Market Roundup
- GBP/USD -0.07%, USD/JPY +0.38%, EUR/USD -0.04%
- PBOC DepGov Yi Gang – Yuan remains broadly stable – People’s Daily
- BOJ's Kuroda: will keep monetary stimulus to achieve 2 pct inflation quickly
- BOJ official says new policy is not firm target for yields - Nikkei
- Japan auto-makers Mazda, Fuji Heavy take hit from stiffer yen – Nikkei
- EU’s Schulz: Don’t expect signing of EU-Canada trade deal this week
- German Oct Ifo Business Climate 110.5 vs 109.5 previous, 109.5 expected
- German Oct Ifo Current Conditions 115 vs 114.7 previous, 114.9 expected
- German Oct Ifo Expectations 106.1 vs 104.5 previous, 104.5 expected
- Brexit likely to knock 0.25% off German growth in 2017-study
- Austria joins ultra-long bond foray with first 70-year issue
- UK sells GBP 4bn of 2065 gilt via syndication, GBP 17bn orders
- UK government approves expansion of Heathrow Airport
- Norway suffered small nuclear leak on Monday-regulator
Economic Data Ahead
- (0900 ET/1300 GMT) The S&P/Case-Shiller is expected to report that U.S. composite home price index of 20 metropolitan areas remained unchanged at an annualized rate of 5 percent in August.
- (0900 ET/1300 GMT) The Federal Housing Finance Agency releases its housing price index for the month of August. The index is likely to stay unchanged at 0.5 percent.
- (1000 ET/1400 GMT) The U.S. consumer confidence index is expected to have declined to 101.0 in October from a reading of 104.1 recorded in September.
- (1000 ET/1400 GMT) The Investor's Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of October. The indicator is expected to rise to 47.6 from 46.7 in the prior month.
- (1000 ET/1400 GMT) Federal Reserve Bank of Richmond will publish it Manufacturing Index for October. The index stood at -8 in the previous month.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac, max $2.750bn
- (1030 ET/1430 GMT) Bank of England Governor Mark Carney's speech
- (1130 ET/1530 GMT) European Central Bank President Mario Draghi's Speech
- (1320 ET/1720 GMT) Atlanta Fed President Dennis Lockhart speaks to the Opportunity Finance Network about "Lending and Investing in Community Development."
FX Beat
DXY: The dollar gained versus its major rivals on increasing expectations of a U.S. rate hike by year-end. The greenback against a basket of currencies traded at 98.72, within the sight of near 9-month high of 98.85 hit in the previous session.
EUR/USD: The euro weakened, extending losses for the sixth consecutive session, as the greenback gained after upbeat U.S. manufacturing activity and comments from a Federal Reserve official strengthened Fed rate hike speculation. The major failed to recover despite Germany posting better-than-expected Ifo business sentiment surveys in October. The headline Ifo business climate came in at 110.5, beating forecasts of 109.5, while current assessment and expectations rose to 115 and 106.1, respectively. The European currency trades flat at 1.0897, within the sight of a 7-month low hit last week. Markets attention now remains on the U.S. consumer confidence and ECB Draghi’s speech due later in the N.Y session. The intraday trend is slightly bullish as long as support 1.0850 holds. Any violation below will drag the pair down till 1.0820/1.07750 level in the short term. The minor intraday resistance is around 1.0902 (23.6% retracement of 1.0392 and 1.08596) and any break above targets 1.0950/1.09705.
USD/JPY: The dollar rose, hovering towards a 2-1/2-month high hit earlier this month largely on the back of growing expectations of an eventual Fed rate hike action by the end of this year. The major was also supported by improving investors' appetite and prospects that Hillary Clinton is likely to win the upcoming US presidential elections. The Japanese yen trades 0.3 percent lower at 104.53, hovering towards a low of 104.63, its lowest since July 29. The major resistance is around 104.65 (trend line joining 104.32 and 104.48) and a break above targets 105.08/106. On the lower side major support is around 103.50 (cloud bottom) and any break below targets 103.02 (100- day MA) /102.80/102.20.
GBP/USD: Sterling edged slightly lower on expectations that the Bank of England Governor Mark Carney could signal the possibility of further monetary easing in his speech due later in the day. BoE Carney will appear before the House of Lords Economic Affairs Committee to testify about the economic consequences of the Brexit vote. Markets have priced out probabilities of further easing, however, dovish tone from Carney could force investors to re-price the prospect of a rate cut and push the British pound lower. Sterling trades flat at 1.2235, while against the euro, it was 0.1 percent down at 89.00 pence. The intraday trend is bearish as long as resistance 1.2250 holds, any violation above will take the pair to next level till 1.2275/1.23325 (Oct 19 High). The immediate support stands at 1.2200 and any indicative break below targets 1.2170/1.2150/1.2088 (Oct 11 Low). The short term trend reversal is only above 1.3325 level.
USD/CHF: The Swiss franc edged down, as the greenback strengthened on upbeat U.S. Manufacturing activity and growing expectations of U.S. interest rate hike by December. The dollar trades 0.1 percent up at 0.9941, just short of a 7-month high of 0.9961 hit on Friday. Moreover, the prevalent risk-on market sentiment will continue to extend support to the major. The temporary top around 0.9962 will be acting as major resistance and slight jump can happen only above that level. Any violation above 0.9962 will take the pair to next level till 1.000. On the lower side, any break below 0.9902 (10-day MA) will drag it down till 0.9845/0.9780.
