Market Roundup
- GBP/USD -0.06%, EUR/USD +0.09%, USD/JPY +0.25%
- DXY -0.02%, DAX -0.3%, Brent +0.7%, Iron +0.75%
- EZ Sept M Money Supply 5.0% vs 5.1% previous, 5.1% expected
- UK Preliminary Q3 GDP +0.5% q/q vs 0.7% previous, 0.3% expected
- UK Preliminary Q3 GDP +2.3% y/y vs 2.1% previous, 2.1% expected
- UK Oct CBI Distributive Trades +21 vs -8 previous, -2 expected
- UK’s Hammond-Decline in Sterling means we will see inflationary pressures
- Riksbank leaves policy unchanged but dovish statement
- Norges Bank leaves policy unchanged-Statement shows no path change
- BoJ Gov Kuroda – Yield curve moving as per BoJ policy
- BoJ DepGov Iwata – Will continue to promote powerful easing with QE/rates
- BoE seeks details of large UK lender exposure to Deutsche, Italy banks – FT
- UK car exports offset domestic drop in September – Reuters
- Staff reports – ECB “groupthink” ups risk of missing next crisis – Reuters
- Australia Q3 export prices +3.5% q/q, import prices -1.0%.
Economic Data Ahead
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 5,000 to a seasonally adjusted 255,000 for the week ended Oct. 21 while continuing claims for the week ending Oct 14 is expected to rise to 2.068 m from 2.057 m.
- (0830 ET/1230 GMT) The U.S. durable goods orders are expected to have edged up 0.1 percent in September after remaining unchanged in August, while non-defense capital goods orders excluding aircraft are likely to have risen 0.3 percent after gaining 0.9 percent the prior month.
- (1000 ET/1400 GMT) The National Association of Realtors is likely to report that U.S. pending home sales increased 1.2 percent in September after declining 2.4 percent in August.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending October 21.
- (1100 ET/1500 GMT) Federal Reserve Bank of Kansas City issues manufacturing activity index for the month of October.
- (1901 ET/2301 GMT) The GfK Group will release Britain's consumer confidence index for the month of October. The index is expected to decline to 3 after slumping to 1 in September.
- (1930 ET/2330 GMT) Japan's Statistics Bureau will release its National Consumer Price Index for the month of September. The index posted an annualized decline of 0.5 percent in the previous month.
- (1930 ET/2330 GMT) Japan's Statistics Bureau is expected to report that unemployment rate remained unchanged at 3.1 percent for the month of September.
- (1930 ET/2330 GMT) Japan's overall household spending probably declined 3.0 percent in September after tumbling 4.6 percent in August.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae (max $1.375 bln)
FX Beat
DXY: The dollar steadied near 3-week high against the yen as investors cautiously awaited U.S. durable goods figures. The greenback against a basket of currencies trades flat at 98.55, just off this week's near 9-month high.
EUR/USD: The euro advanced, extending gains for the third consecutive session after a report showed lending growth to Eurozone companies and households grew at a steady pace in September. Loans to companies and household increased at an annualized rate of 1.9 percent and 1.8 percent, respectively, however, annual growth rate of M3 slowed to 5 percent as compared to expectations of 5.1 percent. The major trades 0.1 percent higher at 1.0923, attempting to sustain gains above the 1.0900 handle. It should break above 1.0955 for further upside and any break above will take the pair to next level till 1.1000/1.0392 (Oct 20 High). On the lower side, any break below 1.0850 will drag it to next immediate support at 1.0820/1.0770.
USD/JPY: The dollar rose to a near 3-month high against the yen, boosted by higher U.S. bond yields and increasing expectations that the Federal Reserve will hike interest rates by the end of the year. Moreover, investors would prefer to stay long on the US dollar, ahead of Friday's US Q3 GDP release, which is expected to show the economy expanded at the fastest rate in almost two years. The major trades 0.2 percent higher at 104.70, hovering towards a high of 104.87 touched on Tuesday. Markets now await U.S. durable goods figures, unemployment claims and existing home sales data for further insights on the strength of the economy. The major resistance is around 105 and break above targets 105.80/106.30. On the lower side major support is around 104.01 (daily Tenken- Sen) and any break below targets 103.02 (100- day MA) /102.80/102.20.
