Market Roundup
- Dollar pressured by decline in U.S. inflation, US CPI MM, SA Aug -0.1%, forecast- 0%, 0.1%-previous.
- US Real Weekly Earnings MM Aug 0.7%, 0.1%-previous, Jul revised lower from 0.4%, saps headline strength.
- Another failed auction sends German yields to 2-wk highs; German-U.S. yield gap tops 100 bps.
- Senate leader McConnell: will not shut down govt on Oct 1; will seek stop-gap funding through late fall.
- Traders hold U.S. rate-hike view after CPI; OIS rates see 29% chance of Fed hike Thurs, 49% in Oct.
- U.S. home builder sentiment near decade high in September, highest since Oct 2005.
- BOE’s Forbes interest rates will need to increase in the not-too-distant future to ensure inflation doesn’t overshoot 2% target.
- BOE’s Weale Chinese developments are one reason I have not voted for rate hike.
- BOE’s Carney MPC will have to feel its way as it goes on interest rates.
Looking Ahead – Economic Data (GMT)
- 22:45 New Zealand GDP Production QQ* Q2 forecast- 0.5%, 0.2%-previous
- 22:45 New Zealand GDP – Annual-Avg, Prod-Bas* Q2 forecast 2.9%, 3.2%-previous
- 22:45 New Zealand GDP – Annual* Q2 forecast- 2.5%, 2.6%-previous
- 22:45 New Zealand GDP Expenditure QQ* Q2 forecast- 0.5%, 0.1%-previous
- 23:50 Japan Foreign Bond Investment w/e 1120.5b-previous
- 23:50 Japan Foreign Invest JP Stock w/e -986.0b-previous
- 23:50 Japan Exports YY* Aug forecast- 4%, 7.6%-previous
- 23:50 Japan Imports YY* Aug forecast -2.2%, -3.2%-previous
- 23:50 Japan Trade Balance Total Yen* Aug forecast -541.3b, -268.1b-previous
Looking Ahead – Events, Other Releases (GMT)
- 06:35 Japan- BOJ Governor Kuroda speaks at the annual securities firms’ association meeting
Currency SummariesEUR/USD is likely to find support at 1.1260 levels and currently trading at 1.1290 levels. The pair has made session high at 1.1320 and hit lows at 1.1212 levels. The dollar edged lower on Wednesday after a surprise fall in U.S. inflation last month reduced expectations that the Federal Reserve would raise interest rates at this week’s monetary policy meeting. The greenback had traded higher before the U.S. data, underpinned by lofty U.S. yields in the wake of upbeat consumer spending data on Tuesday. But the unexpected 0.1 percent decline in U.S. consumer prices in August, the first since January, wiped out the dollar’s gains. As a result, money market traders stuck to their view that the Fed was unlikely to raise rates on Thursday. The euro was slightly up at $1.1271 gaining ground after earlier losses triggered by soft euro zone inflation numbers. The euro zone inflation report kept alive expectations that the European Central Bank would extend quantitative easing in coming months. To the upside, immediate resistance can be seen at 1.1301. To the downside, immediate support level is located at 1.1260 levels.GBP/USD is supported in the range of 1.5440levels and currently trading at 1.5492 levels. It reached session high at 1.5526 and dropped to session low at 1.5485 levels. Sterling rose to its highest in three weeks against the dollar on Wednesday after data showed British wages grew at the fastest rate in over six years, prompting investors to bring forward bets on a first rise in interest rates. Sterling climbed half a percent in morning trade after the data before pushing above $1.5500 for the first time since late August as BoE Governor Mark Carney and other policymakers spoke later in parliament. The late gains pushed sterling’s rise against the dollar above 1 percent on the day. The pound also strengthened to 72.93 pence per euro, 0.7 percent higher on the day. The BoE is watching for signs pay is rising as it debates when to raise rates for the first time since 2007. Though wage growth is still weaker than before the financial crisis, it is growing far faster than inflation, upping the spending power of British households. To the upside, immediate resistance can be seen at 1.5528. To the downside, immediate support level is located at 1.5485 levels.USD/JPY is supported around 120.28 levels and currently trading at 120.58 levels. It peaked to hit session high at 120.71 and made session lows at 120.35 levels. The dollar slipped against Japanese yen on Wednesday, after U.S. consumer prices (CPI) unexpectedly fell in August, pointing to tame inflation that complicates the Fed’s decision whether to raise rates. The Labor Department said on Wednesday its Consumer Price Index slipped 