Market Roundup
- USD/JPY +0.35%, EUR/USD 0.0%, GBP/USD +0.02%
- DXY +0.03%, DAX -0.16%, Brent +0.06%, Iron -2.02%, Gold -0.75%
- Fed’s Bullard-Says leaning towards supporting December hike
- BoE’s Broadbent-Reason behind fall in exchange rate matters for policy
- UST 10-year yield hits 2.3410 trend high, last seen December 2015
- France Post Thurs presidential TV debate sees Fillon advance in the polls
- Germany Finmin says EU Commission has no authority to decide on fiscal wiggle room
- AXJ currencies on the back foot, but no real panic unlike last week
- Draghi-EZ recovery relies to a considerable degree on accommodative policy
- Germany Oct Prod Prices -0.4% y/y vs -1.4% previous, -0.9% expected
- EZ Sept C/A SA E25.3 bln vs revised 296.1 bln previous,
- BoJ Kuroda – Conducted fixed rate ops because of rapid rise in 2-5 yr- yields
- Japan FinMin Aso – FX stability desirable, no comment on recent moves
- PM Abe after meet with Trump – Confident of building relationship based on trust
- Yuan falls to fresh 8-year low on resurgent USD, PBOC fix 6.8796
- Auditors – ECB at risk of conflicts of interest over bank supervision
- Bank of Korea suspected of intervening to slow KRW decline
Economic Data Ahead
- (0830 ET/1330 GMT) The Statistics Canada is expected to report that annual inflation rate rose 1.5 percent in October from 1.3 percent in September, bringing it closer to the Bank of Canada’s 2 percent target. While core consumer price index is likely to remain unchanged at 1.8 percent.
- (1000 ET/1500 GMT) The Conference Board is likely to report that U.S. leading indicator edged up 0.1 percent in the month of October after rising 0.2 percent in September.
- (1100 ET/1600 GMT) Federal Reserve Bank of Kansas City issues manufacturing activity index for the month of November. The indicator stood at 18 in the previous month.
- (1300 ET/1800 GMT) Baker Hughes reports U.S. Oil Rig Count.
Key Events Ahead
- (0930 ET/1430 GMT) Kansas City Federal Reserve Bank President Esther George will likely give her views on the economic and monetary policy outlook.
- (0935 ET/1435 GMT) Federal Reserve Bank of New York President William Dudley participates in an economic press briefing in New York.
- (0945 ET/1445 GMT) Federal Reserve Bank of Chicago President Charles Evans gives opening remarks before the Eleventh Annual Community Bankers Symposium hosted by the Federal Reserve Bank of Chicago.
- (1145 ET/1645 GMT) FedTrade 30-year Ginnie Mae max $1.225 bln
- (1230 ET/1730 GMT) Federal Reserve Board Governor Lael Brainard speaks on "The Evolution of Work and the Increase in Alternative Work Arrangements" in New York.
- (1330 ET/1830 GMT) Dallas Federal Reserve Bank President Robert Kaplan will deliver a speech
- (2145 ET/0245 GMT) Federal Reserve Board Governor Jerome Powell speaks on "The Global Trade Slowdown and its Implications for Emerging Asia" before the Center for Pacific Basin Studies 2016 Research Conference, in San Francisco.
FX Beat
DXY: The dollar gained versus its major peers after Federal Reserve Chair Janet Yellen testimony reinforced market expectations of U.S. interest rate hike next month. The greenback against a basket of currencies traded flat at 101.00, having hit a 13-1/2 -year high of 101.37 earlier in the session. FxWirePro's Hourly Dollar Strength Index stood at 47.75 (Bias Neutral) by 1100 GMT.
EUR/USD: The euro declined, extending losses for the tenth consecutive session, as the greenback continued to rise after Federal Reserve Chair Janet Yellen's testimony provided a strong signal that U.S. interest rates would rise next month. Moreover, the selling pressure around the major intensified after comments from ECB president Draghi indicated that the central bank is prepared to utilize all instruments available to secure sustained convergence towards inflation target. The European currency trades 0.2 percent down at 1.0604, having hit an 11-month low of 1.0581 earlier in the session, and was down around 2.5 percent for the week. FxWirePro's Hourly Euro Strength Index stood at -69.89 (Bias Slightly Bearish) by 0900 GMT, ahead of speeches from Fed officials. The major support is around 1.0580 and any break below confirms further weakness, a decline till 1.0560/1.0520 is possible. On the higher side, any break above 1.0680 (5- day MA) will take the pair till 1.0760/1.08200 in the short term.
