Market Roundup
- USD/JPY plays 101.00 before BoJ, 102.79 after then 101.62 in Europe
- BoJ overhauls policy, sets yield curve target
- BoJ abandons monetary base target for now
- BoJ scraps duration target of JGBs bought
- BoJ NIRP left at -0.1%, will let infl overshoot 2%
- Kuroda-Room to ease policy further and will do if needed
- Kuroda – Will use yld curve control to prevent damage to sentiment
- DXY +0.02%, DAX +1.0%, Brent +1.9%, Iron +0.4%
- OECD revised Euro area GDP f/c to 1.5% 2016, 1.4% 2017,1.6/1.7% previous
- OECD UK GDP 1.8% 2016 vs 1.7%, Japan 2016 0.6% vs 0.7%
- UK Aug PSNB GBP10.051 bln vs -2.427 bln previous, 10.3 bln expected
- UK Aug PSNCR GBP727 mln vs -2.437 bln previous,
- Japan big banks retreat further from government bond market – Nikkei
- Japan Aug trade def. Y18.7 bln, Y202.3 bln surplus eyed, exp -9.6%
- Japan, EU reaffirm goal to reach trade deal by year-end – Nikkei
- IIF - EM net inflows fall to one-third of previous month
Economic Data Ahead
- (0830 ET/1230 GMT) Statistics Canada is expected to report that wholesale trade fell 0.2 percent in July after rising to 0.7 percent in June.
- (1000 ET/1400 GMT) Mexico’s national statistics agency will release private spending and aggregate demand data for the second quarter of 2016.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending Sept 16.
- (1400 ET/1800 GMT) The U.S. Federal Reserve concludes its two-day policy meeting and issues a monetary policy statement on interest rates.
- (1700 ET/2100 GMT) The Reserve Bank of New Zealand will announce its interest rate decision.
- (1950 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending September 16.
- (1950 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending September 16.
Key Events Ahead
- (1430 ET/1830 GMT) U.S. Federal Reserve Chair Janet Yellen holds a press conference following Federal Open Market Committee meeting.
- N/A Chinese Premier Li Keqiang will visit Ottawa and Montreal for talks on trade including a dispute over Canadian canola exports - as well as boosting the economy.
FX Beat
DXY: The dollar index against a basket of currencies trades 0.1 percent lower at 95.90, after rising to an early 6-week high of 96.33, while markets eye FOMC policy decision and Chair Janet Yellen's press conference.
EUR/USD: The euro slumped, hitting a 3-week low after rising initially following BOJ announcement. The weakness in the greenback across the board helped the major to regain some lost ground, however, the pair lacked a follow-through buying interest and continues to extend previous session losses. The European currency trades lower at 1.1145, having touched an early low of 1.1123, its lowest since August 10. Investor’s attention will remain on FOMC policy outcome and Chair Yellen's presser which is likely to trigger a fresh bout of volatility in financial markets. The major has formed a triple bottom around 1.11200 and any further weakness can be seen only below that level. Any break below 1.1120 will drag it further till 1.1045/1.100 in the short term. On the higher side, any break above 1.1164 (50- day MA) will take it to next immediate resistance at 1.1210/1.1245. The short-term bullishness is only above 1.12840 (Sep 15 High) and overall bullishness above 1.13660.
USD/JPY: The Japanese yen recovered from a 1-week low of 102.78 hit following BoJ interest rate announcement. The yen found support from BoJ Governor Kuroda's presser, as he noted that the economy is out of deflationary pressure and CPI could touch the 2 percent price target in FY 2017. The major trades 0.6 percent lower at 101.12, hovering towards a 4-week low of 100.95 touched earlier in the session. Markets now await Fed monetary policy decision and economic projections in order to determine the timing of next Fed rate-hike action. The short term trend is slightly bearish as long as resistance 103.40 holds. The major resistance is around 103.40 and break above targets 103.80/104.60. On the lower side, major support is around 101 and any break below 101 will drag the pair till 100.55/100.
GBP/USD: Sterling steadied after hitting fresh 5-week low below the 1.3000 handle earlier in the session, as investors remain uncertain over the impact of Britain's looming exit from the European Union. However, the major recovered from earlier losses, as markets seem to have digested the BoJ policy announcements and now shift their focus on the FOMC meeting outcome. Sterling trades flat at 1.2996, having declined to a low of 1.2945, its weakest since Aug. 16. The pair is facing minor resistance around 1.3010 (50- HMA) and any break above 1.3010 will take it to next level till 1.30650 (20th high)/1.30905. On the lower side, any break below 1.2945 will drag it down till 1.2900/1.28650. Against the euro, pound was little changed at 85.78 pence, within the sight of a 4-week low of 86.31 pence hit in the previous session.
USD/CHF: The Swiss franc advanced, extending previous session gains as investors remained cautious ahead of the Federal Reserve's policy announcement and the subsequent press conference by the Fed Chair Janet Yellen. The dollar declined 0.3 percent to 0.9763, having touched an early high of 0.9814. On the higher side, any break above 0.9820 will take the pair till 0.9845/0.9880. The short-term weakness can be seen only below 0.9748 and break below targets 0.9680/0.9635.
