Market Roundup
- USD/JPY -0.07%, EUR/USD -0.01%, GBP/USD -0.02%
- DXY -0.02%, DAX +0.30%, Brent +0.7%, Gold -0.09%
- UK Aug Retail Sales -0.2% m/m vs revised 1.9% previous, -0.4% expected
- UK Aug Retail Sales +6.2% y/y vs revised 6.3% previous, 5.4% expected
- EZ Jul Trade Bal. E25.3 vs 29.2 bln previous, 25.0 bln expected
- EZ Aug Final Infl. 0.1% m/m vs -0.6% previous, +0.1% expected
- EZ Aug Final Infl. 0.2% y/y vs +0.2% previous, +0.2% expected
- Germany Sept TR IPSOS PCSI vs 55.30 previous
- UK Sept TR IPSOS PCSI vs 49.20 previous
- Poll-Median 35% see chance of UK recession vs 60% July poll
- Switzerland SNB rate decision: Unchanged-Says CHF overvalued
- BOJ to weigh tougher hurdles for easing exit – Nikkei
- US fund investors kept buying bonds ahead of selloff – ICI
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department is likely to report that current account deficit narrowed to $120.5 billion in the second quarter from $124.7 billion in the previous quarter.
- (0830 ET/1230 GMT) The Federal Reserve Bank of New York is expected to report that manufacturing activity in New York State has dropped 1.00 in September after posting a slump of 4.21 in August.
- (0830 ET/1230 GMT) The U.S. Commerce Department is expected to report that retail sales edged down 0.1 percent in August while excluding autos, retail sales are likely to rise 0.2 percent, after tumbling 0.3 percent in July.
- (0830 ET/1230 GMT) The U.S. producer price index is likely to have edged up 0.1 percent in August, after declining 0.4 percent in July. PPI excluding food and energy is expected to rise 0.1 percent after falling 0.3 percent in July.
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 6,000 to a seasonally adjusted 265,000 for the week ending Sept 9 while continuing claims for the week ending Sept 2 is expected to decline to 2.140 m from previous 2.144 m.
- (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production decreased 0.3 percent in the month of August after rising 0.7 percent in July.
- (1000 ET/1400 GMT) The U.S. Commerce Department is expected to report that business inventories increased 0.1 percent in July, compared with a 0.2 percent rise in June
. - (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending Sept 9.
- N/A Statistics Canada releases household debt figures for the second-quarter.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-yr Fannie Mae/Freddie Mac max $2.550 bln.
FX Beat
DXY: The dollar index against a basket of currencies trades flat at 95.35, after rising to a high of 95.56 earlier in the session.
EUR/USD: The euro declined after data showed Eurozone's trade balance s.a. for the month of July narrowing to 20.0 billion euros, against projections of 22.1 billion euros and previous 23.4 billion euros. However, the losses were capped as July consumer price index and core - CPI came in line with consensus at 0.2 percent y/y and 0.8 percent y/y, respectively. The European currency trades lower at 1.1242, retreating from an early low of 1.1219. On the higher side, any break above 1.12780 will take the pair till 1.1300/1.13270/1.1360. The major support is around 1.1189 (55- day EMA) and any break below targets 1.1138 (200- day MA)/1.1100. Overall trend reversal is only above 1.1360.
USD/JPY: The Japanese yen held on to its gains, as investors' sought safe havens ahead of the Bank of Japan and U.S. Federal Reserve policy meeting next week. The BoJ is likely to announce additional monetary easing at the meeting, when it conducts the comprehensive assessment of its policies, while Fed could provide further clues on U.S. interest rate hike this year. The dollar trades 0.1 percent lower at 102.30, having tumbled below the 102 handle earlier in the day. The short term trend is slightly bearish as long as resistance 104.80 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 slumped below the 1.3200 handle, after Bank of England said it was still likely to cut interest rates to just above zero later in 2016, despite recent data showing resilience in the economy from June's Brexit vote fallout. At the policy meeting the central bank left the bank rate at its new record low of 0.25 percent and bond-buying programme target at 435 billion pounds. Sterling trades 0.3 percent lower at 1.3197, having touched an early high of 1.3277, after data showed British retail sales fell at a much slower pace than expected in August. The upside is capped by 10–day MA and it should break above 1.3295 (10- day MA) for further bullishness. Any break above 1.3295 will take the pair to next level till 1.3350/1.3400/1.3480. Any close above 1.3480 confirms major bullishness. The minor resistance is around 1.3240. On the lower side, any break below 1.3155 will drag it down till 1.3100/1.3050. Against the euro, the pound was trading 0.2 percent lower at 85.17 pence, hovering towards a 2-week low of 85.44 pence hit in the previous session.
USD/CHF: The Swiss franc edged down, as Swiss National Bank stood pat on its monetary policy outlook. The central bank kept its key interest rates in deep negative territory at -0.75 percent and reiterated its view that the Swiss franc was significantly overvalued. The major traded higher at 0.9737, having touched an intra-day high of 0.9767. On the higher side, any break above 0.9806 will take the pair till 0.9845/0.9880. Any break below 0.9700 will take it to next level till 0.9670. The short-term weakness can be seen only below 0.9630.
