- USD/JPY closing in on 200DMA at 120.82 and 0.6% higher.
- Nikkei closes up 7.7% at 18770, +1344-points, largest pct gain since 2008.
- Japan PM Abe - To lower corporate tax cumulative 3.3% over 2 years.
- GBP weakens after soft output data, cable 0.2% easier.
- UK July Industrial output +0.8% y/y vs 1.5% previous, 1.4% expected.
- UK July manufacturing output -0.5% y/y vs 0.5% previous, 0.5% expected.
- UK July Trade balance bln vs -9.18 bln previous, -9.5 bln expected.
- China Premier Li, no basis for continuing depreciation of Yuan.
- World Bank chief economist warns Fed to delay rate rise.
- RBA Deputy Gov Lowe - Australia has to adjust to slower China growth.
- BOJ's Shirai - Once CPI trend stabilizes, inflation expectations to rise.
- Japan's Abe likely to retain key economic cabinet members.
- Australia September Westpac/MI consumer conf index -5.6% to 93.9, Aug +7.8%.
- (1000 ET/1400 GMT) US Jul JOLTS job openings, 5.29 mln eyed; last 5.25 mln.
- (1000/1400) The Bank of Canada is expected to hold interest rates at 0.5 percent as it waits for signs the economic pick-up expected in the second half of the year is unfolding.
- (1130 ET/1530 GMT) Brazil will announce its weekly capital flows and foreign reserves data.
Key Events Ahead
- (0915 ET/1315 GMT) BOE Habgood parliamentary testimony.
- (1700 ET/2100 GMT) RBNZ policy announcement, 25 bp OCR cut to 2.75% eyed.
FX Recap
USD: The yen fell for the third straight day on Wednesday as a rally in global stock markets weakend demand for safe-haven assets, while the low-yielding euro also struggled as a recent unwinding of risky euro-funded carry trades took a breather. The dollar was up 0.7 pct at 120.62 yen while the euro was down 0.3 pct at $1.1175.
EUR/USD fractionally lowers in quiet trading holding below the 1.12 level. Pair has made intraday high at 1.1216 and low at 1.1147 levels. German Chancellor Merkel reiterated view that domestic economy was in good shape and strong; one reason is the Government budget policy. Chinese efforts to calm the markets helped renew risk sentiment and played in favour of the US dollar, which strengthened across the board and erased the euro's previous gains. Global markets have been buoyed by China's new market intervention and the announcement from China's Ministry of Finance that they will speed up fiscal spending. The next risk event for the pair will be Friday's release of the final figures of German inflation during last month, with headline prices expected to have risen at an annual pace of 0.2%. Across the pond, Initial Claims is due tomorrow followed by the Reuters/Michigan index on Friday. Initial support is seen around at 1.1015 and resistance at 1.1363 levels. Option expiries are at 1.1050 (557M), 1.1100 (243M), 1.1175 (539M).
The Yen fell 0.72% to ¥120.66, down from overnight peaks below ¥120 level. Restored risk sentiment after China's intervention and potential further monetary policy easing by the BOJ pushed the Japanese currency lower, while stocks booked the biggest daily gains since 2008. Prime Minister Shinzo Abe announced plans for dramatic cuts to corporate tax rates, which also helped equities. He stated that he planned to initially cut the current corporate tax rate of 35% by 3.3%, and push it down into the twenties over several years until it reaches as level that compares favourably in the international context. Pair is currently trading at 120.53 levels. It had made intraday high at 120.73 and low at 119.80 levels. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 120.00 (2.3BLN), 121.00 (352M).
