Market Roundup
- BoJ overhauls policy, sets yield curve target, abandons monetary base target for now, scraps duration target of JGBs bought, NIRP left at -0.1%, will let inflation overshoot 2% - Reuters.
- Japan big banks retreat further from government bond market - Nikkei.
- Japan Aug trade deficit Y18.7 bln, Y202.3 bln surplus eyed, exp -9.6% y/y imp -17.3%, -4.8/-17.8% eyed, exports to US -14.5%, China -8.9%, Asia -9.4%.
- Japan Aug crude import volume +0.5% y/y, LNG +9.4%, thermal coal -16.6%.
- Japan, EU reaffirm goal to reach trade deal by year-end – Nikkei.
- ThomsonReuters/INDEAD Q3 Asia business sentiment index up to 68, Q2 67, best in five quarters, energy prices-potential Trump presidency chief risks.
- Australia Aug Westpac/MI leading index 96.99, unch m/m, 6-mo trend dev +0.2.
- New Zealand posts record migrants as of August but key sectors missing out, Aug +5.6k.
- New Zealand Fonterra GDT price index +1.7%, volumes off at auction though, ‘16/17 farmgate milk prices forecast upped, production falling.
- IIF - Emerging markets net inflows fall to one-third of previous month.
Economic Data Ahead
- (0400 ET/0800 GMT) Norway Jul labor force survey – unemployment, 4.8% eyed; last 4.8%.
- (0430 ET/0830 GMT) Great Britain Aug PSNB/ex-banks, GBP10.0 bln for both eyed; last -GBP1.47/-0.98 bln.
- (0430 ET/0830 GMT) Great Britain Aug PSNCR; last -GBP2.1 bln.
Key Events Ahead
- N/A ECB Governing Council meeting, no policy announcements scheduled.
- N/A BoE Rule at Dublin conference.
- (0330 ET/0730 GMT) Riksbank September policy meeting minutes.
- (0500 ET/0900 GMT) Riksbank DepGov Skingsley to speak at Stockholm event.
- (0500 ET/0900 GMT) OECD interim forecasts for main developed economies.
- (0530 ET/0930 GMT) ECB 1463-day TLTRO operation, E10 bln allotment eyed, June E6.72 bln.
- (0530 ET/0930 GMT) Germany E4 bln zero% 2021 Bobl auction.
- (0540 ET/0940 GMT) Portugal E1.5-1.75 bln 6 and 12-month treasury bill auctions.
- (1400 ET/1800 GMT) FOMC policy announcement, no changes eyed, statement dovish?
- (1405 ET/1805 GMT) US TsySec Lew speaks at New York UN forum.
- (1430 ET/1830 GMT) FOMC Chair Yellen press conference.
- (1700 ET/2100 GMT) RBNZ policy announcement, no changes eyed, OCR to remain at 2.0%.
FX Beat
DXY: The dollar index against a basket of currencies rose 0.2 percent at 96.21, hitting fresh 6-week high following BoJ monetary policy announcement.
EUR/USD: The euro declined, hitting fresh 3-weeks low after the greenback strengthened, as markets sought to cover their dollar shorts ahead of the Fed policy meeting decision due later in the day. Recent comments from Fed officials have triggered volatility in financial markets, however, investors expect the central bank to hike rates by year-end. The major trades 0.1 percent lower at 1.1132, having failed to sustain gains above 1.1200 handle in the previous session. In absence of macro fundamentals from both the economies, markets attention will remain on FOMC policy outcome for further cues on the U.S monetary policy outlook. Immediate resistance is located at 1.1190, break above could take it till 1.1220. On the downside, support is seen at 1.1112, break below could drag it lower 1.1100.
USD/JPY: The Japanese yen slumped after Bank of Japan refrained from cutting interest rates from -0.1 percent and adopted a target for long-term interest rates in a refurbish of its massive stimulus programme. The dollar rallied above the 102.00 handle after declining to an early low of 101.00 following BoJ policy statement. The major trades 0.8 percent higher at 102.50, now attempting to take out the 103.00 handle. Investors will continue to digest headlines from the Japanese central bank, ahead of Federal Reserve policy decision, which is widely expected to hold interest rates unchanged and could hint at a rate hike by the end of the year. Immediate resistance is located at 103.30, break above targets 103.80/ 104.00. On the downside, support is seen at 101.00 (Session Low), break below could take it near 100.70.
