Market Roundup
- USD/JPY +0.64%, EUR/USD -0.35%, GBP/USD -0.3%
- DXY +0.25%, DAX +1.65%, Brent +0.7%, Iron +3.0%
- BoE’s Carney says willing to tolerate some inflation overshoot
- Carney says inflation environment in the UK is going to change
- Certainly not a fan of EZ entry-Czech Finmin Babis-Hospodarske Noviny
- S.A Finmin Gordhan says he is here to stay
- Gordhan says has been subjected to political mischief
- Switzerland Sept Prod Prices -0.1% y/y vs -0.4% previous, -0.2% expected
- EZ Aug Trade Bal. E18.4 bln vs 25.3 bln previous, 15.3 bln expected
- UK Aug Construction output +0.2% y/y vs -1.5% previous, +1.5% expected
- Japan Sept domestic corp goods prices -3.2% y/y, Aug -3.6%
- China Sept CPI +0.7% m/m, +1.9% y/y, +0.3/+1.6% expected
- RBA warns banks of oversupply danger in apartment frenzy
- RBA banking system in good shape, China focus of risk
- RBA concerns over rising debt defaults
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department is expected to report that retail sales rose 0.6 percent in September, compared with a 0.3 percent decline in August. Excluding autos, retail sales are likely to rise 0.4 percent, after edging down 0.1 percent in the previous month.
- (0830 ET/1230 GMT) The U.S. producer price index is forecast to have increased 0.6 percent in September, after remaining unchanged in August. PPI excluding food and energy is expected to rise 0.2 percent after falling 0.1 percent in the prior month.
- (1000 ET/1400 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index rose to 91.9 in October, compared to a final reading of 91.2 in September.
- (1000 ET/1400 GMT) The U.S. Commerce Department is expected to report that business inventories increased 0.2 percent in August, after staying unchanged in July.
- (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count.
- (1400 ET/1800 GMT) The U.S. government is expected to report a budget surplus of $25 billion for the month of September, as compared with a deficit of $107 billion in August.
Key Events Ahead
- (0830 ET/1230 GMT) Federal Reserve Bank of Boston President Eric Rosengren is expected to give welcome and opening remarks at the "The Elusive 'Great' Recovery: Causes and Implications for Future Business Cycle Dynamics" conference hosted by the Federal Reserve Bank of Boston.
- N/A Bank of England Governor Mark Carney's speech.
- (1200 ET/1600 GMT) Federal Reserve Bank of Cleveland President Loretta J. Mester will participate in a roundtable discussion with Common Good Ohio, which is affiliated with the Center for Popular Democracy's Fed Up campaign in Cleveland.
- (1330 ET/1730 GMT) Federal Reserve Chair Janet Yellen speaks on "Macroeconomic Research After the Crisis" at a conference hosted by the Federal Reserve Bank of Boston.
FX Beat
DXY: The dollar gained versus the euro and the yen as investors await series of U.S. economic data and Fed Chair Janet Yellen speech for further insights on the U.S. monetary policy outlook. The greenback against a basket of currencies traded 0.3 percent higher at 97.84, hovering towards a 7-month high of 98.13 hit on Thursday and was up 1 percent for the week.
EUR/USD: The euro slumped, extending downside near 1.1000 handle, as expectations of a rate hike by the Federal Reserve at its December meeting continued to strengthen the dollar. Markets appeared to ignore better-than-expected Eurozone's trade balance data, which rose to 23.3 billion euro (s.a.) in August. The major declined 0.4 percent to 1.1015, hovering towards a 2-1/2-month low of 1.0985 hit on Thursday and was heading for a 1.7 percent weekly loss. Investors await U.S. retail sales data and remarks from Federal Reserve officials that could cement prospects of a U.S. interest rate hike this year. On the lower side, 1.0980 will be acting as major support and any break below will drag the pair down till 1.0950/1.0900. Immediate resistance is around 1.10750 and any break above targets 1.10750 (23.6% retracement of 1.13660 and 1.09850)/1.1100/1.1160 in the short term.
USD/JPY: The dollar gained, hovering towards an 11-week high as risk sentiment got a boost from upbeat Chinese inflation data, driving investors away from the perceived safe-haven Japanese Yen. The major trades 0.6 percent higher at 104.27 yen, having risen to 104.62 on Thursday, its strongest level since July 29 and was up 1.2 percent for the week. The prevalent risk-on sentiment will continue to drive the pair higher; however, further upward momentum will depend on the outcome of upcoming US macro releases that include - monthly retail sales, PPI and Prelim UoM Consumer Sentiment, and speeches from Federal Reserve official Eric Rosengren and Janet Yellen. The major resistance is around 104.65 (trend line joining 104.32 and 104.48) and a break above targets 105.08/106. On the lower side, major support is around 103.35 (100- day MA) and any break below 103.30 will drag it till 102.80/102.20.
GBP/USD: Sterling steadied above the 1.2200 handle, retreating from early lows, following comments from Bank of England policymakers. BoE Gov Carney stated that central bank's wanted to remove uncertainty around inflation and rates, while policymaker Nemat Shafik commented on the impact of August stimulus package announced to combat Brexit-fallout. Sterling trades 0.2 percent lower at 1.2227, attempting to sustain gains above the 1.2200 level. Investors will continue to digest headlines from the BoE and developments surrounding Brexit, ahead of series of U.S. macro fundaments. Cable is facing major resistance at 100-HMA and any violation above confirms minor trend reversal, a jump till 1.2320/1.2350 is possible. On the lower side, any break below 1.2200 will drag the pair down till 1.21670/1.21320 in the short term. Against the euro, the pound trades 0.2 percent higher at 90.00 pence.
