Market Roundup
- EUR/USD backing away from 200DMA at 1.1032, 1.1025 high.
- USD/ZAR backs away from 15.30 Wed high.
- USD/CNH breaks Aug 24 high to 6.5479, +0.5%.
- EUR/CHF plays 1.0800-1.0847, USD/CHF 0.9832-0.9900.
- SNB 3 month Target Libor unchanged at -0.25%, as expected.
- SNB says CHF still significantly over valued.
- SNB's Jordan: Does not exclude further rate cut.
- UK Oct Trade Bal. Non-EU -bln, -1.7bln expected, -2.076bln previous.
- UK Oct Trade Bal. -bln vs -9.7bln exp, -8.8bln expected.
- BoE might send message on distant rate hike bets.
- UK Nov RICS house price balance +49, +50 expected, Oct rev up to +50, supply short.
- Australia Nov employment +71.4k, jobless 5.8%, -10k, 6% expected.
- Fed plans to signal gradual, cautious path on rate hikes -J. Hilsenrath, WSJ
Economic Data Ahead
- (0830 ET/1330 GMT) New U.S. applications for jobless benefits likely unchanged at 269,000 last week at levels consistent with sustained labor market strength, according to a survey of economists.
- (0830 ET/1330 GMT) The U.S. import and export prices are expected to have dropped 0.7 percent and 0.3 percent, respectively in November.
- (0830 ET/1330 GMT) Canada's industrial capacity use likely to have increased to 81.9 percent in the third quarter, offsetting its fall for two consecutive quarters. Capacity utilization use in the second quarter was 81.3 percent.
- (0830 ET/1330 GMT) Analysts expect new home prices in Canada to have edged up by 0.1 percent in October from September.
- (1030 ET/1530 GMT) EIA Natural Gas Storage Change for the week ending Dec 4 likely to be at -64B vs previous -53B.
- (1400 ET/1900 GMT) The Treasury Department is likely to post a budget deficit of $68 billion in November, compared to a gap of $136 billion in the previous month.
Key Events Ahead
- (0945 ET/1445 GMT) FedTrade Operation 30-year Ginnie Mae (max $1.050 bn).
- (1145 ET/1645 GMT) FedTrade Ops 15-yr F.Mae / (max $500 mn).
- ( 1500 ET/2000 GMT) FRB NY releases tentative agency MBS operation schedule
FX Beat
USD: The dollar inched higher as traders eyeing next week's expected increase in U.S. interest rates, took advantage of its recent dip.
EUR/USD: The euro pulled back from a one-month high against the dollar to trade 0.5 percent lower at $1.0975. The common currency scaled a one-month peak of $1.1044 on Wednesday, extending last week's short-covering rally after the ECB fell short of delivering the aggressive easing many had anticipated. The pair has broken major resistance 1.100 and was trading around 1.09445. Overall trend is still weak as long as resistance 1.10900 holds. It has broken minor support 1.0960 and slightly declined till 1.09335 at the time of writing from that level. It should close above 1.1030 for further bullishness. On the lower side major support is around 0.9960 and break below targets 0.9928/0.9900 level. Major resistance is around 1.1030 and break above targets 1.1070/1.1090 level.
USD/JPY: The pair has broken major support 122.25 and declined till 121.07 level. It is currently trading around 121.60. Intraday trend is still weak as long as resistance 122.25 holds. On the higher side minor intraday resistance is around 122.25 and any break above targets 122.50/122.90. Minor support is at 121 and break below targets 120.60/120.
EUR/CHF: The Swiss franc rose to a 1-week high against the euro after Swiss National Bank kept its target range for three-month Libor at between -1.25 and -0.25 percent as expected, but it said it would remain active in the currency market if necessary. The euro fell to 1.08 francs, its lowest in a week, from around 1.0830 francs before the policy announcement.
