Market Roundup
- Dollar extends gains against euro; Fed, ECB policy divergence weighs on euro.
- U.S. T-bill rates stay in negative territory amid expectations the Fed may keep rates near zero into ’16.
- European shares sharply lower as Volkswagen dives; miners down.
- Copper hits 3-week low, biggest one-day fall in more than 2 months; China fears fortify bears.
- Gold dips as renewed rate rise bets lift dollar; commodities slide.
- Philadelphia Fed services sector index 29.3 in Sept, full-time employment index 4.9 in Sep vs 15.4 in Aug.
- HSBC, Bank of China (HK) given permission to issue bonds in China’s interbank market.
- Brazil currency hits all-time low (4.0607) on political wrangling, higher US rate outlook.
- U.S. home prices up 0.6 percent in July (0.6% vs 0.20% in June).
- OECD tells Europe to act fast with 1 million migrants expected.
Looking Ahead – Economic Data (GMT)
- 01:45 China Caixin Manufacturing PMI Flash Sep forecast- 47.5, 47.1-previous
Looking Ahead – Events, Other Releases (GMT)
- No Significant Events
Currency SummariesEUR/USD is likely to find support at 1.1080 levels and currently trading at 1.1127 levels. The pair has made session high at 1.1169 and hit lows at 1.1111 levels. The U.S. dollar hit a nearly two-week high against the euro on Tuesday on continued belief that the Federal Reserve would hike rates this year while the European Central Bank could ease further. The euro hit $1.11370, its lowest against the greenback since Sept. 9, following Fed officials’ recent comments indicating that the U.S. central bank was still on track to raise interest rates this year for the first time since 2006. Expectations that Draghi would hint at more stimulus kept the euro lower against the dollar. The ECB has come under pressure to take a looser stance after the Fed left interest rates unchanged at its policy meeting last week. ECB President Mario Draghi will speak on Wednesday, while Fed Chair Yellen will speak on Thursday. Bets on the euro weakening against the dollar, which had looked forlorn for much of this year, are finally showing signs of coming good as investors price in growing chances of further monetary easing by the European Central Bank. To the upside, immediate resistance can be seen at 1.1154. To the downside, immediate support level is located at 1.1111 levels.GBP/USD is supported in the range of 1.5315 levels and currently trading at 1.5368 levels. It reached session high at 1.5383 and dropped to session low at 1.5340 levels. Sterling fell on Tuesday, retreating from a one-month high against the euro, hurt by soft economic data and a wave of risk aversion that swept global markets and which saw traditional safe-haven currencies and assets gain. Data released on Tuesday showed Britain’s public finances deteriorated unexpectedly last month, recording their worst August in three years, while industrial orders also declined, signaling a global slowdown was hitting the economy. Sterling fell 0.7 percent against the dollar to trade at $1.5403. Regardless of this weakness experienced by the pound, the outlook for the UK economy remains robust and even though investor sentiment is clearly shaky as of now, this may subside with time. Sterling has been bolstered of late by expectations that the Bank of England will eventually follow the Federal Reserve in raising rates in contrast to likely action by the European Central Bank. Most analysts reckon the BoE will wait to raise rates until the Fed moves and many think it will not be far behind. To the upside, immediate resistance can be seen at 1.5383. To the downside, immediate support level is located at 1.5337 levels.USD/JPY is supported around 119.57 levels and currently trading at 120.11 levels. It peaked to hit session high at 120.18 and made session lows at 119.70 levels. The dollar slipped against the Japanese yen, on concerns about global growth. Traders digested the Fed’s Sept. 17 policy statement and comments from Fed Chair Janet Yellen regarding worries about the global economy, which in turn helped the safe-haven yen gain while riskier emerging market currencies fell. Weakness in stock markets also helped lift the yen against the dollar, though the policy divergence between the Fed on the one hand and the European Central Bank and Bank of Japan on the other helped push the dollar to its highest since Sept. 10 against a basket of currencies. The dollar eased 0.5 percent to 119.96 yen but was still above Friday lows. To the upside, immediate resistance can be seen at 120.18. To the downside, immediate support level is located at 119.91 levels. USD/CAD is supported at 1.3225 levels and is trading at 1.3261 levels. It has made session high at 1.3296 and lows at 1.3245 levels. The Canadian dollar softened against its U.S. counterpart on Tuesday, as the greenback strengthened on expectations the Federal Reserve is still on track to hike interest rates before next year and crude prices gave back some of Monday’s rally. Global oil demand worries, combined with excess supply, continue to plague the commodity, with prices remaining volatile.The Fed held off hiking interest rates last week and scaled back its forecasts for U.S. growth, but the U.S. dollar has since rebounded as investors bet on a rise next month or in December, particularly following comments from Atlanta Fed President Dennis Lockhart. The currency’s strongest level of the session so far was C$1.322, while its weakest level was C$1. the data front, Canadian retail sales data for July are due at 8:30 a.m. EDT on Wednesday. To the upside, immediate resistance can be seen at 1.3276. To the downside, immediate support level is located at 1.3243 levels.Equities RecapEuropean stocks fell sharply on Tuesday on concerns over the global economy, with Volkswagen plunging to four-year lows and dragging down the whole auto sector as investors gauged the implications of an emissions scandal.UK’s benchmark FTSE 100 closed down by 2.75 percent, the pan-European FTSEurofirst 300 ended the day down by 3.23 percent, Germany’s Dax ended down by 3.86 percent, France’s CAC finished the day down by 3.55 percent.Wall Street was more than 1 percent lower on Tuesday, amid a decline in commodity prices and continuing uncertainty about when the Federal Reserve will raise interest rates. Dow Jones closed down by 1.09 percent, S&P 500 ended down by 1.23 percent Nasdaq finished the day down 1.49 percent.Treasuries RecapU.S. Treasuries prices rose on Tuesday as lingering worries about the global economy triggered a selloff in stock and commodity markets worldwide and revived safe-haven demand for lower-risk government debt.Benchmark 10-year Treasuries notes were up 24/32 in price, yielding 2.127 percent, down 9 basis points from Monday, while the 30-year bond was up 1-30/32 points in price to yield 2.935 percent, down 10 basis points on the day.Commodities RecapGold fell 1 percent on Tuesday, pressured as the dollar strengthened on renewed expectations that the Federal Reserve will raise U.S. interest rates for the first time in nearly a decade.Spot gold was down 0.7 percent at $1,125.22 an ounce at 3:17 p.m. EDT (1917 GMT), while U.S. gold futures for December delivery settled down 0.7 percent at $1,124.80 an ounce.Brent settled up while U.S. crude finished down 2 percent but off its lows after a partial pipeline outage and bets of positive U.S. inventory data helped oil offset some of Tuesday’s skittish sentiment caused by weak Wall Street stocks.Brent’s front-month contract, November, settled up 16 cents, or 0.3 percent, at $49.08 a barrel.U.S. crude’s October contract settled down 85 cents, or 1.8 percent, at $45.83 before expiring as the front month. The nearby November contract, settled down 60 cents at $46.46.
The material has been provided by InstaForex Company – www.instaforex.com