GBP/USD: Sterling rose to a 1-week high against the dollar after data showed that the economy grew at a faster pace in the third quarter, trimming prospects of an interest rate cut in the near-term. Britain’s preliminary gross domestic product expanded by 0.5 percent in the July-September period, against projections of 0.3 percent but slower than 0.7 percent seen in the second quarter. However, growth edged up to 2.3 percent, as compared with the third quarter of last year, recording its strongest pace in more than a year. Separately, another survey showed UK's CBI distributive trades in October rose to 21, beating estimates of -2 and previous reading of -8. Sterling trades higher at 1.2254, having struck a high of 1.2271, its strongest since Oct. 20. Any violation above 1.2272 will take the pair to next level till 1.23325 (Oct 19 High)/1.2400. The immediate support stands at 1.2200 and any indicative break below targets 1.2170/1.2150/1.20880 (Oct 11 low). The short term trend reversal is only above 1.3325 level. Against the euro, the pound was trading flat at 89.06 pence.
USD/CHF: The Swiss franc rose, extending gains for the second consecutive session after a recent report showed private consumption rose for the month September. Switzerland's UBS consumption indicator came in at 1.59, surpassing previous reading of 1.53, which weakened the bid tone around the major. The dollar trades 0.1 percent down at 0.9918, hovering towards a 6-day low of 0.9903 hit in the previous session. The short term trend is weak as long as resistance 1.000 holds and any violation above confirms further bullishness, a jump till 1.0040/1.0090 is possible. On the lower side support stands at 0.9900 and any indicative break below targets 0.9840 (21-day MA)/0.9780. The short-term reversal is only above 1.000.
AUD/USD: The Australian dollar slumped, retreating from 6-day high as the greenback strengthened across the board on expectations that the Federal Reserve would eventually hike interest rates at the December meeting. Moreover, Australia's disappointing import prices data and volatile crude oil prices also weighed down the Aussie. The major trades 0.4 percent lower at 0.7617, pulling further away from a high of 0.7709 hit on Wednesday. On the higher side, major resistance is around 0.7645 (23.6% retracement of 0.7587 and 0.77344) and any break above will take the pair till 0.7680 /0.7730 /0.7760/ 0.7800. The major support is around 0.7580 (cloud bottom) and a break below will drag it till 0.7530 /0.7480.
NZD/USD: The New Zealand dollar declined, extending losses from the previous session, as an unexpected surge in the economy's trade deficit for the month of September, dampened the bid tone around the Kiwi. Moreover, the US Dollar continued to remain underpinned on growing expectations that the US Federal Reserve would eventually move towards raising interest rates at its meeting in December. The Kiwi trades 0.1 percent down at 0.7141, hovering away from a peak of 0.7183 hit in the previous session. Immediate resistance is located at 0.7170, a break above targets 0.7200. On the downside, support is seen at 0.7125, a break below could drag it lower 0.7100.
Equities Recap
European shares declined on the back of mixed earning reports from the continent's companies, while UK's upbeat gross domestic product figures boosted sterling to 1-week high.
The pan-European STOXX 600 index decreased 0.3 percent at 340.79 points, while the FTSEurofirst 300 index shed 0.26 percent at 1,346.31 points.
Britain's FTSE 100 trades 0.1 percent lower at 6,953.24 points, while mid-cap FTSE 250 slumped 0.6 percent at 17,562.74 points.
Germany's DAX tumbled 0.24 percent at 10,683.37 points; France's CAC 40 trades 0.50 percent down at 4,511.84 points.
Tokyo's Nikkei fell 0.32 percent at 17,336.42 points, Australia's S&P/ASX 200 index declined 1.06 percent to 5,302.80 points and South Korea's KOSPI added 0.51 percent at 2,024.12 points.
Shanghai composite index fell 0.1 percent at 3,112.35 points, while CSI300 index lost 0.3 percent at 3,345.70 points. Hong Kong’s Hang Seng declined 0.8 percent to 23,132.35 points.