The UK currency fell on Wednesday after the UK posted manufacturing and production data for July. Sterling was seen 0.24% lower at $1.5350 against the US dollar, dropping to a fresh intra-day low. Sterling dropped against the dollar and euro on Wednesday after data showed manufacturing output fell hard in July, keeping pressure off the Bank of England to raise interest rates any time soon. It was 0.3 pct lower at $1.5354 and 0.2 percent weaker against the single currency at 72.905 pence per euro. Manufacturing production declined 0.8% in July, after a stronger performance during the previous month, when output rose 0.2% on a monthly basis. Analysts expected the number to remain at 0.2%. Industrial production fell 0.4% in July in line with analysts' expectations, after output declined 0.4% in June month-on-month. Meanwhile, the trade balance data pointed to a bigger deficit of -£3,371 million, which declined from -£818 million in June, according to the ONS. It made an intraday high at 1.5404 and low at 1.5350 levels. Pair is currently trading at 1.5355 levels. Initial support is seen at 1.5185 and resistance is seen around 1.5436 levels. Option expiry is at 1.5310 (178M).
The NZD/USD pair jumped around 150 pips from its swing lows of $0.6240 and was seen rising toward $0.64 during the Asian session on Wednesday. Pair made intraday low at 0.6338 and high at 0.6402 levels. The latest rise did not do any harm to the bearish trend, as it still remains intact and it might continue further after Reserve Bank of New Zealand's (RBNZ) monetary policy decision. Due to this fact, volatility on Wednesday is likely to be lower. Initial support is seen at 0.6195 and resistance at 0.6511 levels.
AUD/USD is supported above 0.7000 levels and trading at 0.7041 levels. It has made intraday high at 0.7069 levels and low at 0.7013 levels. The Australian dollar sat comfortably above the $0.70 area following a speech from the RBA's Lowe, although the gains were capped by weak consumer data and a risk-on driven US dollar. Lowe said the exchange rate adjustment has led to improved conditions in a number of sectors, highlighting tourism as one of the key beneficiaries. Today the Westpac-Melbourne Institute Consumer Sentiment Index showed confidence levels slid back to a July low in September, with the gauge tumbling 5.6% to 93.9 points in September from 99.5 in August. Initial support is seen at 0.6908 and resistance at 0.7122 levels. Option expiries are at 0.7000 (378M), 0.7030 (200M).
Equities Recap
Global shares rose on Wednesday, led by an 8 percent surge in Japanese stocks, helping lift the dollar as the prospect of more stimulus from China soothed investors rattled by recent market turmoil.
European shares followed Asia higher, with the pan-European FTSEurofirst 300 index up more than 2 percent.
U.S. index futures suggested Wall Street would open up about 1 percent.
Signals from Prime Minister Shinzo Abe that Japan will cut corporate taxes pushed the Nikkei 225 stock index up 7.7 percent, the most it has risen in a day since the depths of the global financial crisis in October 2008. The Shanghai Composite closed 2.3 percent higher and the CSI 300 index rose 1.96 percent while Hong Kong's Hang Seng was up 4.5 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan also rallied hard, rising 3.2 percent, with gains across all the major indices.
The dollar was up 0.7 percent at 120.62 yen while the euro was down 0.3 percent at $1.1175, with the single currency also suffering due to widening interest rate differentials between two-year U.S. Treasury yields and their comparable German bunds The euro had been supported in recent weeks as investors unwound risky euro-funded carry trades which involved selling euros to buy high-yielding currencies for better returns.
Commodities Recap
Crude oil prices edged higher. Brent crude was trading at $49.61 per barrel, up 9 cents from the previous evening's close, after jumping 4 percent in the last session. U.S. West Texas Intermediate crude was down 6 cents to $45.88 after falling in the previous session as the end of the U.S. summer driving season pointed to lower fuel consumption.
Gold held above a three-week low, last trading at $1,120 an ounce, having fallen as low at $1,116.20 earlier this week. The physical gold market has been mixed, providing little support to global prices. Spot gold was at $1,121.35 an ounce at noon.
Treasuries Recap
German 10-year bond yields climbed 3 bps to 0.71 percent. German is due to sell 4 billion euros of the paper at noon.
U.S. 10-year Treasury yields headed higher still and were last up 3 bps at 2.22 percent. The Treasury Department will sell $21 billion of the notes on Wednesday.
