Market Roundup
- Sterling hurt by Northern Ireland court judgment siding with UK
- GBP/USD slips to 1.2123 from 1.2187 Asia/Europe high
- USD/JPY flat, EUR/USD +0.15%, GBP/USD +0.10%
- DXY -0.11%, DAX -0.6%, Brent -0.02%, Iron +3.7%
- ECB’s Coeure – accommodation to stay until we see sustained adjusted
- Switzerland Oct KoF Ind. 104.7 vs revised 101.6 previous, 101.8 expected
- EZ Oct Business Climate 0.55 vs revised 0.44 previous, 0.44 expected
- EZ Oct Economic Sentiment 106.3 vs 104.9 previous, 104.8 expected
- EZ Oct Consumer Confidence -8.0 vs -8.2 previous, -8.0 expected
- Sweden Oct Retail Sales disappoint- +0.6% y/y vs 2.9% Reuters poll
- BoJ Gov Kuroda – Government to take steps to up potential growth
- Japan Sept core CPI -0.5% y/y, Tokyo Oct core -0.4%, -0.5% expected for both
- Japan fund managers up stock exposure in Oct, trim bonds – Reuters poll
- CITIC VP – Chinese samurai bond offers to continue – Nikkei
- US monetary policy works better, may unwind harder
- UK Oct GfK consumer confidence index -3, as eyed, Sept -1
- ECB/BoS Gov Linde – Reducing QE should be done slowly
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department is expected to report that preliminary gross domestic product increased at a 2.5 percent annual rate in the third quarter after a slow 1.4 percent pace in the second quarter.
- (0830 ET/1230 GMT) The U.S. Labor Department will release its employment cost index for the third quarter. The index is expected to remain steady at 0.6 percent.
- (0830 ET/1230 GMT) The U.S. Commerce Department releases the personal consumption expenditures (PCE) price index for the third quarter. The index likely edged down to 1.3 percent after rising 2.0 percent in the previous quarter, while core PCE probably increased 1.6 percent after gaining 1.8 percent in the second month.
- (1000 ET/1400 GMT) The University of Michigan is expected to report that the consumer sentiment index stood at 88.10 in October from a final reading of 87.9 in September.
- (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae (max $1.375 bln)
FX Beat
DXY: The dollar advanced to a 3-month high against the yen as investors awaited for U.S. third-quarter growth data. The greenback against a basket of currencies trades 0.1 percent down at 98.83, hovering just below a near 9-month high of 99.12 struck on Tuesday.
EUR/USD: The euro rose above the 1.0900 handle after data showed Eurozone's economic sentiment strengthened in the month of October. The economy's sentiment indicator rose to 106.3, surpassing projections of 104.8 and previous reading 104.9. The major also strengthened after the ECB policymaker Benoit Coeure stated that the central bank will continue to provide stimulus until inflation rebounds, but its room to manage has been reduced as the government required to bear some of the weight. The major trades 0.2 percent up at 1.0918, attempting to extend gains above the 1.0900 level, but was down nearly 3 percent for the month. It should break above 1.0955 for further upside and any break above 1.0955 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 fresh 3-month high above the 105.00 handle, underpinned by higher U.S. Treasury yields and growing expectations of a rate hike in December. Investors now await U.S. third-quarter GDP data, which is expected to grow at an annualized rate of 2.5 percent during the July-September period, up from 1.4 percent in the previous quarter. An upbeat number would give the Fed an opportunity to raise the economic assessment in the November statement and strengthen prospects for a December rate hike. However, a disappointing result could trigger a fall in the dollar. The major trades higher at 105.31, having touched a high of 105.41, its highest since July 29. Markets attention will also remain on the final print of October’s Reuters/Michigan index, following flash US GDP figures release. The major resistance is around 105.50 and break above targets 105.80/106.30. On the lower side, major support is around 104.25 (daily Tenken- Sen) and any break below targets 103.49 (21- day MA) /102.89.
GBP/USD: Sterling fell to a 3-day against the dollar and 8-day low against the euro following Northern Ireland High Court's ruling on Article 50. The court ruled that the law of the region did not restrict the British prime minister's ability to trigger an exit from the European Union. However, its ruling is applicable only to Northern Ireland law and not to the English case. Sterling trades 0.2 percent lower at 1.2139, after falling as low as 1.2123, its lowest since Oct. 25. Against the euro, it slumped 0.4 percent to 89.84, having declined to a low of 89.93, its lowest since Oct. 20. The short-term trend is bearish as long as resistance 1.2272 holds and any violation above it will take the pair to next level till 1.23325 (Oct 19 High)/1.2400. The immediate support is seen at 1.2150 and any indicative break below targets 1.20880 (Oct 11 Low).
USD/CHF: The Swiss franc declined, as the greenback strengthened on expectations that the Federal Reserve will raise U.S. interest rates by the end of the year. However, gains were capped as Switzerland’s KoF leading indicator for October came in at 104.7, beating estimates of 101.8 and previous 101.6. The dollar trades 0.1 percent up at 0.9945, hovering towards a near 7-month peak of 0.9998 hit earlier in the week. The short term trend is weak as long as resistance 1.000 holds and any violation above 1.0000 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.
AUD/USD: The Australian dollar hit a fresh 2-week low below the 0.7600 handle after a report showed Australian PPI rose 0.3 percent in the third quarter but eased to 0.5 percent on yearly basis as compared to 1.0 percent registered in the previous quarter. Moreover, new home sales growth also decreased to 2.7 percent in September against a growth of 6.1 percent recorded in August. The Aussie trades 0.1 percent lower at 0.7580, having hit a low of 0.7564, it’s lowest since Oct.14. 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 0.7560 (100- day MA) and a break below will drag it till 0.7530/0.7480.
