries sold off across the curve during a relatively quiet session that witnessed data of little significance, highlighted largely by lower than expected jobless claims. The yield on the benchmark 10-year Treasury note rose more than 5 basis points to 1.611 percent, the yield on 5-year bond bounced 3 basis points to 1.179 percent and the yield on short-term 2-year note also climbed 3 basis points to 0.774 percent.
The UK gilts plunged after the Bank of England in its August survey report on inflation expectations mentioned that the country’s consumer inflation to rise in the short-term. The yield on the benchmark 10-year gilts rose 4-1/2 basis points to 0.804 percent, the super-long 40-year bond yield bounced 6 basis points to 1.318 percent and the yield on short-term 2-year bond climbed 1 basis point to 0.154 percent.
The Eurozone periphery bonds plunged as the European Central Bank kept its monetary policy rate and the pace of quantitative easing steady. The French 10-year bond yields rose 2-1/2 basis points to 0.186 percent, Irish 10-year bonds yield climbed 1 basis point to 0.423 percent, Italian equivalent ticked 1-1/2 basis points higher to 1.168 percent, Netherlands 10-year bonds yield climbed 2-1/2 basis points to 0.073 percent, Portuguese equivalents inched 3-1/2 basis points higher to 3.098 percent, Spanish 10-year bonds yield bounced 1-1/2 basis points to 1.003 percent.
The German bunds slumped after the European Central Bank in its monetary policy decision left interest rates and the pace of asset purchases unchanged, as expected, but reaffirms that quantitative easing will run until at least March 2017. The yield on the benchmark 10-year bond rose more than 2 basis points to -0.038 percent, the yield on long-term 30-year note jumped 6-1/2 basis points to 0.565 percent and the yield on short-term 2-year bond climbed ½ basis point to -0.642 percent.
The Japanese government bond traded mixed following United States debt market as the world’s largest economy recorded the lowest level of jobless claims in seven weeks. On the contrary, bonds prices saw upward pressure at the short-end of the curve as energy prices pulled back on profit-taking. The benchmark 10-year bond yield rose 1-1/2 basis points to -0.019 percent, the super-long 30-year JGB yield climbed 6 basis points to 0.510 percent and the short-term 2-year JGB yield slid nearly 1 basis point to -0.199 percent.
The New Zealand government bonds closed lower as investors cashed in profits relishing previous gains. The yield on the benchmark 10-year bond increased 6-1/2 basis points to 2.345 percent, the yield on 7-year note ended 4-1/2 basis points higher at 2.040 percent and the yield on short-term 2-year note climbed 2 basis points to 1.875 percent.
The Australian government bonds plunged as fewer Americans filed applications for unemployment benefits last week, highlighting the United States job market remains healthy. Also, investors cashed in profits after relishing previous gains. The yield on the benchmark 10-year Treasury note rose 10-1/2 basis points to 2.023 percent and the yield on short-term 2-year jumped 7 basis points to 1.578 percent.