0.1 percent, the first drop since January, after edging up 0.1 percent in July. In the 12 months through August, the CPI rose 0.2 percent after a similar gain in July. The U.S. central bank’s policy-setting committee was due to start a two-day meeting later on Wednesday. While solid data on consumer spending, housing and employment have been supportive of a rate hike, the case for higher borrowing costs has been undermined by recent global financial markets turmoil. The dollar was up 0.2 percent against the yen at 120.52 with the Japanese currency largely shrugging off a lowering of Japan’s sovereign credit rating by Standard and Poor’s. Volumes were on the low side, with most investors preferring to stay on the sidelines before the Fed decision. To the upside, immediate resistance can be seen at 120.83. To the downside, immediate support level is located at 120.28 levels.USD/CAD is supported at 1.3150 levels and is trading at 1.3174 levels. It has made session high at 1.3250 and lows at 1.3159 levels. The Canadian dollar advanced against its U.S. counterpart on Wednesday, bolstered by further gains in crude prices, stronger Canadian manufacturing data and an unexpected fall in U.S. inflation. The currency continued to trade within a narrow range, however, ahead of Thursday’s interest rate decision by the Federal Reserve. Domestically, factory sales rose for the third straight month in July, up 1.7 percent, as sales rose in the motor vehicle parts and assembly industries. This was stronger than the 1 percent increase economists had been forecasting. May and June sales data were also revised higher. Also helping the currency was a pullback by the U.S. dollar, which eased on U.S. inflation data that showed consumer prices fell in August, the first decline in seven months. The currency’s strongest level of the session was C$1.3171, while its weakest level was C$1.3253. To the upside, immediate resistance can be seen at 1.3187. To the downside, immediate support level is located at 1.3160 levels.Equities RecapEuropean shares ended higher for a second session on Wednesday, with M&A hopes sending stocks up sharply, while investors remained cautious ahead of the Federal Reserve’s interest rate decision.UK’s benchmark FTSE 100 closed up by 1.67 percent, the pan-European FTSEurofirst 300 ended the day up by 1.64 percent, Germany’s Dax ended up by 0.49 percent, France’s CAC finished the day up by 1.78 percent.Energy stocks pushed Wall Street higher on Wednesday due to an almost 6-percent jump in oil prices, but volume was light as many investors stayed on the sidelines a day ahead of the Federal Reserve’s decision on interest rates. Dow Jones closed up by 0.82 percent, S&P 500 ended up by 0.86 percent Nasdaq finished the day up 0.58 percent.Treasuries RecapU.S. Treasury yields rose slightly on Wednesday in response to higher German Bund yields and traders’ uncertainty regarding whether the Federal Reserve would hike rates Thursday.German Bund yields shot higher for a second day, with benchmark 10-year Bund yields hitting a nearly two-week high of 0.80 percent.U.S. two-year notes were last mostly flat in price to yield 0.81 percent, from a yield of 0.80 percent late Tuesday.Benchmark 10-year notes were last down 3/32 in price to yield 2.29 percent, from a yield of 2.28 percent late Tuesday.U.S. 30-year bonds were last down 9/32 in price to yield 3.08 percent, from a yield of 3.06 percent late Tuesday.
Commodities RecapGold rallied more than 1 percent on Wednesday after data showing a surprise drop in U.S. inflation last month dented expectations that the Federal Reserve this week will decide to increase interest rates for the first time in nearly a decade.Spot gold was up 1.3 percent at $1,119.70 an ounce at 1:57 p.m. EDT (1757 GMT), while U.S. gold futures for December delivery settled up 1.5 percent at $1,119 per ounce.Oil prices jumped as much as 6 percent on Wednesday, after the largest U.S. crude drawdown in seven months at the key delivery point in Cushing, Oklahoma fed a new round of market volatility.Oil bulls were also encouraged by doubts on whether the Federal Reserve will decide to hike U.S. interest rates on Thursday after tame August inflation data.U.S. crude settled up $2.56, or 5.7 percent, at $47.15 a barrel. Global oil benchmark Brent finished up $2, or 4.2 percent, at $49.75.
The material has been provided by InstaForex Company – www.instaforex.com