NZD/USD: The New Zealand dollar attempted a minor recovery on the back of board based corrective slide in the US dollar. However, the recovery appears fragile as a continuous rise in the US 10-year Treasury bond yields and expectations of December Fed rate-hike action, weighed on the sentiments of the Kiwi bulls. The major trades 0.3 percent up at 0.7142, pulling away from previous sessions’ low of 0.7108. The pair is likely to extend its downslide further in the near-term, as markets speculate further monetary easing by RBNZ at its November meeting. Immediate resistance is located at 0.7162 (10-DMA), a break above targets 0.7190. On the downside, support is seen at 0.7100, a break below could drag it near 0.7077.
Equities Recap
European shares declined, as global bond yields continued to surge, while the dollar hit a 3-month high against the yen ahead of U.S. third-quarter GDP data due later in the day.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent, while MSCI's global stock index declined for the fourth consecutive day and was down 0.2 percent.
The pan-European STOXX 600 index decreased 0.5 percent at 340.02 points, while the FTSEurofirst 300 index shed 0.54 percent at 1,343.43 points.
Britain's FTSE 100 trades 0.26 percent lower at 6,968.31 points, while mid-cap FTSE 250 slumped 0.24 percent at 17,538.24 points.
Germany's DAX tumbled 0.51 percent at 10,662.66 points; France's CAC 40 trades flat at 4,535.24 points.
Tokyo's Nikkei rose 0.63 percent at 17,446.41 points, Australia's S&P/ASX 200 index declined 0.23 percent to 5,283.20 points and South Korea's KOSPI shed 0.23 percent at 2,019.42 points.
Shanghai composite index fell 0.3 percent at 3,104.27 points, while CSI300 index lost 0.2 percent at 3,340.13 points. Hong Kong’s Hang Seng declined 0.8 percent to 22,954.81 points.
Commodities Recap
Crude oil prices edged up but were set for the biggest weekly losses in six weeks as doubts about whether major oil producers will agree upon an output cut to reduce a global glut that has weighed on markets for two years. Global benchmark Brent crude was trading 0.1 percent up at $50.33 per barrel at 0951 GMT, while U.S. West Texas Intermediate crude declined 0.1 percent at $49.51 a barrel, both contracts on track for their biggest weekly loss in six weeks.
Gold prices steadied, after declining for the previous two sessions as the dollar eased and were on course for second straight weekly gains. Spot gold nudged up 0.1 percent at $1,266.25 an ounce at 0955 GMT and was up about 0.2 percent for the week so far. U.S. gold futures shed 0.1 percent at $1,268.80 per ounce.
Treasuries Recap
The U.S. Treasuries continued their march lower following the largely as expected releases of durable goods orders and initial jobless claims data, seeing further downside in the wake of stronger than expected pending home sales. The yield on the benchmark 10-year Treasury note rose 2 basis point to 1.850 percent, the yield on long-term 30-year Treasury jumped 2 basis points to 2.60 percent and the yield on short-term 2-year note remained steady at 0.884 percent.
The UK 10-year Gilt yields touched its highest for the first time 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. Also, the Gilt/Bund yield spread also widened to the 110 basis points mark. We would expect the yields to stay in the range of 1.20-1.30 percent in the short-term, with an upward break likely eventually but not imminently. The yield on the benchmark 10-year gilts rose 7 basis points to 1.30 percent (highest since Brexit vote), the super-long 40-year bond yield jumped 2 basis points to 1.72 percent and the yield on short-term 2-year bond hovered around 0.30 percent.
The German 10-year bund yields touched its highest levels since May as inventors moved away from safe-haven buying amid rising speculations about the Federal Reserve interest rate hike. We would expect the yields to stay in the range of 0.10-0.20 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 8 basis points to 0.20 percent intra-day, the yield on long-term 30-year note climbed 5 basis points to 0.816 percent and the yield on short-term 3-year bond bounced 3 basis points to -0.591 percent.
The Japanese government bonds slumped as markets followed an overnight retreat by U.S. Treasuries. Also, investors moved away from safe-haven buying after Bank of Japan’s Governor Haruhiko Kuroda made hawkish comments in the Parliament on Thursday. The benchmark 10-year bond yield rose 1 basis point to -0.044 percent, the yield on long-term 30-year Treasury jumped nearly 2 basis points to 0.521 percent and the yield on short-term 3-year note climbed 1/2 basis point to -0.223 percent.
The New Zealand government bonds traded lower following sell-off in the global debt market. Also, rising speculations on the December Federal Reserve interest rate hike supported the Treasury yields. The yield on the benchmark 10-year bond rose 7 basis point to 2.670 percent and the yield on 7-year note jumped 5-1/2 basis points at 2.425 percent.
The Australian government bonds plunged as investors expect that the Reserve Bank of Australia in its next week monetary policy meeting will keep the official cash rate (OCR) on hold at a record low of 1.50 percent in the wake of stronger-than-expected third quarter consumer price index. The yield on the benchmark 10-year Treasury note rose nearly 5 basis points to 2.388 percent (six months high), the yield on 15-year note jumped 6 basis points to 2.751 percent and the yield on short-term 2-year climbed 3 basis points to 1.73 percent.
