Market Roundup
- USD/CAD hits 1.3555, 11-1/2 high as oil weighs on commodity currencies.
- NOK fell to 6 week low. EUR/NOK up to 9.4380 fm 9.3820.
- AUD/USD -0.7%, 0.7200 from 0.7270.
- Brent holds close to 7-year low. Monday $40.60. Today $40.82/$41.32.
- WTI closed down 230 cents at 37.65/barrel Monday after 110 cent drop Friday.
- GBP/USD under pressure, breaks 1.5000 to test 1.4991 from 1.5059.
- China yuan ends at weakest versus dollar in more than 4 years.
- Gold traders raise bets prices will soon drop to $1,000.
- UK Nov BRC Retail Sales -0.4% y/y vs previous -0.2%. 0.4% expected.
- UK Nov Halifax House Prices -0.2% m/m vs previous 1.0% revised.
- UK Oct Industrial O/P 0.1% m/m, 1.7% y/y vs prev 0.0%./1.5%. 0.1%/1.2% expected.
- UK Oct Manufacturing O/P -0.4% m/m, -0.1% y/y vs previous 0.9%/-0.4% revised. 0.0%/0.1% expected.
- EZ Q3 GDP revised 0.3% q/q, 1.6% y/y vs previous 0.3%/1.6%. 0.3%/1.6% expected.
- French employer's group chief wants 'emergency' plan on unemployment.
- BOJ Kuroda: Hope for positive atmosphere during next yr's wage negotiations.
- PM Abe: Hope for more gains in wages next year.
- Japan to cut corporate tax rate to 29.74 pct in two stages - Sources.
- Turkish PM: Will impose sanctions on Russia if needed.
Economic Data Preview
- (0815 ET/1315 GMT) A report from Canadian Mortgage and Housing Corp is expected to show a rise in housing starts for November. Groundbreaking on new homes is likely to have increased to an annual rate of 198,700 from 198,100 in the prior month.
- (0830 ET/1330 GMT) Canadian building permits are expected to have increased 3.2 percent in October, after dropping 6.7 percent in September.
Key Events Ahead
- (1045 ET/1545 GMT) FedTrade Operation 30-year Ginnie Mae (max $1.050 bn).
- (1330 ET/1830 GMT) FedTrade Operation 15-year Fannie Mae / Freddie Mac (max $500 mn).
- Bank of Canada Governor Stephen Poloz will give a speech on "The Evolution of Unconventional Monetary Policy" at the Empire Club of Canada in Toronto, six days after the Bank of Canada held interest rates steady in its last rate decision of the year. Poloz will also hold a press conference following the speech.
FX Beat
Currencies of major oil exporting nations such as the Canadian dollar and the Norwegian crown were under pressure despite their slight recovery, while safe-havens like the yen and the low-yielding euro performed well. The loonie fell sharply with the greenback rising 0.2 percent to C$1.3531. That was the U.S. dollar's strongest level since mid-2004. The Norwegian crown also slipped to a 6-week low against the euro in London trade. The euro rose 0.5 percent to hit a high of 9.43 crowns.
EUR/USD: The euro was firm at $1.08560 following last week's less-than-aggressive stimulus from European Central Bank. The has recovered till 1.0882 at the time of writing after making a low of 1.07961 and is currently trading at 1.08493. It is facing major support around 1.0800 and break targets 1.0760/1.0700. Overall trend reversal is only above 1.100 level. Above 1.100 it will take the pair to next level 1.10350/1.1070/1.1100. The pair's minor resistance is around 1.0900 and break above targets 1.09500/1.09800.
USD/JPY: The pair has recovered after making a low of 122.25 and was trading at 123.17. Intraday trend is slightly bullish as long as support 122.90 holds. On the higher side minor intraday resistance is around 123.25 and any break above targets 123.75/124.15. The minor support is at 122.90 and break below targets 122.60/122.20.
