Market Roundup
- Tokyo holiday
- USD/JPY +0.4%, EUR/USD +0.4%, GBP/USD +0.2%
- DXY -0.25%, DAX +1.9%, Brent +0.8%, Iron +2.5%, Gold -0.35%
- Japan MOF’s Asakawa-Will monitor fx moves in Europe/US more closely
- Asakawa- Will take necessary action if spec moves are seen in yen trade
- Asakawa- FX market has not digested outcomes of BoJ/Fed policy meetings
- UK Sept CBI Trends-Orders -5 vs -5 previous, -5 expected
- France Sept Business Climate 103 vs 101 previous, 101 expected
- Norgesbank holds rates at 0.5% but raises rate path: NOK rallies hard
- EUR/NOK drops from 9.2350 to 9.1220
- RBNZ stands pat but keeps door open to easing
- Australia c.bank upbeat on economy but keeps door open for more easing
- RBA's Lowe says rate cuts, lower A$ helping economy
Economic Data Ahead
- (0830 ET/1230 GMT) Federal Reserve Bank of Chicago will release its Chicago Fed National Activity Index (CFNAI) for the month of August. The index stood at 0.27 in the previous month.
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 2,000 to a seasonally adjusted 262,000 for the week ended Sept 17 while continuing claims for the week ended Sept 9 is expected to stay unchanged at 2.143 m.
- (0900 ET/1300 GMT) The Federal Housing Finance Agency releases its housing price index for the month of July. The index is expected to edged up to 0.3 percent from 0.2 percent in the previous month.
- (0900 ET/1300 GMT) Mexico's annual inflation rate is expected to have decreased to 2.71 percent in the 12 months through mid-September, compared with 2.80 percent in July. While core annual inflation rate is likely to have edged up to 0.25 percent in the first half of September.
- (1000 ET/1400 GMT) National Association of Realtors is likely to show that U.S. existing home sales rose 1.1 percent to a 5.45 million-unit rate in August from a 5.39 million-unit pace in July.
- (1000 ET/1400 GMT) The Conference Board is likely to report that U.S. leading indicator stood flat in the month of August, after rising to 0.4 percent in July.
- (1000 ET/1400 GMT) The European Commission releases Eurozone's preliminary Consumer Confidence reading for the month of September. The index is expected to slump 8.2 percent after posting a drop of 8.5 in the prior month.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending Sept 16.
- (1100 ET/1500 GMT) Federal Reserve Bank of Kansas City issues manufacturing activity index for the month of September.
- (1500 ET/1900 GMT) Argentina will release GDP figures for the second quarter.
Key Events Ahead
- (0900 ET/1300 GMT) European Central Bank President Mario Draghi's speech
- (0930 ET/1330 GMT) Bank of England Deputy Governor for Financial Stability Sir Jon Cunliffe's speech
- (1145 ET/1545 GMT) FedTrade operation 30-yr Fannie Mae/Freddie Mac max $2.550 bln
- (1300 ET/1700 GMT) Bank of England Governor Mark Carney's speech
FX Beat
DXY: The dollar index against a basket of currencies declined 0.3 percent at 95.22, hitting a fresh 1-week low as the Fed policymakers cut the number of rate increases, projecting a less aggressive path for rate hikes in coming years.
EUR/USD: The euro rallied week above the 1.1200 handle, as the greenback weakened after the Federal Reserve meeting indicated a rise in interest rates this year, but with cuts in the longer term outlook. The U.S. central bank strongly signaled that it could tighten monetary policy by the end of 2016 as the labour market improved further. The major trades 0.4 percent higher at 1.1233, after rising as high as 1.1247, its strongest since last Friday. The major resistance is around 1.1245 (daily Kijun-Sen) and break above targets 1.12840/1.13660. It should break above 1.13660 for further bullishness. On the lower side, any break below 1.1180 will drag the pair down till 1.1150/1.1120.
