Market Roundup
- SF Fed Williams – Makes sense to up rates gradually and sooner than later, US economy in good shape, headed in right direction, unemployment to fall to 4.5% next year, inflation to 2% in next year or two, Fed should consider raising inflation target, switch to nominal GDP targeting – Reuters.
- KC Fed George, Richmond Fed Lacker urge Hill not to alter Fed structure –MNI.
- Three-way split among BoJ Policy Board over policy outlook – Sankei.
- Ex-BoJ Momma – BoJ won’t expand stimulus this month, economic fundamentals steady, BoJ more cautious – Bloomberg.
- Japan Aug FX reserves off to $1.256 trln, end-July $1.265 trln.
- Japan to bulk up 40-year bond issuance - Nikkei.
- Australia Q2 GDP +0.5% q/q, +3.3% y/y, +0.6% and +3.4% forecast, Q1 revised +1.0% q/q, consumption +0.8%, fixed CAPEX unch, chain price index +0.9%, economy toasts 25 years without recession.
- Australia Aug AIG PCI -5.0 points to 46.6, construction in contraction.
- New Zealand Q2 manufacturing sales +2.8% q/q.
- New Zealand Fonterra GDT price index +7.7% but volumes off, previous auction +12.7%.
Economic Data Ahead
- (0245 ET/0645 GMT) France Jul current account balance; last E600 mln deficit.
- (0245 ET/0645 GMT) France Jul trade balance, E3.6 bln deficit forecast; last E3.4 bln deficit.
- (0330 ET/0730 GMT) Great Britain Aug Halifax HPI, -0.1% m/m forecast; last -1.0%.
- (0400 ET/0800 GMT) Norway Q2 current account balance; last NOK54.02 bln surplus.
- (0400 ET/0800 GMT) Norway Jul manufacturing production, +1.0% m/m forecast; last -2.9%.
- (0430 ET/0830 GMT) Great Britain Jul ind production, -0.2% m/m, +1.9% y/y forecast; last +0.1%, +1.6%.
- (0430 ET/0830 GMT) Great Britain Jul mfg production, -0.4% m/m, +1.7% y/y forecast; last -0.3%, +0.9%.
- (1000 ET/1400 GMT) United States Jul Jul JOLTS job openings; last 5.62 mln.
Key Events Ahead
- N/A Sweden SEK3.5 bln 1.0% 2026 government bond auction.
- (0300 ET/0730 GMT) Riksbank policy announcement/MPR, no change in -0.5% repo rate forecast.
- (0500 ET/0900 GMT) Italy E2 bln 4.75% 2028 bond exchange.
- (0500 ET/0900 GMT) Greece E1 bln 13-week treasury bill auction.
- (0530 ET/0930 GMT) Germany E5 bln zero% 2026 Bund auction.
- (0915 ET/1315 GMT) BoE Gov Carney parliamentary testimony.
- (1000 ET/1400 GMT) BoC policy announcement, no change in 0.5% overnight rate forecast
. - (1000 ET/1400 GMT) Richmond Fed Lacker, KC Fed George House testimony.
- (1400 ET/1800 GMT) Fed Beige Book release.
- (1855 ET/2255 GMT)RBA Gov speaks at Sydney conference.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.14 percent lower at 94.74, having touched a near 2-week low of 94.71 earlier in the session.
EUR/USD: The euro edged up, after rising to more than 1-week high above the 1.1200 handle in the previous session. The major strengthened after downbeat U.S. economic data increased speculation that the Federal Reserve is unlikely to raise interest rate this month, prompting investors to trim their dollar bets. The ISM's non-manufacturing purchasing managers' index declined to 51.4 in August, against estimates of 55.0, its biggest 1-month fall since November 2008, while Fed's labour market conditions index also dropped last month, after posting a positive reading in July. The European currency traded flat at 1.1252, having touched an early low of 1.1233. In absence of major fundamental releases from the Eurozone, markets attention will remain on U.S. Job Openings and Labor Turnover Survey (JOLTS) for further cues. Immediate resistance is located at 1.1297, break above could take it over 1.1300. On the lower side, support is seen at 1.1228 (20-DMA), break below could drag it till 1.1100.
USD/JPY: The Japanese yen strengthened, rising for the third consecutive session, as investors reduced their dollar bets after worse-than-expected U.S. economic data slashed expectations of U.S. interest-rate increase this month. The dollar slumped to an early low of 101.20, hitting near 2-weeks low after tumbling more than 1 percent on Tuesday. The bid tone around the yen remained intact after the Sankei newspaper's report stated that the BoJ policymakers were divided on reaching consensus ahead of the central bank's Sept. 20-21 meeting. The major trades 0.5 percent lower at 101.44, attempting to recover from the daily low. The movements in the pair will be driven by overall market sentiment, ahead of U.S. economic data. Immediate resistance is located at 102.00, break above targets 102.40. On the downside, support is seen at 101.20 (Session Low), break below could take it lower 101.00.