Commodities Recap
Crude oil edged up, regaining most of the previous session losses, boosted by a further decline in U.S. crude inventories, but doubts that OPEC will be able to implement a production cut capped upside. Global benchmark Brent crude was trading 0.7 percent higher at $50.27 per barrel at 0946 GMT, retreating from a near 4-week low of $49.63 hit in the previous session. U.S. West Texas Intermediate crude rose 0.2 percent at $49.33 a barrel, having struck a 3-week low of $48.85 on Wednesday.
Gold prices climbed on the back of robust physical demand ahead of the festival season in India amid a firm dollar, while markets awaited more clues on a rate hike from the U.S. Federal Reserve. Spot gold was up 0.3 percent at $1,270.12 an ounce by 0950 GMT, hovering towards a 3-week high of $1276.59 hit on Wednesday. U.S. gold futures were up about 0.2 percent at $1,269.60 per ounce.
Treasuries Recap
The U.S. 10-year Treasury yields hit highest in five months after reading stronger than expected goods trade balance and Markit US services PMI data, which increased bets for the Federal Reserve interest rate hike. The yield on the benchmark 10-year Treasury note rose 4 basis points to 1.831 percent, the yield on long-term 30-year Treasury jumped 4-1/2 basis points to 2.583 percent and the yield on short-term 2-year note climbed 1-1/2 basis points to 0.884 percent.
The Eurozone periphery plunged following a rally in the benchmark bund yields. Also, bond prices tracked a retreat in the U.S. Treasuries. The French 10-year bond yields rose 6 basis points to 0.429 percent, Irish 10-year bonds yield climbed 2 basis points to 0.587 percent, Italian equivalent bounced 4-1/2 basis points to 1.578 percent, Netherlands 10-year bonds yield inched 6 basis points higher to 0.254 percent, Portuguese equivalents up 4 basis points to 3.255 percent and the Spanish 10-year bonds yield jumped 4 basis points to 1.180 percent.
The UK 10-year Gilt yields touched its highest since the Brexit vote on June 23 as a stronger third-quarter gross domestic product (GDP) faded further easing bets from the Bank of England for this year. The yield on the benchmark 10-year gilts rose more than 8 basis points to 1.234 percent (hits 4-months high), the super-long 40-year bond yield jumped 6 basis points to 1.70 percent and the yield on short-term 2-year bond climbed 4 basis points to 0.313 percent.
The German 10-year bund yields touched its highest levels in five months as investors moved away from safe-haven buying to riskier assets including equities and crude oil amid rising speculations of the Federal Reserve interest rate hike. We would expect the yields to stay in the range of 0.08-0.15 percent in the short-term, with an upward break likely eventually but not imminently. The yield on the benchmark 10-year bond rose more than 3 basis points to 0.12 percent, the yield on long-term 30-year note climbed 4 basis points to 0.767 percent and the yield on short-term 3-year bond bounced 1-1/2 basis points to -0.624 percent.
The Japanese government bonds slumped as markets followed an overnight retreat by U.S. Treasuries. The benchmark 10-year bond yield rose 1 basis point to -0.054 percent, the yield on long-term 30-year Treasury jumped nearly 2 basis points to 0.496 percent and the yield on short-term 2-year note climbed 1 basis point to -0.245 percent.
The New Zealand government bonds closed mixed after the country’s trade deficit widened unexpectedly in September. The yield on the benchmark 10-year bond fell 1 basis point to 2.670 percent, the yield on 7-year note ended 4 basis points higher at 2.353 percent and the yield on short-term 2-year note climbed 2-1/2 basis points to 1.995 percent.
The Australian government bonds plunged as stronger-than-expected third quarter consumer price index has lowered the possibilities of a rate cut by the Reserve Bank of Australia in the upcoming monetary policy meeting in November. The yield on the benchmark 10-year Treasury note rose nearly 7 basis points to 2.343 percent, the yield on 15-year note jumped 6-1/2 basis points to 2.699 percent and the yield on short-term 2-year climbed 1-1/2 basis point to 1.717 percent.