AUD/USD: The Australian dollar rose, extending previous session gains on expectations that upbeat consumer price index figures could ease prospects of another interest rates cut by RBA this year. The major initially declined to an intra-day low of 0.7589 on board based greenback strength, however, improving risk sentiment and higher crude oil prices pushed the Aussie higher. The pair trades 0.3 percent up at 0.7634, having touched an early high of 0.7646. On the higher side, major resistance is around 0.7645 (23.6% retracement of 0.7587 and 0.77344) and any break above will take the pair till 0.7680/0.7730/0.7760/0.7800. The major support is around 0.7580 (cloud bottom) and a break below will it till 0.7530/0.7480.
NZD/USD: The New Zealand dollar rose, retreating from a 1-week low hit earlier in the day after the Reserve Bank of New Zealand announced it would start making projections for the OCR rather than the 90-day bank bill rate. However, the gains were limited as increasing prospects of an eventual Fed rate hike action and speculations of further monetary easing by RBNZ at its meeting in November undermined the Kiwi. The major trades 0.1 percent up at 0.7146, after rising to an intra-day high of 0.7161. Immediate resistance is located at 0.7171 (20-DMA), a break above targets 0.7200. On the downside, support is seen at 0.7109 (Session Low), a break below could drag it lower 0.7100.
Equities Recap
European shares advanced as upbeat economic data and signs of a revival in inflation lifted stocks and commodity prices higher, while the dollar hovered near a 9-month high.
The pan-European STOXX 600 index increased 0.2 percent at 344.91 points, while the FTSEurofirst 300 index gained 0.27 percent at 1,362.18 points.
Britain's FTSE 100 trades 0.42 percent higher at 7,015.91 points, while mid-cap FTSE 250 was flat at 17,849.00 points.
Germany's DAX rose 0.45 percent at 10,809.75 points; France's CAC 40 trades 0.25 percent up at 4,563.82 points.
Tokyo's Nikkei gained 0.7 percent at 17,365.25 points, Australia's S&P/ASX 200 index rose 0.60 percent to 5,441.00 points and South Korea's KOSPI added 0.73 percent at 2,047.74 points.
Shanghai composite index edged up 0.1 percent at 3,131.94 points, while CSI300 index ended flat at 3,367.45 points. Hong Kong’s Hang Seng declined 0.2 percent to 23,565.11 points.
Commodities Recap
Crude oil prices were volatile as a disagreement within producer cartel OPEC on proportionate production cut to coordinate reduction in fuel supply, hurt market sentiment. International benchmark Brent crude was trading 0.4 percent higher at $51.61 per barrel at 0924 GMT, after declining to a 3-week low of $50.48 in the previous session. U.S. West Texas Intermediate crude rose 0.5 percent to $50.74 a barrel, having touched a 1-week low of $49.60 on Monday.
Gold prices rose, strengthened by healthy demand, however, an increasing probability of a U.S. interest rate hike and a strong U.S. dollar kept gains limited. Spot gold was up 0.3 percent at $1,268.56 an ounce at 0928 GMT, while U.S. gold futures were up 0.3 percent at $1,267.5 an ounce.
Treasuries Recap
The U.S. Treasuries plunged after New York Fed President Dudley and St. Louis Fed President Bullard suggested that a December hike was quite likely. The yield on the benchmark 10-year Treasury note rose 2-1/2 basis points to 1.786 percent, the yield on long-term 30-year Treasury also jumped 2-1/2 basis points to 2.538 percent and the yield on short-term 2-year note climbed 1-1/2 basis points to 0.856 percent.
The UK gilts slumped as investors moved away from the safe-haven buying amid gains in riskier assets including equities and crude oil. The yield on the benchmark 10-year gilts rose 1 basis point to 1.092 percent, the super-long 40-year bond yield jumped 1-1/2 basis points to 1.586 percent and the yield on short-term 2-year bond climbed 1 basis point to 0.254 percent.
The German bunds slumped following a stronger-than-expected Ifo business climate that further stretched the view that the country’s activity momentum has started to pick up and should be reflected in a hardening of the country's annual GDP growth in fourth quarter. The yield on the benchmark 10-year bond rose 1 basis point to 0.025 percent, the yield on long-term 30-year note also climbed 1 basis point to 0.653 percent and the yield on short-term 3-year bond bounced 1 basis point to -0.652 percent.
The Japanese government bonds traded modestly firmer after the MoF published better-than-expected results for 20-year Treasury auction. The benchmark 10-year bond yield fell nearly 1 basis point to -0.060 percent, the yield on long-term 30-year Treasury also dipped 1 basis point to 0.483 percent and the yield on short-term 2-year note slid 1/2 basis point to -0.246 percent.
The New Zealand government bonds closed modestly higher as investors remained cautious ahead of the Reserve Bank of New Zealand’s (RBNZ) survey of inflationary expectations report, scheduled to be released next week, which could be the catalyst for rate cut from the central bank. The yield on the benchmark 10-year bond fell 1 basis point to 2.610 percent, the yield on 7-year note ended ½ basis point lower at 2.288 percent and the yield on short-term 2-year note slid 1 basis point to 1.955 percent.
The Australian government bonds traded nearly flat as investors await the third-quarter consumer inflation data, in an attempt to estimate the RBA's most likely policy step. The yield on the benchmark 10-year Treasury note remained steady at 2.277 percent, the yield on 15-year note hovered around 2.63 percent mark and the yield on short-term 2-year slid 1 basis point to 1.672 percent.