AUD/USD: The Australian dollar rose, extending gains for the third straight day, as diminishing expectations of an eventual Fed rate hike action weakened the bid tone around the greenback. The Aussie trades 0.5 percent higher at 0.7593, having touched a 2-week high of 0.7602 earlier in the session. On the higher side, any break above 0.7620 (61.8% of 0.7730 and 0.74420) will take the pair till 0.7700/0.7735. The major support is around 0.7530 and break below will drag it till 0.7470/ 0.7440.
NZD/USD: The New Zealand dollar reversed early session losses to trade above the 0.7300 handle. The major strengthened largely on the back of rallying oil prices and a retreat in the US dollar across the board. The Kiwi trades 0.1 percent higher at 0.7323, attempting to sustain gains above the 0.7300 level. Investors focus now shifts towards the Fed and RBNZ interest rates decision, which could provide further momentum to the pair. Immediate resistance is located at 0.7350, break above targets 0.73680. On the downside, support is seen at 0.7260, break below could drag it till 0.7200.
Equities Recap
European shares rose, largely on the back of a rally in bank shares, after Bank of Japan's monetary policy announcement strengthened risky assets globally.
The pan-European STOXX 600 index increased 0.86 percent at 343.92 points, while the FTSEurofirst 300 index added 0.8 percent at 1,352.85 points.
Eurozone banks were up 2.75 percent and on track for their best day in two month.
Britain's FTSE 100 trades 0.36 percent up at 6,855.13 points, while mid-cap FTSE 250 gained 0.53 percent at 17,994.39 points.
Germany's DAX rose 0.97 percent at 10,494.89 points; France's CAC 40 trades 1.03 percent higher at 4,433.86 points.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1 percent.
Tokyo's Nikkei climbed 1.91 pct at 16,807.62 points, Australia's S&P/ASX 200 index jumped 0.72 percent at 5,341.80 points and South Korea's KOSPI added 0.51 percent at 2,035.99 points.
Shanghai composite index rose 0.1 percent at 3,025.87 points, while CSI300 index gained 0.3 percent at 3,266.64 points. Hong Kong's Hang Seng index advanced 0.6 percent at 23,669.90 points.
Commodities Recap
Crude oil prices advanced by more than 1 percent, hovering towards the $47.00 a barrel mark after an industry report showed a 7.5 million barrel draw to 507.2 million barrels in U.S. crude inventories and an oil service worker strike in Norway which could likely reduce output. Global benchmark Brent crude oil was trading 1.26 percent higher at $46.76 per barrel by GMT, pulling away to a 2-week low of $45.07 hit in the previous session. U.S. West Texas Intermediate crude rose 1.28 percent at $44.98 a barrel, having touched a high of $45.10, its highest since September 14.
Gold advanced, retreating from session lows, as the dollar reversed gains ahead of the U.S. Federal Reserve's decision on interest rates, which are expected to be left unchanged. Spot gold rose 0.1 percent at $1,320.69 an ounce by 1003 GMT, having hit an early low of $1307.81 an ounce. U.S. gold futures climbed 0.5 percent at $1,325 an ounce.
Treasury Recap
The US Treasuries saw modest upward pressure across the curve during a relatively quiet Wednesday session, highlighted by the release of weaker than expected housing starts data for August. The yield on the benchmark 10-year Treasury note rose ½ basis point to 1.691 percent, the yield on 5-year bond also climbed 1/2 basis point to 1.205 percent and the yield on short-term 2-year note bounced 1-1/2 basis points to 0.791 percent.
The UK gilts traded modestly lower Wednesday as investors await the Federal Reserve monetary policy decision and Fed Chair Yellen’s post-statement press conference. The yield on the benchmark 10-year gilts rose 1 basis point to 0.81 percent, the super-long 30-year bond yield jumped 1-1/2 basis points to 1.55 percent and the yield on short-term 2-year bond climbed 1/2 basis point to 0.118 percent.
The German bunds traded narrowly mixed as markets remained volatile ahead of the Federal Reserve monetary policy decisions and Yellen’s post-statement press conference, in an attempt to estimate the Fed's most likely step. The yield on the benchmark 10-year bond, which moves inversely to its price, hovered around -0.017 percent mark, the yield on long-term 30-year note dipped 2-1/2 basis points to 0.544 percent and the yield on short-term 2-year bond remained steady at -0.663 percent.
The Japanese government bonds slumped after the Bank of Japan in its monetary policy decision kept its interest rates unchanged at -0.10 percent and added to continue its asset purchase until inflation stabilise around 2 percent target. The benchmark 10-year bond yield rose 6 basis points to 0.005 percent (turned positive for the first time in six months), the super-long 30-year note yield climbed 3 basis points to 0.55 percent and the short-term 2-year JGB yield bounced 1-½ basis points to -0.24 percent.
The New Zealand government bonds closed modestly higher after the recent data showed that country’s latest dairy auction prices rose lower than the market expectations. The yield on the benchmark 10-year bond fell 1 basis point to 2.620 percent, the yield on 7-year note also ended 1 basis point lower at 2.290 percent and the yield on short-term 2-year note slid 1 basis point to 1.995 percent.
The Australian government bonds slumped as the Bank of Japan leave its monetary policy rate unchanged at -0.10 percent and chose to tweak its current Qualitative and Quantitative Easing (QQE) that introduce fresh dosage of stimulus. The yield on the benchmark 10-year Treasury note rose 2 basis points to 2.198 percent, the yield on long-term 15-year note jumped 1-1/2 basis points to 2.562 percent.
