Market Roundup
- CFTC IMM CTA data - Specs cut USD longs for second week, GBP shorts fall further, smallest since mid-July, to 58.6 contracts, JPY longs up small, EUR shorts up small.
- BoJ’s new framework faces test as market to scrutinize bond ops – Reuters.
- BoJ – Japan household financial assets as of end-June Y1746 trln, -1.7% y/y, corporate assets Y242 trln, +7.8%, overseas investor holdings of JGBs Y111 trln, +16.4%, accounted for 10% of market.
- Japan has most to lose from global trade backlash - Reuters.
- As rivals circle, Japan boosting firepower to buy global energy assets.
- Asia cull makes Goldman Sachs look rattled – Reuters BreakingNews.
- New Zealand Aug trade deficit NZ$1.265 bln, def year-to-Aug NZ$3.1 bln, NZ$765.5 mln and NZ$2.7 bln deficits forecast, imports NZ$4.65 bln, exports NZ$3.39 bln.
- New Zealand Q3 Westpac/MM employee confidence index 110.1, Q2 101.5.
- New Zealand Fonterra – ‘16/17 milk collection likely off 3% - Reuters.
Economic Data Ahead
- (0400 ET/0800 GMT) Germany Sep Ifo business climate index, 106.4 forecast; last 106.2.
- (0400 ET/0800 GMT) Germany Sep Ifo current conditions index, 113.0 forecast; last 112.8.
- (0400 ET/0800 GMT) Germany Sep Ifo expectations index, 100.2 forecast; last 100.1.
- (0400 ET/0800 GMT) Italy Jul retail sales; last +0.8% y/y nsa.
- (0430 ET/0830 GMT) Great Britain Aug BBA mortgage approvals; last 37.66k.
- (0500 ET/0900 GMT) Italy Jul trade balance – non-EU – flash; last E3.46 bln surplus.
- (1000 ET/1400 GMT) United States Aug new home sales, 600k units AR, -8.8% m/m forecast; last 650k, +12.4%.
- (1030 ET/1430 GMT) United States Sep Dallas Fed mfg business index; last -6.2.
Key Events Ahead
- N/A OPEC meeting in Algeria (till Wednesday).
- N/A SNB Chair Jordan, ECB Mersch speak at Geneva SIBOS conference.
- (0530 ET/0930 GMT) Germany E1.5 bln 12-month Bubill auction.
- (0830 ET/1230 GMT) ECB Angeloni speaks at London conference.
- (0850 ET/1250 GMT) France E3.1-3.5/1.4-1.8/0.9-1.3 bln 3/6/12-month BTF note auctions.
- (0900 ET/1300 GMT) ECB Pres Draghi Brussels parliamentary testimony.
- (0915 ET/1315 GMT) ECB Coeure speaks at Rome conference.
- (0930 ET/1330 GMT) Minny Fed Kashkari speaks at Minneapolis symposium.
- (0945 ET/1345 GMT) ECB VP Constancio speaks at Frankfurt conference.
- (1145 ET/1545 GMT) Fed Gov Tarullo speaks at Yale University.
- (1200 ET/1600 GMT) ECB/Austria CB Nowotny speaks in Vienna.
- (1330 ET/1730 GMT) Dallas Fed Kaplan in San Antonio panel discussion.
- N/A Clinton-Trump presidential debate.
- (1900 ET/2300 GMT) BoC Gov Poloz speech at Western Washington University.
FX Beat
DXY: The dollar edged down against the yen and euro, as investors were reluctant to take positions ahead of the impending first debate between U.S. presidential candidates. The dollar index against a basket of currencies trades flat at 95.47, after rising to 95.68 in the previous session.
EUR/USD: The euro edged up, having posted modest gains on Friday's after the release of relatively upbeat Eurozone preliminary manufacturing purchasing managers' index. However, renewed concerns regarding the banking sector in the Eurozone capped gains. The European currency traded flat at 1.1227, having touched an intra-day high of 1.1241. Investor’s attention will remain on German IFO expectations, ahead of U.S. new home sales and ECB President Draghi’s testimony due later in the day. Immediate resistance is located at 1.1258 (Sept 22 High), break above could take it till 1.1285/ 1.1300. On the downside, support is seen at 1.1202 (10-DMA), break below could drag it till 1.1184.
USD/JPY: The dollar eased against the yen, as investors remained cautious ahead of the looming first debate between U.S. presidential candidates that could determine the near-term direction of the pair. The debate between Democrat Hillary Clinton and Republican Donald Trump, the first of three face-to-face contests, will be held on Tuesday. The major was 0.1 percent down at 100.86, trading above a 1-month low of 100.10 struck last week. Data released earlier showed, Japan's coincident index for July edged up to 112.1 from 112 while leading economic index for the same period fell to 100 from 106. Immediate resistance is located at 101.30, break above targets 101.60/ 102.00. On the downside, support is seen at 100.30, break below could take it lower 100.00.