USD/JPY: The major recovered from 4-week lows after comments from Japanese Ministry of Finance official, Asakawa, to take action in order to prevent speculative moves in the Japanese yen, strengthened the bid tone around the dollar. The major’s recovery mode was also supported by prevalent risk-on sentiment which drove investors towards riskier assets, thus hampering demand for the safe-haven yen. The Japanese yen trades 0.4 percent lower at 100.73, hovering away from a high of 100.09, its highest since August 26. The major resistance is around 103.40 and break above targets 103.80/104.60. On the lower side, major support is around 100 and any break below 100 will drag the pair till 98.80.
GBP/USD: Sterling retreated from a 5-week low against the dollar, boosted largely on the back of renewed weakness in the greenback after the Federal Reserve left interest rates unchanged and forecasted a slow path for rate hikes in coming years. The major rose to an intra-day high of 1.3086, but trimmed gains to trade at 1.3048, still 0.2 percent up for the day. Data released by Confederation of British Industry showed industrial trends survey- orders at -5, in line with consensus and projections. Investors now await MPC member Cunliffe and BoE chief Carney's speech for further cues on the monetary policy and economy outlook. On the higher side, major resistance is around 1.30920 and any break above will take the pair to next level till 1.3142 (200- HMA)/1.3195 (50% retracement of 1.3445 and 1.29450). Cable’s intraday support stands at 1.3038 (100- HMA) and any violation below will drag the pair down till 1.3000/1.2950. Against the euro, the pound trades 0.3 percent lower at 86.06 pence, hovering towards a 4-week low of 86.31 pence hit in the previous session.
USD/CHF: The Swiss franc rose, extending gains for the third straight day, as the greenback lost ground against major currencies following Federal Reserve’s monetary policy announcements. The dollar trades 0.4 percent lower at 0.9688, having touched a 2-week low of 0.9685 earlier in the session. On the higher side, any break above 0.9710 will take the pair till 0.9750/0.9800. The short-term weakness can be seen only below 0.9630 and any break below targets 00.9580/0.9530.
AUD/USD: The Australian dollar hit fresh 2-weeks high on the back of a rally in the commodities, particularly copper and oil prices and sharp losses in the US dollar following FOMC policy outcome. The major also found support from upbeat comments from the new RBA governor Lowe, in his testimony before the parliament. The Aussie trades 0.5 percent higher at 0.7658, hovering towards the 0.7700 handle. Investors will closely watch Reserve Bank of Australia Governor Philip Lowe's speech due tomorrow. On the higher side, any break above 0.7620 (61.8% retracement of 0.7730 and 0.74420) will take the pair till 0.7700/0.7735. The major support is around 0.7580 and break below will drag it till 0.7530/0.7470/ 0.7440.
NZD/USD: The New Zealand dollar declined, reversing most of previous session gains after RBNZ left the official cash rate unchanged at 2.0 percent, as was widely expected. The major came under renewed selling pressure as the central bank's announcement triggered speculations of a possible further interest-rate cut at its meeting in November. The Kiwi trades 0.3 percent lower at 0.7317, pulling away from an early 2-week high of 0.7369, posted in the aftermath of Fed inaction. Immediate resistance is located at 0.7380 (Aug 26 High), break above targets 0.7400. On the downside, support is seen at 0.7304 (10-DMA), break below could drag it lower 0.7300.
Equities Recap
World shares and European stocks rallied after the Federal Reserve kept monetary policy steady and forecasted a slow path for rate hikes in coming years, weakening the dollar and boosting commodity prices.
The pan-European STOXX 600 index increased 1.17 percent at 346.47 points, while the FTSEurofirst 300 index added 1.18 percent at 1,363.14 points.
Eurozone's basic resources index rose 3.44 percent as oil and metal price rebounded.
Britain's FTSE 100 trades 1.10 percent up at 6,910.12 points, while mid-cap FTSE 250 gained 0.51 percent at 18,024.82 points.
Germany's DAX rose 1.67 percent at 10,610.46 points; France's CAC 40 trades 1.63 percent higher at 4,481.27 points.