GBP/USD: Sterling inched higher on Tuesday after a mixed batch of UK industrial output numbers showed overall production continuing to grow but manufacturing surprisingly falling. It had fallen steadily in the first two hours of trading in London before the data. It inched higher after the numbers to trade at $1.5015, still down 0.3 percent on the day, and 0.4 percent weaker at 72.30 pence per euro. Cable has broken major support 1.5000 and was trading around 1.49960 level. Short term trend is weak as long as resistance 1.5060 holds. Any break above 1.5060 will take the pair to next level 1.5100/1.5160. Overall trend reversal is only above 1.5160 level. On the downside major support is around 1.4980 and break below targets 1.4900/1.4880 level.
USD/CHF: The pair has made a high of 1.00305 yesterday and declined from that level. Intraday trend is weak as long as resistance 1.00350 holds. On the higher side any break above 1.00350 will take the pair till 1.0090/1.0120. Overall bearish invalidation is only above 1.0140. The minor support is around 0.9950 and break below targets 0.9900/0.9870.
AUD/USD: The Australian dollar fell 0.6 percent to $0.7220 as this week's tumble in oil prices weighed broadly on commodity currencies. It touched a 3-1/2 monthhigh of $0.7386 touched on Friday. It has broken major support 0.7280 and was trading at 0.7210. The pair's major intraday resistance is around 0.7250 and break above targets 0.7280/0.7300. On the lower side minor support is around 0.7170 and any break below will target 0.7100/0.7050.
NZD/USD: The kiwi dollar dropped to $0.6641, having slipped 1.6 percent overnight and away from a peak of $0.6787 set on Friday. Support was found at the $0.6600 level.
Equities Recap
A sudden jump in Chinese commodity imports kept oil prices steady and energy-linked currencies, still the market mood was subdued as world stocks dropped for a second consecutive day and emerging market stocks hit 2-month low.
European shares started at their lowest level since mid October as energy and mining stocks plunged sharply again and manufacturing figures from Britain also posted losses, Europe's FTSEurofirst 300 index was down 0.1 pct, Britain's FTSE 100 fell 0.1 pct, France's CAC 40 dropped 0.2 pct while Germany's Dax remained flat in early trades.
Asia shares had also taken a hit overnight. Tokyo's Nikkei closed down more than 1 pct despite data showing Japan dodged recession in the Q3, while Chinese stocks slipped 1.8 pct, HK's Hang Seng Index ended down 1.3 pct at 21,905.13 points and Shanghai Composite Index closed down 1.9 pct at 3,470.07 points.
Commodities Recap
Crude prices moved away from nearly 7-year lows as China reported strong commodity imports despite economic weakness, but overall the market remained weak due to global supplyglut compounded by OPEC's decision to keep output high. Internationally traded Brent futures inched higher 31 cents at $41.04 a barrel. U.S. crude was trading at $37.82 a barrel.
Gold tumbled to recover from overnight losses on expectations of US Fed rate hike next week and a strong USD. Spot gold went up 0.3 pct to $1,073 an ounce, but not far from Monday's session low of $1,069.66. The metal slid 1.5 pct overnight.
Treasuries Recap
US 10-year Treasury yields stood at 2.2305 pct, rising 0.6 bps on Tuesday.
German and other northern euro zone government bond yields nudged lower as investors retreated into safer areas, though Swiss yields inched up as bets on another rate cut this month from the Swiss National Bank (SNB) faded.
The yield on Greece's 10-year government bond rose to its highest level in almost three months on Tuesday, amid concerns about the country's ability to push forward with key reforms. Greek 10-year government bond yields rose 18 basis points to 8.765 percent, their highest since mid-September.
JGB prices closed the day unchanged to slightly higher, with the 5s/30s curve flattening by 1.5bp on the day. JGBs in the 7-yr and longer zone opened modestly stronger, with yields down by 0.5bp to 1bp from yesterday, on the back of stronger overseas bond market and weaker crude oil prices overnight. Yields on the current 30-yr JGBs closed midday down 0.5bp at 1.395% for the regular settlement date (T+2).
UK Gilts started 11 points higher than the settlement of 117.81, as expected, as the market goes risk off in light of further falls in the oil price.
New Zealand government bonds earned, pushing yields 3 bps lower along the curve. Australian government bond futures bounced from multi-month lows in a bullish flattening of the curve. The 3-year bond contract added 4 ticks at 97.850, while the 10-year contract climbed 8 ticks to 97.1000. The 20-year contract also gained 8 ticks to 96.5850.
