- UK September CPI -0.1% y/y vs 0.0% previous, 0.0% expected.
- UK September core CPI +1.0% y/y vs 1.0% previous, 1.1% expected.
- BoE's Vlieghe Headwinds - Reasonably strong exchange rate, global weakness.
- BoE's Mccafferty - Places more weight on upside risks to domestic inflation.
- Germany October ZEW Economic Sentiment 1.9 vs 12.1 previous 6.0 expected.
- Germany October ZEW Current Condition 55.2 vs 67.5 previous, 64.7 expected.
- Sweden September CPI 0.1% y/y vs -0.2% previous, -0.1% expected.
- Sweden September Core CPI 1.0% vs 0.8% previous, 0.9% expected.
- China September trade surplus $60.34, near record high.
- (0855 ET/1255 GMT) US Redbook Index, previous -1.6.
- (1400 ET/1800 GMT) US Federal budget for September is likely to be at $95.0bln vs previous $-64.4 bln.
Key Events Ahead
- (0800 ET/1200 GMT) St Louis Fed Bullard speech at NABE annual meeting in Washington, DC.
- (1145 ET/1545 GMT) NY Fed Dudley speech at Economic Club of New York luncheon.
FX Recap
EUR/USD: The pair pushed toward the $1.14 handle during the London session on Tuesday on the global risk-off approach, which now benefits the euro. The latest ZEW Surveys failed to spur any reaction, with the economic sentiment gauge printing 1.9, down from 12.1 in September, while the sub Current Situation Index dropped from 67.5 to 55.2. Earlier in the day, German CPI for September stayed at -0.2% month-on-month. It made intraday high at 1.1410 and low at 1.1343 levels. Initial support is seen around at 1.1015 and resistance at 1.1560 levels. Option expiries are at 1.1325 (440M), 1.1400 (432M).
USD/JPY: The Japanese yen is extending its solid tone against the greenback, relegating pair to session lows in the 119.60 band so far. Amongst the safe-haven assets, the yen benefited the most, with pair dropping -0.15% to 119.80 levels. The Japanese currency also remains lifted as markets re-assess the Oct 30 BOJ meeting risks and now believe that the central bank could wait for some more time before easing further. While today's BOJ minutes release offered no new surprises and hence had negligible impact on the major. Pair made intraday high at 120.07 and low at 119.60 levels. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 120.00 (300M), 120.20 (480M), 120.50-55 (825M).
GBP/USD: Sterling was trading 0.8 percent lower against the dollar and hitting a five-month low against the euro after UK inflation turned negative again. By 0839 GMT it traded at $1.5236 and 74.64 pence per euro respectively. The annual rate of CPI slipped back into deflationary territory by 0.1% in September from the previous 0.0% growth. Core prices remained at 1.0%, the same as last month. Pair made intraday high at 1.5387 and low at 1.5230 levels. Initial support is seen at 1.5107 and resistance is seen around 1.5725 levels.
NZD/USD: Following a ten-day upward rally, the kiwi lost ground following mixed Chinese data on Tuesday, although the New Zealand currency still remains close to its highest level since July. Moreover, the pair came under pressure amid an overnight sell-off in crude prices, with WTI oil declining 5.4%. The broader negative outlook for commodities seems to be further risk-off sentiment weighing on higher yielding currencies such as the NZD. Pair made intraday high at 0.6716 and low at 0.6656 levels. Initial support is seen at 0.6235 and resistance at 0.6721 levels.
AUD/USD: Currencies linked to Chinese growth like the Aussie and kiwi dropped for the first time in over a week on Tuesday, after trade data from China reinforced fears that the world's second largest economy is losing momentum. Australian dollar fell from a two-month high, to trade 1 percent lower at $0.7295, it also tumbled 1.2 percent against the Japanese currency, to 87.31 yen. The New Zealand dollar was down 0.6 percent at $0.6675. The Aussie was the biggest loser so far in European session, as the weak internal demand in China as highlighted by the poor import data. China represents New Zealand and Australia's biggest export destination. Pair made intraday high at 0.7364 levels and low around 0.7291 levels. Initial support is seen at 0.6908 and resistance at 0.7438 levels. Option expiries are at 0.7250 (550M), 0.7350 (605M).
Equities Recap
World share prices dropped on Tuesday, snapping their longest winning streak since February after Chinese trade data gave a further sign the world's economic growth engine is sputtering and a big fall in oil prices triggered profit-taking.
The FTSEuroFirst 300 index of leading European shares fell 1.4 pct at 1,409 points, Germany's DAX dropped 1.5 pct, France's CAC 40 plunged 1.9 pct and Britain's FTSE 100 dropped 0.9 pct in early trades.
Japan's Nikkei fell 1.1 pct, MSCI world share index dropped 0.5 pct, its first fall in 10 sessions, ending the longest winning streak since February. MSCI's broadest index of Asia-Pacific shares outside Japan was down 1 pct from a 2-month high touched on Monday, China's CSI300 index closed down 0.1 pct at 3,445.04 points and HK's Hang Seng Index closed down 0.6 pct at 22,600.46 points.
Commodities Recap
Oil prices dropped on Tuesday after the International Energy Agency (IEA) forecast a global supply glut would last through 2016 as demand growth slows and key OPEC producers maintain near-record output. Global benchmark Brent crude fell 20 cents a barrel at $49.66 by 0950 GMT. U.S. crude slipped down 30 cents at $46.80 after settling down $2.53.
Gold plunged nearly 1 pct on Tuesday as sellers took advantage of the previous session's 3-month high to book profits, though losses were limited by expectations the Federal Reserve will not lift interest rates this year. Spot gold fell 0.7 pct at $1,155.00 an ounce at 0930 GMT, while U.S. gold futures for December delivery were down $9.90 an ounce at $1,154.60.
Treasuries Recap
The yields on US treasuriy 10- and 30-year bonds slipped 5 bps to 2.04 pct and 2.87 pct.
Euro zone bond yields fell on Tuesday as European equities ticked down and investors awaited German economic sentiment data that may provide clues to the impact of the VW emissions scandal on Europe's biggest economy. German 10-year Bund yields were down 1 bp at 0.57 pct, a 1-week low, Portuguese 10-year yields fell 2.1 bps to 2.42 pct, reversing a similar rise on Monday.
JGB prices ended the day steady to slightly higher in very quiet trading, sending yields down by 0.5bp from last Friday in the 5-yr and 20-yr tenor. Yields on the current 5-yr, 10-yr, 20-yr, and 30-yr JGBs moved little all through the session, as both investors and dealers took a wait-and-see stance today after the long holiday weekend in Japan. Yields on the current 5-yr JGBs remained unchanged after the BoJ purchase on caution ahead of tomorrow's monthly JPY2.5tn 5-yr JGB auction.
UK Gilt futures jumped about 10 ticks to a high for the day of 118.90 after the negative inflation data. Buyers may gain traction as 10-year cash yields probe support from former lows and highs around the 1.80% level. The next target for buyers will be former lows around 1.78%.
New Zealand government bonds were up, sending yields 2 bps lower along the curve. Australian government bond futures gained, with the 3-year bond contract rising 2 ticks at 98.150. The 10-year contract gained 3 ticks to 97.2950, while the 20-year contract rose 3.5 ticks at 96.7300.