GBP/USD: Sterling continues to tumble, hitting fresh 5-week lows, as investors’ wary on the political and economic uncertainty from Britain's pending exit from the European Union. The major trades 0.1 percent lower at 1.2968, having touched an early low of 1.2945, its lowest since August 16. Traders now await UK's public sector net borrowing data and Bank of England quarterly bulletin report for further cues on the pair. Immediate resistance is located at 1.3043 (5-DMA), break above could take it near 1.3100. On the downside, support is seen at 1.2935, break below targets 1.2900. Against the euro, the pound trades flat at 85.79 pence, within the sight of a 4-week low of 86.31 pence touched on Tuesday.
AUD/USD: The Australian dollar declined, reversing most of its previous session gains as the greenback advanced across the broad. However, the losses were capped as crude oil prices rose, recovering from 6-weeks low. Data released earlier in the day showed Australia's Westpac leading index for the month of August flat after posting a rise of 0.08 percent in the previous month. The Aussie trades 0.2 percent lower at 0.7539, pulling away from a 1-week high of 0.7573 hit earlier in the week. Investors will continue to track broad market sentiment, ahead of Federal Reserve policy decision. Immediate support is seen at 0.7525, break below could drag it till 0.7500. On the upside, resistance is located at 0.7580, break above targets 0.7600.
NZD/USD: The New Zealand dollar fell below the 0.7300 handle, as latest dairy auction result showed the Global Dairy Trade price index rose by 1.7 percent, which was well below previous auctions result of 7.7 percent rise. The major pulled away from a 1-week high of 0.7358 hit in the previous, as the U.S. dollar strengthened across the broad after BoJ maintained the 0.1 percent negative interest rate. Data released by Statistics New Zealand showed visitors arrivals rising at an annualized pace of 9.0 percent in the month of August against a gain of 14.4 percent in the previous month. The major will be driven overall market sentiment, ahead of Federal Reserve meeting result and Fed Chair Yellen’s post-statement press conference. Immediate resistance is located at 0.7330, break above targets 0.7380. On the downside, support is seen at 0.7260, break below could drag it till 0.7200.
Equities Recap
Asian shares traded in a volatile market after the Bank of Japan left interest rates unchanged at minus 0.10 percent and stated that it would introduce QQE with a newly-introduced tool to control the yield curve.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat, hovering around its highest levels since Sept. 12.
Tokyo's Nikkei gained 1.91 percent at 16,807.62 points, Australia's S&P/ASX 200 index climbed 0.72 percent at 5,341.80 points and South Korea's KOSPI advanced 0.42 percent at 2,034.29 points.
Shanghai composite index rose 0.27 percent at 3,031.29 points, while CSI300 index was trading 0.37 percent higher at 3,269.52 points.
Hong Kong’s Hang Seng was trading 0.7 percent up at 23,702.54 points. Taiwan shares added 0.73 percent at 9,228.50 points.
Commodities Recap
Crude oil prices advanced, hovering away from a 6-week low touched in the previous session after industry reported showed a draw in U.S. crude inventories and upbeat import data from Japan. Global benchmark Brent crude oil was trading 0.6 percent higher at $46.47 per barrel at 0405 GMT, having touched a low of $45.07 on Tuesday, its lowest since August 11.. U.S. West Texas Intermediate crude rose 1 percent at $44.84 a barrel.
Gold edged up, extending gains for the third consecutive session, as investors await the Bank of Japan's policy outcome and Federal Reserve's decision on interest rates later in the day. Spot gold rose 0.1 percent at $1,315.40 an ounce by 0412 GMT, while U.S. gold futures were steady at $1,318.60 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7084 percent higher by 0.021, while 5-year was at 1.2116 percent up by 0.012 bps.
The Australian government bonds slumped as the Bank of Japan leave its monetary policy rate unchanged at -0.10 percent and chose to tweak its current Qualitative and Quantitative Easing (QQE) that introduce fresh dosage of stimulus. The yield on the benchmark 10-year Treasury note rose 2 basis points to 2.198 percent, the yield on long-term 15-year note jumped 1-1/2 basis points to 2.562 percent.
Canadian government bond prices were higher on the day, with the 2-year bond up 2 Canadian cents to yield 0.573 percent and the benchmark 10-year climbing 26 Canadian cents to yield 1.165 percent.
