Market Roundup
- DXY down from near 7 month highs. From 99.756 to 99.311.
- EUR/USD recovers some ground but limited. Plays 1.06315 to 1.0693.
- USD/CHF corrects off 1.0171 peak in line with dollar adjustment. 1.0130 low.
- Sterling up after Broadbent plays down BoE forecasts. GBP/USD rises to 1.5250 from 1.5189, then eases to 1.5228.
- BOE Broadbent: No virtue in moving rates by less than 25bps.
- Broadbent: Commodity prices fall brought more time for BOE to think about rate rise.
- Broadbent: Some coverage of BOE Nov inflation report misplaced.
- Swiss Nov ZEW falls 18.3 points to zero.
- SNB Jordan: SNB active via negative rates, willingness to intervene if necessary.
- Swedish c.bank risk survey shows worries over low interest rates.
- Copper holds near Tues USD 4590/tonne 6 year low, risk remains.
Economic Data Ahead
- (0830 ET/1330 GMT) U.S. housing starts likely slipped in October, but could remain at health recovery levels. Groundbreaking is expected to have dropped to a seasonally adjusted annual pace of 1.16 million units last month from 1.21 million units in September, according to a survey of economists. October would mark the seventh straight month that housing starts have been above 1 million units.
- (0830 ET/1330 GMT) U.S. Building permits likely rose to a 1.15 million-unit pace from 1.11 million in September.
- (1030 ET/1530 GMT) EIA Crude Oil Stocks Change (Nov 13), consensus 1.600M, previous 4.224M
Key Events Ahead
- (0800 ET/1300 GMT) Cleveland Fed President Loretta Mester, New York Fed President William Dudley and Dennis Lockhart of the Atlanta Fed are participating in "Conference Breakfast on Federal Reserve Perspectives" before the Clearing House Annual Conference in New York.
- (0845 ET/1345 GMT) FedTrade Operation 15-Year Fannie Mae / Freddie Mac (max $475 mn).
- (1045 ET/1545 GMT) FedTrade Operation 30-Year Ginnie Mae (max $1.025 bn).
- (1130 ET/1630 GMT) Dudley will also preside over a conversation with former Federal Reserve chair Ben Bernanke to discuss book "Courage to Act," at an Economic Club of New York luncheon.
- (1200 ET/1700 GMT) Federal Reserve Bank of Dallas President Robert Kaplan gives his first talk on the economy and monetary policy at an event hosted by the University of Houston. Kaplan doesn't vote on Fed policy until 2017, but this will be the first hint of what kind of a view he is already voicing at the policy table as the Fed considers its first rate hike in nearly a decade.
- (1400 ET/1900 GMT) The Federal Open Market Committee will release the minutes of its Oct 27-28 policy meeting.
FX Beat
USD: The dollar was just off 7-month highs against a basket of currencies, as latest minutes from the U.S. Fed were expected to underpin expectations of an interest rate hike in December. The dollar index was lower at 99.501 after touching 99.745 on Tuesday, its highest since mid April. The greenback was also down 0.1 percent against the safe-haven yen and the Swiss franc.
EUR/USD: The dollar's drop drove the euro to regain its ground. It rose to $1.0692, having dropped to a seven-month low of $1.0630 on Tuesday. Technically the pair's minor support is around 1.0660 and break below will drag the pair further down till 1.0630/1.0600 level. Major resistance is around 1.0720 (trend line joining 1.08292 and 1.0868) and break above targets 1.0770/1.0830. Overall bearish invalidation is only above 1.0830.
USD/JPY: The pair has made a high of 123.48 and retreated from that level. It is currently trading at 123.31. Overall trend is still bullish as long as support 122 holds. Its minor support is around 122.70 and break below targets 122.40/122 in short term. On the higher side major resistance is around 123.60 and break above targets 124.13/125.
GBP/USD: Sterling climbed almost half a cent to its strongest levels this week after BoE's Ben Broadbent said markets should focus more on broader indicators of economic growth than the bank's recent subdued inflation forecasts. It rose as high as $1.5250 after his remarks were released by the bank from around $1.5205 beforehand. The euro also dipped to 70.12 pence. Any break above 1.5250 will take the pair to new level 1.5300/1.5350. On the downside minor support is around 1.5185 and break below targets 1.5140/1.5080. Short term bullishness is only above 1.5250.