USD/JPY: The dollar rallied above the 110.00 handle, as investors continued to cheer on optimistic Fed Chair Yellen's testimony, which kept the bid tone around the greenback strong. According to CME FedWatch, markets now price in a more than 90 percent chance of a rate hike at the December policy meeting. The major was also underpinned by BoJ’s announcement on buying unlimited JGBs and higher yields on U.S. Treasury notes. The pair trades 0.5 percent higher at 110.63, having hit an early 5-1/2 month high of 110.92, and had gained nearly 7.5 percent in the last two weeks, its strongest since January 1988. FxWirePro's Hourly Yen Strength Index stood at -121.19 (Bias Highly Bearish) by 1000 GMT. In absence of relevant fundamental drivers from the U.S docket, investors’ attention now remains on Federal Reserve officials' speeches. The major resistance is around 111 and break above targets 111.80. On the lower side, minor support is around 108.66 (5- day MA) and any break below targets 108 /107.45
GBP/USD: Sterling steadied above the 1.2400 handle after declining to an early low of 1.2382, despite broad-based U.S. dollar strength. The major was supported by rising speculation that post-Brexit referendum slump this year may have run its course for now after Bank of England Deputy Governor Ben Broadbent stated that sterling's plunge since Brexit vote reflected concern about the economic outlook rather than expectations of higher inflation. Sterling trades 0.1 percent up at 1.2424, attempting to sustain gains above the 1.2400 handle. FxWirePro's Hourly Sterling Strength Index stood at 33.72 (Bias Neutral) by 1000 GMT. On the higher side, any break above 1.2530 will take the cable to next level till 1.2600/1.2675. The pair should break below 1.2378 (daily Kijun-Sen) for further decline, a drop till 1.23500/1.2300 is possible. Against the euro, the pound trades flat at 85.47 pence, after rising to an early high of 85.4226 pence, its highest since mid-Sept.
USD/CHF: The Swiss franc declined, extending losses for the ninth consecutive day, as the greenback gained following Federal Reserve Chair Janet Yellen testimony. The dollar trades 0.1 percent higher at 1.0081, after rising as high as 1.0119, its strongest level since Feb. 3. FxWirePro's Hourly Swiss Franc Strength Index stood at -22.84 (Bias Neutral) by 1000 GMT. Short term trend is bullish as long as support 0.9990 (5- day MA) holds. Any violation below 0.9990 confirms minor weakness, a decline till 0.9945/0.9900 is possible. On the higher side, resistance stands at 1.0095 and any indicative close above targets 1.0180
AUD/USD: The Australian dollar slumped to a 5-month low amid board based greenback strength. The major fell for the third straight session as Fed Chair Janet Yellen's testimony reaffirmed market expectations for a December rate hike action, which weakened the bid tone around the Aussie. The pair trades 0.3 percent lower at 0.7381, having hit an early low of 0.7365, its weakest since Jun. 28. FxWirePro's Hourly Aussie Strength Index stood at - 145.45 (Bias Highly Bearish) by 1000 GMT. On the higher side, minor resistance is around 0.7506 (5- day MA) and any break above will take it till 0.7580/0.7650/0.7680. The major support is around 0.7350 and break below will drag it till 0.7300/0.7280.
NZD/USD: The New Zealand dollar retreated after tumbling to a 3-1/2 month low, as upbeat economic data from New-Zealand kept the bid tone around the major intact. Moreover, the recovery is likely to remain fragile, as the greenback continues to remain strong across the board. The Kiwi trades 0.2 percent higher at 0.7039, recovering from an early low of 0.7000, its lowest since Jul. 26. FxWirePro's Hourly Kiwi Strength Index was at -14.08 (Bias Neutral) by 1100 GMT. Immediate resistance is located at 0.7050, a break above targets 0.7100. On the downside, support is seen at 0.7000 (Session Low), a break below could drag it near 0.6974.
Equities Recap
European shares declined in early trade, while the U.S. bond yields were on track for the biggest fortnightly rise in 15 years on increasing speculations of higher U.S. inflation and imminent interest rates hike.
The pan-European STOXX 600 index decreased 0.34 percent at 339.44 points, while the FTSEurofirst 300 index shed 0.47 percent at 1,339.04 points.
