Market Roundup
- Dollar inches up ahead of rate meeting, EUR/USD plays 1.0995/1.0945.
- ZAR +0.5% after Gordhan named as finmin. USD/ZAR 15.7705/14.9275. 16.0485 Fri peak.
- In U-turn, South Africa's Zuma restores Gordhan to Finance Ministry.
- Yuan weakens further after China launches trade-weighted index.
- Germany Merkel: Haven't solved EZ crisis yet, mistakes of ccy's founders still not resolved.
- ECB Draghi: Must and will bring inflation back to target.
- Draghi: Sees no restrictions within ECB mandate regarding use of instruments.
- EZ Oct Industrial Production 0.6% m/m, 1.9% y/y vs previous -0.3%/1.3% revised. 0.3%/1.4% expected.
- Swiss sight deposits of domestic banks at 401.399 bln in w/e Dec 11 vs pevious 397.098bln.
- UK Cameron not planning to drop EU welfare demands - Spokeswoman.
- Argentine cenbank considers annulling dollar futures contracts -Sources.
- Russia says no OPEC meeting in mid-December.
Economic Data Ahead
No major economic data releases or events scheduled.
FX Beat
USD: The dollar rose against a basket of major currencies on Monday as investors focused on the prospect of US rate hike this week. The dollar index was 0.3 percent up from late Friday levels, at 97.874. The dollar was up a third of one percent against the yen at 121.20 yen.
EUR/USD: The euro was down a third of one percent at $1.0950, it has made a high of 1.10305. Overall trend is weak as long as resistance 1.10450 holds. Any break above 1.10450 will take the pair till 1.1070/1.1090 level. Investors await highly anticipated FOMC meeting on Dec 16th. Fed is expected to hike interest rates by 25bpbs to 0.50%. On the lower side major support is around 1.0900 and break below will drag the pair further down till 1.0830/1.07850 level.
USD/JPY: The pair has recovered slightly after making a low of 120.58 level, was trading around 121.15. Intraday trend is still weak as long as resistance 122.25 holds. On the higher side minor intraday resistance is around 121.50 and any break above targets 121.85/122.25. The minor support is at 120.50 and break below targets 120/119.15.
GBP/USD: Sterling eased from a 3-week high against a stronger dollar on Monday, with investors focusing on Fed rate hike this week for the first time in a decade. They are also cautious about the pound ahead of UK inflation and labour market data this week. Sterling dropped 0.5 percent at $1.5151, having struck a 3-week high of $1.5240 on Friday. On the lower side major support is around 1.51500 and break below targets 1.5100/1.5050 level. It is facing minor resistance around 1.5180 and break above will take the pair to next level around 1.5220/1.52500. Further bullishness only above 1.5250. The euro was up 0.1 percent against the pound at 72.26 pence.
USD/CHF: The pair has retreated till 0.9800 after making a high of 0.99079 and is currently trading around 0.9840. Major intraday resistance is around 0.9880 and break higher will take the pair to next level around 0.9910/0.9957/0.9975. Overall bearish invalidation is only above 1.00350 level. On the other hand break below 0.9820 will drag down the pair further lower till 09798 (61.8% retracement of 0.9476 and 1.03280) /0.9766.
AUD/USD: The Australian dollar has retreated till 0.7159 and slightly recovered from that level. It skidded 2 percent last week in part due to sliding commodity prices. Short term trend is still weak as long as resistance 0.7350. The pair's major intraday resistance is around 0.7240 and break above targets 0.7280/0.7300/0.7350. On the lower side major support is around 0.7150 and any break below will target 0.7100/0.7050. The Aussie dropped 0.5 percent on the day to 86.56 yen pulling away from a peak of 90.71 touched earlier this month.
NZD/USD: The New Zealand dollar was in consolidation mode, having bounced 3.2 percent last week. It was quiet at $0.6707, not far from a peak of $0.6782 touched last week.
USD/CNY: China's yuan hit a 4-1/2-year low in onshore trading after the PBoC again lowered the yuan midpoint rate. Spot yuan dropped to as low as 6.4665 to the dollar, its lowest since mid-2011, taking its losses far this year to about 4 percent.
Equities Recap
Global markets were volatile as China's yuan hit a fresh multi-year low and oil continued its freefall after the International Energy Agency (IEA) warned that global oversupply could worsen next year. Asian stocks traded down but European stocks were recovering from their worst week in almost four months.
The FTSE EuroFirst index of leading 300 shares rose 0.6 pct at 1,406 points. Britain's FTSE 100 climbed 0.6 pct and Germany's DAX went up 0.4 pct, while France's CAC 40 was down 0.61 pct in early trades.
Contrary to this, in Asia, Japan's Nikkei fell 1.8 pct and MSCI's broadest index of Asia-Pacific shares outside Japan was last down 0.8 pct, while China's CSI300 Index ended up 2.9 pct at 3,711.32 points, Shanghai Composite Index closed up 2.5 pct at 3,520.67 points and HK's Hang Seng Index finished down 0.7 pct at 21,309.85 points.
Commodities Recap
Oil prices persisted to drop after US EIA warned that global supplyglut could increase next year. Brent crude dropped below $38 a barrel, first time in 7 years on Friday and was last down 1.6 pct at $37.30, within a few cents of Friday's low.
Gold was little changed, ahead of US Fed's policy meeting on Wednesday, when the central bank is likely to raise its near zero interest rates. Spot gold shed 0.1 pct to $1,073 an ounce, after earning 0.3 pct on Friday.
Treasuries Recap
U.S. 10-year Treasury yield rose 3 bps at 2.17 pct and the 2-year yield was up 2 bps at 0.915 pct.
Euro zone bond yields inched higher as investors keeping political shifts in France and Spain aside and lightening up positions ahead of Fed's meeting. German 10-year Bund yields rose 3 basis points to 0.57 percent. French and Spanish yields were up by a similar amount at 0.90 percent and 1.66 percent, respectively.
JGB prices closed the day steady to slightly higher, with the 7-yr to 10-yr zone outperforming the rest of the curve. JGBs in 7-yr to 10-yr zone extended their earlier profits slightly, after the BoJ purchased JPY400bn of JGBs in the 5-yr to 10-yr zone, JPY240bn of JGBs in the 10-yr to 25-yr zone, and JPY140bn of JGBs in the 25-yr and longer zone under its JGB purchase program, before tomorrow's monthly JPY2.5tn 5-yr JGB auction and Thursday's monthly JPY1.2tn 20-yr JGB auction.
UK Gilts started 26 ticks lower than the settlement of 117.96, as expected, as core fixed income markets reacted to above forecast China factory data released over the weekend.
Australian government bond futures climbed, with the 3-year bond contract up 5 ticks at 98.875. The 10-year contract gained 6.25 ticks to 97.1775, while the 20-year contract rose 5.75 ticks to 96.6575.
New Zealand government bonds earned modestly after a rise in the U.S. 10-year. Yields were 2 bps lower at the front end and 3 lower at the back.