MSCI's broadest index of Asia-Pacific shares outside Japan rose, extending gains to 1.3 percent in its sixth straight session of increases.
Japanese markets closed in observance of Autumnal Equinox Day. Australia's S&P/ASX 200 index climbed 0.80 percent at 5,382.20 points and South Korea's KOSPI added 0.67 percent at 2,049.70 points.
Shanghai composite index rose 0.5 percent at 3,042.31 points, while CSI300 index gained 0.7 percent at 3,291.12 points. Hong Kong's Hang Seng index advanced 0.4 percent at 23,759.00 points.
Commodities Recap
Crude oil prices edged up, extending gains from the previous session after an unexpected U.S. crude inventory draw tightened supply. International benchmark Brent crude was trading 0.3 percent higher at $47.19 per barrel by 0919 GMT, having touched a 1-week high of $47.33 earlier in the session. U.S. West Texas Intermediate crude rose 0.26 percent at $45.72 a barrel, hovering towards an early high of $45.85, its highest since September 13.
Gold prices declined on profit booking after rising more than 1.5 percent in the previous session, while investors turned towards riskier assets following the U.S. Federal Reserve policy outcome. Spot gold fell 0.3 percent at $1,332.37 an ounce by 0931 GMT, pulling away from a high of $1336.61 hit in the previous session. U.S. gold futures rose 0.4 percent to $1,337.30 an ounce.
Treasuries Recap
The US Treasuries were pushed higher across the curve following the release of the September FOMC statement that left rates unchanged, highlighted balanced risks to the economic outlook. The yield on the benchmark 10-year Treasury note fell nearly 3 basis points to 1.641 percent, the yield on 5-year bond dipped 1-1/2 basis points to 1.182 percent and the yield on short-term 2-year note also slid 1-1/2 basis points to 0.774 percent.
The Eurozone periphery bonds strengthened as the Federal Reserve officials lowered their outlook for long-term interest rates. The French 10-year bond yields fell 5-1/2 basis points to 0.178 percent, Irish 10-year bonds yield fell 6 basis points to 0.424 percent, Italian equivalent also dipped 7-1/2 basis points to 1.212 percent, Netherlands 10-year bonds yield inched 6 basis points lower to 0.057 percent, Portuguese equivalents tumbled 3 basis points to 3.372 percent and the Spanish 10-year bonds yield slid 6-1/2 basis points to 0.940 percent.
The UK gilts gained after the Bank of England in its Financial Policy Committee report mentioned that economy is facing a challenging period of uncertainty and adjustment after the Brexit vote. The yield on the benchmark 10-year gilts fell 4-1/2 basis points to 0.763 percent, the super-long 40-year bond yield dipped 4 basis points to 1.398 percent and the yield on 5-year bond slid 1-1/2 basis points to 0.230 percent.
The German bunds rallied after the Federal Reserve left interest rates unchanged and downgraded the economic outlook, encouraging investors to seek safe-haven assets. The yield on the benchmark 10-year bond fell 5-1/2 basis points to -0.045 percent (two-week low), the yield on long-term 30-year note dipped 7 basis points to 0.520 percent and the yield on short-term 2-year bond slid 1 basis point to -0.669 percent.
New Zealand government bonds closed higher after the Reserve Bank of New Zealand left its official cash rate unchanged at a record low of 2.00 percent. The yield on the benchmark 10-year bond fell 15 basis points to 2.480 percent, the yield on 7-year note ended 11 basis points lower at 2.185 percent and the yield on short-term 2-year note slid 9 basis points to 1.915 percent.
The Australian government bonds rallied after the United States Federal Reserve downgraded its economic outlook and the FOMC left fed funds rate unchanged in a 0.25-0.50 percent range, in line with market expectations. The yield on the benchmark 10-year Treasury note fell 9-1/2 basis points to 2.098 percent, the yield on long-term 15-year note dipped 9 basis points to 2.466 percent and the yield on short-term 2-year slid 2-1/2 basis points to 1.605 percent.