Britain's FTSE 100 trades 0.64 percent down at 6,751.54 points, while mid-cap FTSE 250 lost 0.34 percent at 17,541.66 points.
Germany's DAX tumbled 0.23 percent at 10,660.14 points; France's CAC 40 trades 0.5 percent lower at 4,505.11 points.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.4 percent, hovering above its 4-month low hit earlier in the week.
Tokyo's Nikkei rose 0.59 percent to 17,967.41 points, Australia's S&P/ASX 200 index nudged up 0.34 percent to 5,356.80 points and South Korea's KOSPI declined 0.30 percent at 1,974.58 points.
Shanghai composite index fell 0.5 percent to 3,192.86 points, while CSI300 index shed 0.6 percent at 3,417.46 points. Hong Kong’s Hang Seng shed 0.1 percent at 22,262.88 points.
Commodities Recap
Crude oil prices declined, extending losses for the third consecutive session, as the strengthening of U.S. dollar slashed expectations that OPEC might agree on production cuts. International benchmark Brent crude was trading 0.2 percent lower at $45.80 per barrel by 0915 GMT, pulling away from a high of $47.58 hit in the previous session, its highest since Nov. 2. U.S. West Texas Intermediate crude edged down 0.1 percent at $44.87 a barrel, having touched a 2-1/2 week high of $46.55 on Thursday.
Gold prices tumbled nearly 1 percent to a 5-1/2-month low and were on track for the second week of decline as the dollar strengthened after comments from the Federal Reserve Chair Janet Yellen boosted expectations that U.S. interest rates would rise in December. Spot gold was down 0.81 percent at $1,206.10 an ounce by 0923 GMT, having touched an early low of $1,202.81, its lowest level since May 30. U.S. gold futures fell 1 percent to $1205.00 per ounce, after hitting its lowest since Feb. 10 at $1,201.3 earlier.
Treasuries Recap
U.S. Treasuries were pushed lower across the curve following the release of a firmer October CPI data and was accompanied by stronger than expected jobless claims that reached a 43-year low, coupled with Fed Chair Janet Yellen’s hawkish testimony. The yield on the benchmark 10-year Treasury note rose 3 basis points to 2.308 percent, the yield on long-term 30-year Treasury climbed 3 basis points to 3.016 percent and the yield on short-term 2-year note bounced 1 basis point to 1.035 percent.
The UK 10-year gilt yields hit highest since May as investors moved away from the safe-haven buying amid following weakness in the U.S. Treasuries after Federal Reserve Chair Janet Yellen in her testimony strengthened the case for December interest rate hike. The yield on the benchmark 10-year gilts rose 7 basis points to 1.48 percent, the super-long 40-year bond yield jumped more than 6 basis points to 1.894 percent and the yield on short-term 3-year climbed 1 basis point to 0.323 percent.
The German bunds plunged after the Federal Reserve Chair Janet Yellen in her testimony confirmed that the central bank will hike its interest rate in December. The yield on the benchmark 10-year bond rose 3 basis points to 0.306 percent, the yield on long-term 30-year note jumped 3-1/2 basis points to 0.927 percent and the yield on short-term 3-year bond bounced 1 basis point to -0.63 percent.
The Japanese government bonds slumped after the Federal Reserve Chair Janet Yellen in her testimony to the Joint Economic Committee (JEC) of Congress said that there is a higher possibility for an interest rate hike in December. The benchmark 10-year bond yield rose 2-1/2 basis point to 0.035 percent, the yield on long-term 30-year note climbed 1-1/2 basis points to 0.585 percent and the yield on short-term 3-year note bounced 1/2 basis point to -0.125 percent.
The New Zealand government bonds closed lower as investors moved away from the safe-haven buying amid following weakness in the U.S. Treasuries. The yield on the benchmark 10-year bond rose more than 10 basis points to 3.110 percent, the yield on 7-year note ended nearly 9 basis points higher at 2.763 percent and the yield on short-term 2-year note bounced 7-1/2 basis points to 2.135 percent.
The Australian government bonds slumped after the Federal Reserve Janet Yellen said that recent upbeat economic data strengthened the case of December rate hike. The yield on the benchmark 10-year Treasury note rose 13 basis points to 2.72 percent, the yield on 15-year note jumped 14 basis points to 3.14 percent and the yield on short-term 2-year bounced 5 basis points to 1.827 percent.
