Market Roundup
- Yen strengthens after BoJ declines to ease policy further.
- EUR/USD up from Wed's 2-1/2 mth low vs USD. Plays 1.0965 to 1.1020.
- GBP/USD underpinned on month end demand, trades between 1.5308/1.5359.
- European shares set for monthly gain.
- EZ Oct flash inflation 0.0% vs previous -0.1%. 0.0% expected.
- EZ Sept Unemployment rate 10.8% vs previous 10.9% revised. 11.0% expected.
- Swiss Oct KOF indicator 99.8 vs previous 100.3 revised. 100.0 expected.
- Swiss central bank posts 33.9 bln Sfr loss for 9 months.
- Japan govt plans extra budget of over 3.1 trln yen.
- Kuroda: CPI at 2% in H2 of FY2016.
- BoJ: Price trend improving steadily, Capex to keep rising.
- BoJ opts to remain conventionally unconventional.
- RUB up after CBR keeps rates on hold.
Economic Data Ahead
- (0800 ET/1200 GMT) Chile's jobless rate for the July-to-September period is expected to have risen to 6.6 percent vs previous 6.5 pct.
- (0830 ET/1230 GMT) U.S. consumer spending likely to have increased 0.2 pct in September, after increasing 0.4 percent in August, offering confirmation that domestic demand remains solid despite a softening global economy. While personal income is expected to have risen 0.2 pct.
- (0830 ET/1230 GMT) Employments costs in U.S. in the third quarter probably increased 0.6 percent, after climbing 0.2 pct in Q2.
- (0830 ET/1230 GMT) Investors pay attention to Canadian gross domestic product (GDP) for August to gauge how the economy for the third quarter is shaping up. The GDP is expected to have picked up by 0.1 percent in the month, reinforcing the view that growth is rebounding after a mild recession in the first half of the year.
- (0945 ET/1345 GMT) Chicago PMI for Oct probably climbed to 49.0 from 48.7 in September.
- (1000 ET/1400 GMT) The University of Michigan's final index on overall consumer sentiment for October likely rose to 92.5, a bit higher than the final reading of 92.1 in September.
- Colombia's central bank is likely to raise its benchmark interest rate by a quarter point, according to a recent survey of analysts.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade 15-yr Fannie Mae/Freddie Mac (max $425 mn).
- (1050 ET/1450 GMT) Federal Reserve Bank of San Francisco President John Williams participates in a discussion on "Where Interest Rates Will Be When the Economy is (Finally) Healthy and Why It Matters" at an event hosted by the Brookings Institution.
- (1125 ET/1525 GMT) FRB Kansas City's George on "Federal Reserve Structure".
- (1145 ET/1545 GMT) FedTrade 30-yr Fannie Mae/Freddie Mac (max $1.625 bn).
- (1430 ET/1930 GMT) The Board of Governors of the Federal Reserve System will hold an open meeting to discuss a proposed rule establishing total loss-absorbing capacity and long-term debt requirements for global systemically important banking organizations,as well as a final rule on margin and capital requirements for uncleared swaps of prudentially regulated swap entities.
FX Beat
EUR/USD: The euro rose 0.3 pct on the day at $1.1007, boosted by an unexpected improvement in euro zone economic sentiment and signs of faster-than-expected inflation in Germany. The data helped the common currency bounce from a 2-1/2-month low of $1.0896 struck after the Fed's statement. Overall trend is still weak as long as resistance 1.1100 holds. On the higher side minor resistance is around 1.1038 and any break above targets 1.1070/1. pair's further bullishness only above 1.1380.
GBP/USD: Sterling has made a low of 1.52485 and recovered till 1.53590 from that level. It is currently trading at 1.53370. The break above 1.5370 will take the pair to next level till 1.5420/1.5450. On the downside any break below 1.5320 targets 1.5300/1.5260 in short term. Overall bullishness can be seen only above 1.5510.
USD/JPY: The yen was firm against the dollar on Friday after the Bank of Japan stood pat on monetary policy, disappointing some speculators who had bet the central bank would expand its already huge stimulus programme. The greenback was a touch lower across the board on Friday, and fell to as low as 120.29 yen after rate decision, before recovering a little to 120.715, still down a third of a percent on the day. The pair has made a high of 121.48 today and retreated till 120.40 at the time of writing. It is currently trading at 120.50. Overall trend is still weak as long as resistance 121.50 holds. The pair' major support is around 119.60. Any break below 119.60 will drag the pair further down till 119.20/118.90 in short term. It is facing short term resistance around 121.5 and any indicative break above would extend gains till 122/122.40.