GBP/USD: Sterling steadied after declining over 1 percent to hit a 5-week near 1.2900 on Friday as investors continue to wary over Britain's exit from the European Union. The weakness in the major comes in after statement from British Foreign Secretary Boris Johnson late Thursday suggested that formal separation proceedings between UK and EU were likely to begin early next year and 2-years may not be required to negotiate a deal. Sterling trades 0.2 percent up at 1.2982, having touched a low of 1.2914 in the previous session, its lowest since August 16. Investors will closely watch UK's BBA mortgage approvals for further cues on pair. Immediate resistance is located at 1.3006 (5-DMA), break above could take it near 1.3045. On the downside, support is seen at 1.2950, break below targets 1.2900. Against the euro, the pound trades flat at 86.47 pence, having declined 1.3 percent to a 5-week low of 86.77 pence on Friday.
AUD/USD: The Australian dollar opened on a bearish gap, extending losses from the previous session, but, it closed out the gap after slightly upbeat comments from Algeria’s Energy Minister pushed oil higher. However, the major is likely to remain on the downside, as prospects of oil output freeze are still very low. The Aussie trades flat at 0.7619, within the sight of a 2-week high of 0.7674 hit last week. With the Australian economic calendar absolutely data empty today, the pair will track overall global market sentiment and commodity price movement. Immediate support is seen at 0.7600, break below could drag it till 0.7583/ 0.7552 (10-DMA). On the upside, resistance is located at 0.7674 (2-week High), break above targets 0.7700.
NZD/USD: The New Zealand dollar declined, hitting a 1-month low after data showed an unexpected rise in the country's trade deficit. The economy's trade deficit in August widened to NZ$1.26 billion, well above forecasts of NZ$765.5 million due to a sharp reduction in dairy and meat exports. The Kiwi trades flat at 0.7241, after falling as low as 0.7220, its lowest since Aug 31. The major weakened for the third consecutive session after the Reserve Bank of New Zealand emphasized last week that further easing would be necessary despite rapid growth in the economy. Immediate resistance is located at 0.7284 (10-DMA), break above targets 0.7300. On the downside, support is seen at 0.7204 (Aug 30 Low), break below could drag it near 0.7164.
Equities Recap
Asian shares tumbled, following losses on Wall Street, as investors' shifted their focus from central banks to American politics ahead of the first U.S. presidential debate.
MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.1 percent in early trade.
Tokyo's Nikkei lost 1.25 percent at 16,544.56 points, Australia's S&P/ASX 200 index ended flat at 5,431.50 points and South Korea's KOSPI fell 0.52 percent at 2,043.55 points.
Shanghai composite index declined 0.94 percent at 3,005.64 points, while CSI300 index was trading 0.90 percent lower at 3,246.62 points.
Hong Kong’s Hang Seng was trading 0.83 percent down at 23,492.57 points. Taiwan shares shed 1.0 percent at 9,194.52 points.
Commodities Recap
Crude oil prices bounced back from recent lows after Algeria's energy minister stated that all alternatives were possible for an oil output freeze at an informal meeting of OPEC producers this week. International benchmark Brent crude was trading 0.6 percent higher at $46.26 per barrel at 0403 GMT, pulling away from a low of $45.63, it’s lowest since Sept 20. U.S. West Texas Intermediate crude rose 0.54 percent at $44.79 a barrel.
Gold prices eased, pulling further away from a high of $1343.56, hit last week as markets turned their focus towards U.S. politics. Spot gold declined 0.2 percent at $1,333.80 an ounce by 0412 GMT, while U.S. gold futures traded flat around $1,343.00 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.6167 percent higher by 0.002 bps, while 5-year was 0.005 bps up at 1.1577 percent.
The Australian government bonds gained following the dovish comments from the Reserve Bank of Australia Philip Lowe. The yield on the benchmark 10-year Treasury note fell 2-1/2 basis points to 2.026 percent, the yield on long-term 15-year note also dipped 3 basis points to 2.378 percent and the yield on short-term 2-year slid 1 basis point to 1.610 percent.
The New Zealand government bonds closed higher as investors poured into safe-haven assets after data showed that the country’s trade deficit widened in August. The yield on the benchmark 10-year bond fell 3-1/2 basis points to 2.375 percent, the yield on 7-year note ended 2-1/2 basis points lower at 2.110 percent and the yield on 5-year note slid 2 basis points to 1.980 percent.
Canadian government bond prices were higher across the yield curve, with the 2-year price up 8.5 Canadian cents to yield 0.525 percent and the benchmark 10-year rising 57 Canadian cents to yield 1.04 percent. The 10-year yield fell 4.9 basis points further below its U.S. counterpart, leaving the spread at -58 basis points, the largest gap in nearly six months, as Canadian government bonds outperformed on weaker-than-expected domestic data.