AUD/USD: The Australian dollar rose, after declining to an early low of 0.7446 hit following the release of mixed domestic employment report. The major attempted a minor recovery largely on the back of higher crude oil prices and a broad-based US dollar weakness. The Australian dollar trades 0.1 percent up at 0.7476, having touched a high of 0.7487 earlier in the session. On the higher side, any break above 0.7500 will take the pair till 0.7560/0.7600. The major support is around 0.7440 and break below will drag it till 0.7390 (200- day MA).
NZD/USD: The New Zealand dollar slumped, falling back towards a 2-week low of 0.7234 hit on Tuesday. The Kiwi weakened following the release of lower-than-expected second quarter growth number, which renewed possibilities of further monetary easing by the RBNZ. The Kiwi trades 0.15 percent lower at 0.7270, after declining as low as 0.7241 earlier in the session. Immediate resistance is located at 0.7333 (10-DMA), break above targets 0.7350. On the downside, support is seen at 0.7234 (2-week low), break below could drag it till 0.7200.
Equities Recap
World stocks steadied at 2-month lows, while European shares traded in a volatile market, attempting to halt a 5-day losing streak as the major central banks were running out of measures to get economies going.
The pan-European STOXX 600 index increased 0.16 percent at 338.95 points, while the FTSEurofirst 300 index added 0.11 percent at 1,333.35 points.
Britain's FTSE 100 trades 0.3 percent up at 6,693.91 points, while mid-cap FTSE 250 was flat at 17,630.15 points.
Germany's DAX rose 0.10 percent at 10,388.72 points; France's CAC 40 trades 0.05 percent lower at 4,368.85 points.
Tokyo's Nikkei shed 1.26 percent at 16,405.01 points, Australia's S&P/ASX 200 index rose 0.27 percent at 5,241.80 points and Hong Kong's Hang Seng index edged up 0.6 pct at 23,335.59 points.
China, Taiwan and South Korea’s markets remain closed today.
Commodities Recap
Crude oil prices rose after slumping around 3 percent in the previous session, strengthened by an unexpected fall of 559,000 barrels in U.S. crude inventories as compared to expectations of a crude build of 3.8 million barrels last week. Global benchmark Brent crude oil was trading 0.7 percent up at $46.26 per barrel at 1016 GMT, having dropped to an early low of $45.66. U.S. West Texas Intermediate crude rose 0.6 percent at $43.88 a barrel, hovering away from a low of $43.89 hit earlier in the session.
Gold prices declined as the dollar recovered slightly ahead of the U.S. Federal Reserve meeting next week, which could provide further cues on U.S. interest rate hike this year. Spot gold fell 0.1 percent to $1,320.88 an ounce by 1022 GMT, having touched a near 2-week low of $1313.19 on Wednesday. U.S. gold futures were down 0.3 percent at $1,322.60 an ounce.
Treasuries Recap
The US Treasuries little changed as investors look ahead to a rush of data on Thursday that could go a long way in providing support for hawks at the September FOMC meeting. The yield on the benchmark 10-year Treasury note rose 1 basis point to 1.698 percent, the yield on 5-year bond remained steady at 1.200 percent and the yield on short-term 2-year note slid 1/2 basis point to 0.754 percent.
The UK gilts plunged following the BOE decision to leave rates on hold at 0.25 percent. The yield on the benchmark 10-year gilts increased nearly 5 basis points to 0.923 percent, the super-long 40-year bond yield jumped 6-1/2 basis points to 1.500 percent and the yield on short-term 2-year bond climbed 2-1/2 basis points to 0.188 percent.
The German bunds 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 bond rose 2 basis points to 0.047 percent, the yield on long-term 30-year note climbed 3 basis points to 0.653 percent and the yield on short-term 2-year bond bounced 1 basis point -0.639 percent.
The Japanese government bond rallied as consensus expectations rose among investors that the Bank of Japan will lower its key interest rate further into negative territory in its monetary policy meeting scheduled next week. The benchmark 10-year bond yield, which moves inversely to its price, fell nearly 2 basis points to -0.031 percent, the super-long 30-year note yield dipped nearly 3 basis points to 0.561 percent and the short-term 2-year JGB yield slid 1/2 basis point to -0.272 percent.
The New Zealand government bonds closed flat as investors did not react to the higher second-quarter gross domestic product (GDP). The yield on the benchmark 10-year bond remained steady at 2.555 percent, the yield on 7-year note also ended flat at 2.210 percent and the yield on short-term 2-year note dipped 1-1/2 basis points to 1.950 percent.
The Australian government bonds traded mixed as country’s official unemployment rate declined to two-year low in August. The yield on the benchmark 10-year Treasury note fell nearly 1 basis point to 2.161 percent, the yield on long-term 15-year note also dipped 2 basis points to 2.550 percent and the yield on short-term 3-year climbed 1-1/2 basis points to 1.647 percent.
