Market Roundup
• Fed’s Yellen: Reversing long-term damage may require more accommodative policy than otherwise.
• Fed’s Yellen: more study needed on how inflation expectations are formed & how monetary policy influences them.
• US Sept retail sales rise 0.6% v Aug -0.2%, buoyed by strong auto purchases.
• US Sept producer prices rise 0.3% m/m v 0.2% forecast, +0.7% from 1-yr ago.
• UMich Oct consumer sentiment index 87.9 v 91.9 forecast, lowest since Sept 2015.
• UMich Oct expectations 76.6 vs forecast 82.7, 82.7 previous.
• NY Fed Nowcast: Q3 forecast 2.3% v 2.2% previous, Q4 1.6% v 1.3% previous
• Atlanta Fed’s GDPNow: Q3 +1.9% vs 2.1% on Oct 7.
• BoE’s Carney: limit to extent BoE can make tradeoff between hitting inflation target & accommodating economy.
• BoE’s Carney: not indifferent to pound, FX rate doesn’t matter for inflation.
Looking Ahead - Economic Data (GMT)
• 23:00 Japan Reuters Tankan DI Oct 5-previous
• 04:30 Japan Industrial Output Rev* Aug 1.50%- previous
• 04:30 Japan Capacity Utilization Index Chang MM* Aug 0.60%- previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- Japan- BoJ holds quarterly meeting of its regional branch managers. BoJ Gov Kuroda will deliver a brief speech at the start of the meeting.
Currency Summaries
EUR/USD is likely to find support at 1.0954 levels and currently trading at 1.0977 levels. The pair has made session high at 1.1057 and hit lows at 1.0977 levels. The euro declined against the dollar on Friday as investors increased bets the Federal Reserve would raise interest rates in December after data showed strong U.S. retail sales and producer prices data. The U.S. dollar slightly trimmed gains against the euro after Fed Chair Janet Yellen said the U.S. central bank might need to run a "high-pressure" economy to reverse damage from the last financial crisis, however, her comments on the economy did not alter expectations for a December rate hike. The U.S. retail sales data, which showed a 0.6 percent rise last month after declining 0.2 percent in August, supported the dollar's gains. Other data on Friday suggested a pickup in inflation, with producer prices rising broadly last month to record their biggest year-on-year increase since December 2014. The euro fell 0.6 percent to $1.0970, its weakest level since late July. It was down 1.6 percent for the week, its worst weekly performance since late February.
GBP/USD is supported in the range of 1.2156 and currently trading at 1.2178 levels. It reached session high at 1.2227 and hit low at 1.2170 levels. Sterling eased against the dollar on Friday, as the dollar rallied broadly after upbeat US economic data reinforced expectation that Federal Reserve will raise interest in December. U.S. retail sales rebounded 0.6 percent in September while producer prices also rose broadly to record their biggest year-on-year increase since December 2014. Sterling initially inched higher against the dollar after Bank of England Governor Mark Carney said the bank was not indifferent to the level of the pound but declined after the US dollar gained strength across the board on upbeat US data. The dollar was on track for its largest weekly increase in more than three months, with rebounding U.S. retail sales and a broad rise in producer prices last month indicating the economy regained momentum in the third quarter after a lackluster first-half. The pound last traded down 0.1 percent on the day at $1.2192.
USD/CAD is supported at 1.3073 levels and is trading at 1.3134 levels. It has made session high at 1.3155 and lows at 1.3101 levels. The Canadian dollar strengthened against U.S. dollar on Friday as rise in oil prices and stronger-than-expected Chinese inflation data helped restore risk appetite. A pickup in China's consumer prices helped ease investors' concerns about the health of the world's second-largest economy after disappointing trade numbers on Thursday rattled global markets. Oil slipped below $52 a barrel, giving up earlier gains, as abundant crude supplies outweighed tighter U.S. fuel inventories and plans by the Organization of the Petroleum Exporting Countries to cut output. The Canadian dollar was last trading at C$1.31643 to the greenback, or 75.94 U.S. cents, stronger than Thursday's close of C$1.3205, or 75.73 U.S. cents. The dollar index, which tracks the greenback against a basket of six major currencies, rose 0.4 percent to 97.935. It was up 1.4 percent for the week and 2.5 percent for the month so far.
AUD/USD is supported around 0.7590 levels and currently trading at 0.7607 levels. It hit session high at 0.7635 and made session lows at 0.7604 levels. The Australian dollar edged lower against US dollar on Friday as the dollar was boosted by upbeat US economic data. The Australian dollar initially rose up to $0.7646 but ran out of strength as better than expected U.S. retail sales and producer prices data for September reinforced expectations the Federal Reserve would raise interest rates December. The RBA on Friday cautioned on high household debt levels and the risk that excessive borrowing to build and buy apartments could end in tears given looming supply. The Reserve Bank of Australia (RBA) highlighted a revival in prices for resource exports when it left interest rates unchanged this month, after cuts in August and May. The futures market has recently also slashed the probability of another rate cut this year.
Equities Recap
European shares rose on Friday to claw back ground lost in the previous session, with banking stocks outperforming, while hedge fund Man Group also surged higher.
UK's benchmark FTSE 100 closed up by 0.5 percent, the pan-European FTSEurofirst 300 ended the day up by 1.35 percent, Germany's Dax ended up by 1.6 percent, France’s CAC finished the day up by 1.5 percent.
U.S. stocks ended little changed on Friday, losing ground late after Federal Reserve Chair Janet Yellen's comments on the economy unnerved investors.
Dow Jones closed up by 0.23 percent, S&P 500 ended up by 0.03 percent, Nasdaq finished the day up by 0.04 percent.
Treasuries Recap
Longer-dated U.S. Treasury yields rose sharply on Friday with 30-year bond yields reaching a four-month high after the release of solid U.S. and Chinese economic data and comments from Federal Reserve Chair Janet Yellen, who suggested the central bank may allow inflation to exceed its 2 percent target.
Benchmark 10-year Treasury notes were last down 15/32 in price to yield 1.791 percent.
The 30-year bond fell 1-17/32 in price to yield 2.552 percent, the highest since June 23.
Yields on the 30-year bond were on track for the largest one-day gain in five weeks.
Yields on the 2-year Treasury note fell to 0.819 percent, the lowest since Oct. 5, after Yellen's comments.
Commodities Recap
Gold fell on Friday as the dollar rose after U.S. economic data came in within analysts' expectations, cementing assumptions of an interest rate increase by the Federal Reserve by year-end.
Spot gold was down 0.3 percent at $1,254.26 an ounce by 2:12 p.m. EDT (1812 GMT). U.S. gold futures settled down 0.2 percent, at $1,255.50.
Oil prices fell slightly on Friday as traders balanced a stronger dollar and another increase in the U.S. oil rig count against expectations that more OPEC talk of output cuts will keep crude above $50 per barrel.
Brent, the London-traded crude benchmark, settled down 8 cents, or 0.2 percent, at $51.95 a barrel. For the week, it closed flat.
U.S. West Texas Intermediate (WTI) crude ended down 9 cents at $50.35. It rose about 1 percent on the week.