GBP/USD: Sterling eased after rising above 1.3400 handle on Tuesday for the first time since mid-July, following the release of the downbeat U.S ISM non-manufacturing figures and on the outlook that Britain has likely managed to avoid a recession in coming months following the Brexit shock vote. The major trades 0.1 percent lower at 1.3411, having gained more than 1 percent to 1.3444 in the previous session. Investors will closely watch UK's manufacturing production and housing price data for further cues on the pair. Immediate resistance is located at 1.3480, break above could take it over 1.3500. On the downside, support is seen at 1.3341 (5-DMA), break below targets 1.3300. Against the euro, the pound trades 0.2 percent lower at 83.89 pence, having touched a high of 83.33 pence, it’s strongest since July 22.
AUD/USD: The Australian dollar declined, following a strong overnight rally as weak economic data weighed on its U.S. counterpart. The major touched an early low of 0.7652, however, it trimmed losses after Australia's GDP data showed the economy expanded at its fastest annual pace in four years. The country's gross domestic product for the second quarter came in at 0.5 percent in the second quarter, while annual growth strengthened to 3.3 percent, surpassing consensus of 3.2 percent. The Aussie trades 0.2 percent lower at 0.7672, but within the sight of near 2-week highs of 0.7687 hit in the previous session. Markets will continue to digest the latest GDP report readings, ahead of U.S. JOLTS data and Fed beige book for fresh insights on the Fed interest rates outlook. Immediate support is seen at 0.7650, break below could drag it near 0.7617 (20-DMA). On the upside, resistance is located at 0.7700, break above targets 0.7750.
NZD/USD: The New Zealand dollar hit fresh 16-months high above the 0.7400 handle, largely on the back of a weaker U.S. dollar and stronger dairy prices. The Global Dairy Trade Price Index advanced 7.7 percent, with an average selling price of $2,920 per tonne. Moreover, the major was also supported by New Zealand's upbeat manufacturing sales data which rose 2.8 percent in the second quarter, versus a fall of 0.7 percent in the previous quarter. The Kiwi trades 0.2 percent higher at 0.7430, attempting to gain the 0.7500 handle. The major will be drive by broad market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7450, break above targets 0.7500. On the downside, support is seen at 0.7397 (Session Low), break below could drag it till 0.7350.
Equities Recap
Asian shares advanced to 1-year highs on Wednesday after downbeat U.S. services sector activity data slashed expectations of an interest rate hike by the Federal Reserve as early as this month.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, extending its gains of 2.7 percent over the previous two days.
Tokyo's Nikkei ended 0.41 pct down at 17,012.44, Australia's S&P/ASX 200 index rose 0.15 pct at 5,421.70 points and South Korea's KOSPI added 0.06 percent at 2,067.61 points.
Shanghai composite index added 0.2 percent at 3,097.84 points, while CSI300 index was trading 0.1 percent up at 3,346.88 points.
Hong Kong’s Hang Seng was trading 0.12 percent lower at 23,760.88 points. Taiwan shares edged up 0.8 percent to 9,259.07 points.
Commodities Recap
Crude oil prices edged up, erasing previous session losses, as markets remained uncertain if producers would reach an agreement to freeze output to restrain a global supply glut. Global benchmark Brent crude oil was 0.4 percent up at $47.54 a barrel by 0419 GMT, pulling further away from the previous session's low of $46.27. U.S. West Texas Intermediate crude oil was at $45.08, higher by 0.5 percent.
Gold gained, extending previous session's 2 percent rise, as weak U.S. economic data increased expectations that the U.S. Federal Reserve will not hike interest rates as early as September. Spot gold rose 0.2 percent at $1,351.89 per ounce by 0422 GMT, having touched a high of $1,352.40 on Tuesday, its highest since August 19. U.S. gold futures were mostly unchanged at $1,353.60.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5391 percent down by 0.004 bps, while 5-year was at 1.1234 percent lower by 0.001 bps.
The Australian government bonds rallied as investors are pricing in a rate cut by November after examining third-quarter inflation numbers. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 5-1/2 basis points to 1.903 percent and the yield on short-term 2-year dipped 2-1/2 basis points to 1.495 percent.
The New Zealand government bonds closed higher as investors shrugged off the gains in dairy prices at Fonterra's Global Dairy Trade auction, highlighting that the worldwide glut is easing gradually. The yield on the benchmark 10-year bond, which moves inversely to its price, fell 7-1/2 basis points to 2.260 percent, the yield on 7-year note ended 6 basis points lower at 1.980 percent and the yield on short-term 2-year note tumbled 1-1/2 basis points to 1.845 percent.
Canadian government bond prices were higher across the maturity curve, with the 2-year bond up 4.5 Canadian cents to yield 0.569 percent and the benchmark 10-year adding 33 Canadian cents to yield 1.028 percent. The 10-year yield reached its highest since Aug. 22 at 1.113 percent on Tuesday.