USD/CHF: The Swiss franc declined, reversing most of its previous session gains as upbeat Chinese inflation report strengthened market sentiment across the board. The dollar trades 0.3 percent higher at 0.9887, hovering towards an 11-week high of 0.9909 hit in the prior session. Data released earlier showed Switzerland's producer and import prices in September rose 0.3 percent, surpassing estimates of 0.1 percent and previous -0.3 percent, which limited the downside in the Swiss currency. On the higher side, any close above 0.9910 will take the pair till 0.9960/1.000. The short term weakness can be seen only below 0.9845 (5- day MA) and any break below targets 0.9790/0.9730.
AUD/USD: The Australian dollar rose above the 0.7600 handle, rebounding from a 3-week low as stronger-than-expected Chinese inflation report boosted risk-on investor sentiment. Moreover, higher oil prices and rising European stocks strengthened the bid tone around the Aussie. However, further upside is likely to depend on the outcome of upcoming U.S. retail sales and Fed Yellen’s speech, which will have a significant impact on the pair. The major trades 0.65 percent higher at 0.7618, hovering towards a high of 0.7628 hit earlier in the week. On the higher side, major resistance is around 0.7645) and any break above will take the pair till 0.7680/0.7730. The major support is around 0.74860 (trend line joining 0.74420 and 0.74460) and a break below will drag it till 0.7440/0.7400.
NZD/USD: The New Zealand dollar trimmed upbeat Chinese inflation data-led spike as renewed strength in the greenback weighed on the Kiwi bulls. Moreover, rising speculation of further rate-cut action by RBNZ at its November meeting also weakened the bid tone around the New Zealand currency. The major trades 0.1 percent up at 0.7101, having touched an early high of 0.7132. Investors attention now remains on U.S. macro releases and the Fed Chair Janet Yellen's speech for fresh impetus on the pair. Immediate resistance is located at 0.7150, break above targets 0.7180/ 0.7200. On the downside, support is seen at 0.7050, a break below could drag it lower 0.7030/ 0.7000.
Equities Recap
World shares rose, erasing most of its previous session losses, as better-than-expected Chinese inflation figures eased worries about the health of the world's second-largest economy.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.6 percent, while the MSCI World index was up 0.2 percent and was down 1.2 percent for the week, recording its biggest weekly decline since early September.
The pan-European STOXX 600 index increased 1.24 percent at 339.77 points led higher by its mining stocks, while the FTSEurofirst 300 index gained 1.26 percent at 1,340.65 points.
Britain's FTSE 100 trades 0.82 percent up at 7,035.09 points, while mid-cap FTSE 250 advanced 0.78 percent at 18,015.36 points.
Germany's DAX jumped 1.38 percent at 10,557.96 points; France's CAC 40 trades 1.55 percent higher at 4,473.66 points.
Tokyo's Nikkei rose 0.49 percent at 16,856.37 points, Australia's S&P/ASX 200 index added 0.01 percent at 5,436.30 points and South Korea's KOSPI gained 0.36 percent at 2,022.66 points.
Shanghai composite index rose 0.1 percent at 3,063.81 points, while CSI300 index also edged up 0.1 percent at 3,305.85 points. Hong Kong’s Hang Seng rose 0.9 percent at 23,233.31 points.
Commodities Recap
Crude oil prices rose, extending gains for the previous session, after U.S. government report showed large draws in diesel and gasoline, however, the upside was limited as markets raised doubts over the feasibility of a planned production cut. Global benchmark Brent crude was trading 0.98 percent higher at $52.44 per barrel at 0926 GMT, having declined to a low of 50.95 in the previous session. U.S. West Texas Intermediate crude rose 0.99 percent at $51.02 a barrel, recovering from a low of 49.39 hit on Thursday.
Gold prices nudged down as stronger-than-expected Chinese inflation figures boosted market sentiment, sending the global equity and riskier assets higher. Spot gold was down 0.1 percent at $1,255.87 an ounce by 0935 GMT and was on track to end the week mostly flat. U.S. gold futures fell 0.1 percent at $1,256.80 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7659 percent higher by 0.028 bps, while 5-year was 0.027 bps up at 1.2817 percent.
Euro zone government bond yields edged higher ahead of Federal Reserve chair Janet Yellen speech, which could provide investors further clues on the likelihood of a U.S. rate hike in December. The 10-year Bund yield has risen as much as 21 basis points since the end of September when it hit a low of minus 0.16 percent,
British government bond yields rose to their highest since the results of the Brexit vote as a weakening pound stoked inflation expectations. UK 10-year yields rose 6 basis points to 1.085 percent, the highest since June 24.
Gilts opened 26 ticks lower than the settlement of 127.45 as core fixed income markets came under pressure from above forecast September China PPI and a positive session from the Nikkei.
The short-dated Japanese government bonds rose in price after an auction of 5-year JGBs drew strong demand, however, longer maturities declined after their yields hit 1-week lows in the previous session. The 5-year JGB yield fell 0.5 basis point to minus 0.205 percent, while the 2-year notes yield also fell 0.5 basis point to minus 0.275 percent. Yields on longer dated maturities rose, with the benchmark 10-year yield rising 0.5 basis point to minus 0.060 percent, while the 30-year yield went up 1.5 basis point to 0.495 percent. The price of 10-year JGB futures dipped 0.03 point to 151.84, capped at 151.92 for four straight sessions.
Australian government bond futures eased, with the 3-year bond contract down 4 ticks at 98.29, while the 10-year contract fell 2.5 ticks to 97.755.
New Zealand government bonds slipped, sending yields 1 basis point higher across the curve.