USD/CHF has made a high of 0.9958 and declined till 0.9855 from that level. Overall trend is still bullish as long as support 0.9820 holds. The minor resistance is around 0.9900 and break above would extend gains till 0.9960/0.9100. On the downside minor support is around 0.9820 and below that level will target 0.9800/0.9757.
AUD/USD: The Australian dollar remained fragile and underperformed its steadier New Zealand neighbour, as falling global commodity prices and the risk of a rate cut at home weighed on sentiment. The Aussie dollar did struggle up to $0.7096 from a trough of $0.7067, but was still down 1.7 percent for the week. The pair recovered till 0.71366 after making a low of 0.7068, it is facing strong resistance around 0.7160 and further bullishness only above that level. Overall bullishness can be seen only above 0.7300 and break above targets 0.7360/0.7380. On the lower side minor support is around 0.7060 and break below targets 0.7000.
NZD/USD: The kiwi edged up to $0.6724, and well away from a low of $0.6622 touched earlier in the week.
Equities Recap
World shares were on track for their best month in 4 years as global central banks kept stimulus policies intact and many hinted at further steps to re-energise their economies.
The pan-European index of leading 300 shares rose 0.2 pct at 1,487 points, putting it on course for a rise of 8.5 pct over the course of October, France's CAC 40 and Germany's DAX were both up 0.4 pct, while Britain's FTSE 100 was trading flat.
MSCI's broadest index of Asia-Pacific shares outside Japan went up 0.1 pct, poised to lose 2.3 pct for the week but gain more than 7 pct for October. The Nikkei stock index slid briefly after the BoJ stood steady and then regained its composure to close up 0.8 pct at a more than 2-month high. It rose 1.4 pct for the week and jumped 9.7 pct for the month, the best monthly gain in 2 years. HK's Hangseng Index closed down 0.8 pct at 22640.04 points while Shanghai Composite Index ended down 0.1 pct at 3382.56 points.
Commodities Recap
Crude futures dropped in Asian trading on Friday after the release of U.S. economic growth that had slowed sharply. U.S. crude dropped down 45 cents at $45.89 a barrel. Brent crude slipped 32 cents to $48.48 a barrel and is heading for an increase of 1 pct this week.
Gold held near its lowest in 3 weeks on Friday and looked set to post its worst week in nearly 2 months on expectations that US Fed would raise interest rates this year. Spot gold surged up 0.3 pct to $1,148.50 an ounce, but still not far from a 3-week low of $1,144.20 in the previous session. Bullion is down 1.3 pct for the week.
Treasuries Recap
Benchmark 10-year U.S. Treasury yields was down nearly 3 basis points at 2.14 pct, having climbed 15 bps on Wednesday and Thursday. The 2-year yield was down a basis point at 0.72 pct.
German 10-year Bund yields fell 1 bp to 0.53 percent, having risen 9 bps on Thursday after the Fed opened the door to the first rate hike for nearly a decade in December. Portuguese 10-year bond yields were down 2 bps at 2.50 percent as Lisbon's austerity-minded minority government was set to be sworn in on Friday.
JGB prices closed the day steady to slightly lower from yesterday's afternoon close. JGB yields ended the afternoon session at their intraday lows, after JGB prices recovered most or part of their earlier losses, pushing yields down by 1bp to 2bp form their intraday highs (20s at 1.085%, 30s 1.355%, 40s +1.50%).
UK Gilts opened 5 ticks higher than the settlement of 117.75, as expected, as core markets recovered some of yesterday's FOMC induced sell off into month end. This morning saw 10-year cash yields sitting in a narrow trading range.
New Zealand government bonds eased, with yields 4 bps higher. Australian government bond futures eased in line with U.S. Treasuries. The 3-year bond contract lost 2 ticks to 98.210, while the 10-year contract dropped 4 ticks to 97.3500. The 20-year contract went up 3 ticks to 96.7950.