USD/CHF: The pair has broken major resistance 1.0125 and jumped till 1.01696. It has slightly retreated from level till 1.0127 at the time of writing. On the downside minor support is around 1.0120 and break below targets 1.0075/1.0040. The major support is around 0.9980 and break below will drag the pair till 0.9950/0.9930. The resistance is around 1.0170 (17th Nov high) and break above targets 1.0240/1.0300.
AUD/USD: The Aussie was steady at $0.7107 in Asia, having proved resilient to another slide in prices of iron ore, Australia's top export earner. Resistance was found around the 38.2 percent retracement of the October-November fall at $0.7158, a level tested four times this month. Support was seen at a recent low of $0.7016. It is consolidating between 0.7150 and 0.7070 for the past two trading sessions and is facing major resistance around 0.7170. Any slight trend reversal is only above that level and any break above that level will take the pair till 0.7225/0.7250. On the lower side minor support is around 0.7050 and break below targets 0.7020/0.6935. The Australian dollar was near 3-month highs against the euro after it broke a key barrier on expectations the ECB will ease in December. The single currency dropped to A$1.4956, having lost a full cent since Tuesday. Dealers said the selling accelerated after the euro broke the psychological level of A$1.5000. The next support is found at the Aug. 11 low of A$1.4821.
NZD/USD: The New Zealand dollar opened weaker because global dairy prices fell 7.9 percent at the latest GlobalDairyTrade auction, but pared the losses as some investors took profits after being short going into the auction. The kiwi traded 0.02 percent higher at $0.6471.
Equities Recap
European investors were back to prefer safer assets as a shootout between French police and militants kept the market focused on international security issues.
Stocks slid with the pan-European FTSEurofirst 300 index falling 0.7 percent while the euro zone's blue-chip Euro STOXX 50 index dropped by 0.8 percent. UK's FTSE was down 0.4 pct, France's CAC fell 0.7 pct and Germany's DAX slid 0.6 pct in early deals.
Tokyo's Nikkei closed up 0.09 pct at 19,649.18, China's CSI 300 index ended down 1.1 pct at 3,715.58 points and Shanghai Composite Index finished down 1.0 pct at 3,568.47 points.
Treasuries Recap
10-year U.S. Treasury yield stood at 2.2623 percent in Europe vs U.S. close of 2.261 percent on Tuesday.
JGB futures finished the day at 148.54 for the second day in a row after remaining stuck in a very narrow range near the level. Volume was only 12,942, the smallest since 22 October, and the majority of the trades went through at 148.53, 148.54 or 148.55. One source said that futures stayed at 148.54 for 37% of trading hours. As futures were stuck in a narrow range, traders had no idea about what to do. Some of them think futures will remain trapped in a 148.50-148.60 range for now, and indeed futures finished today at the middle of the range.
German Bund yields fell 2 basis points to 0.51 percent, hitting their lowest in two weeks.
UK Gilt prices fell by around 10 ticks to a session low of 117.37 after Ben Broadbent's speech. They opened 36 ticks higher than the settlement of 117.15 as geopolitical tensions persist. Not much in the way of any real follow through buying as dealers respected support on 10-year cash yields from recent lows at 1.937%.
New Zealand government bonds gained slightly, sending yields 4 bps lower at the short end of the curve and 2 basis points lower at the long end. Australian government bond futures were a touch firmer, with the 3-year bond contract steady at 97.870. The 10-year contract added 1 tick to 97.0600, while the 20-year contract was half a tick higher at 96.5250.
Commodities Recap
Oil rose on reports of falling stockpiles and rising refinery activity in the United States, but analysts said a global supply glut would keep prices under pressure. Brent crude futures were trading higher 65 cents at $44.22 per barrel by 0904 GMT after settling 99 cents lower the day before. U.S. crude futures were up almost half a dollar at $41.13 a barrel.
Spot gold was up 0.07 percent at $1,071.4 an ounce at 0752 GMT, after dropping to $1,064.95 earlier, the lowest since February 2010. U.S. gold futures for December delivery were up 0.11 percent at $1,069.7. Silver returned to positive territory after dropping to a 2-1/2-month low.