GBP/USD: Sterling gained against the euro and traded at its highest in almost three weeks against the dollar on Thursday ahead of a Bank of England statement that some are looking to for a more bullish tone on the timeline for interest rate hikes. By 0930 GMT, the pound was half a percent stronger on the day against the euro at 72.26 pence. It was flat at $1.5175, having hit $1.5197, its highest since Nov. 22. The pair has broken short term resistance 1.5160 and was trading around 1.51750. Major intraday resistance is around 1.5190 and any break above 1.5190 will take the pair to next level 1.5220/1.5250/1.5280 level. On the lower side the support is around 1.5160 (resistance turned into support) and break below will drag the pair further down till 1.5100/1.5050 level. On a trade-weighted basis, sterling has shed around 2 percent since the Bank flagged concerns about external developments weighing on the growth outlook last month.
USD/CHF: The pair is trading flat after SNB kept its deposit rates unchanged at -0.75% . Technically its major intraday resistance is around 0.9876 (34 day H E MA) and break higher will take the pair to next level around 0.9900/0.99387/0.9957. Overall bearish invalidation only above 1.00350 level. On the other hand break below 0.9820 will drag down the pair further lower till 09798 (61.8% retracement of 0.9476 and 1.03280) /0.9760.
AUD/USD: The Australian dollar touched a high of $0.7333, pulling away from the previous day's 2-week low of $0.7169. It last stood at $0.7295, up 0.9 percent, helped by a robust jobs report. The pair's major intraday resistance is around 0.7350 and break above targets 0.7380/0.7435. On the lower side minor support is around 0.7240 and any break below will target 0.7200/0.7170. Short term trend is bullish as long as support 0.7170 holds. Aussie climbed 1.5 percent on the yen, while the euro and pound skidded two full cents and pence against the Aussie.
NZD/USD: The kiwi dollar rose to a high of $0.6782, more than two full U.S. cents above the previous day's low of $0.6562. It was last up 0.3 percent at $0.6737. It jumped as far as $0.6782, from $0.6640, after the RBNZ cut interest rates to 2.50 percent but appeared less dovish than the market had anticipated. It jumped more than 1 percent against the euro, pound and yen, but could not outpace its Aussie cousin.
Equities Recap
Stocks were knocked down towards 2-month lows, with a fourth consecutive day of drop, as the recouping commodity prices, a limp USD and uncertain emerging market add to nervous global mood.
European stocks were steady after two days of losses, Britain's FTSE 100 dropped 0.5 pct, France's CAC 40 fell 0.5 pct, while Germany's DAX slipped 0.4 pct.
Japan's Nikkei ended down 1.3 pct at a 5-week low and Australian shares closed down 0.8 pct. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.1 pct. Chinese shares shed early gains, with the CSI300 ending 0.35 pct down, Shanghai Composite Index closing down 0.5 pct at 3,455.50 points. Hong Kong, Indonesia and Korea stocks ended the day in red.
Commodities Recap
Oil prices posted the first rise in the week, which were trading at multi-year lows. Brent and U.S. WTI crude inched higher in tandem to reach $40.44 and $37.33 per barrel respectively, but both remained close to of 7-year lows.
Gold was unchanged as investors stuck to the sidelines ahead of a widely anticipated U.S. interest rate hike next week, with even a fall in USD failing to trigger interest in the metal. Spot gold was flat at $1,073.58 per troy ounce, after ending down 0.1 pct in the previous session.
Treasuries Recap
US 10-year Treasury yield stood at 2.220 pct versus US close of 2.208 pct on Wednesday.
The yield on 2-year German government bonds dropped to a 1-week low of -0.32 percent, just below the ECB's deposit rate of -0.30 percent. Yields on 10-year bonds across the euro zone inched lower, with German Bund yields down 1 bp at 0.60 percent.
JGB prices closed the day flat to modestly higher, with the 7s/40s curve flattening by 1.5bp from yesterday's afternoon close. JGBs in the 7-yr to 20-yr zone were in a very narrow range of 0.5bp or less in relatively thin trading, with yields closing at their intraday lows, down 0.5bp from yesterday's afternoon close.
UK Gilts started 31 ticks more than the settlement of 117.24, as expected, as weak oil prices continued to fuel thoughts of weak global growth.
New Zealand government bonds went high, pushing yields between 1 and 2 bps lower along the curve. Australian government bond futures dropped sharply, with the 3-year bond contract shedding 12 ticks to 97.780. The 10-year contract lost 6 ticks to 97.0900, while the 20-year contract was a tick lower at 96.6200.
