- EUR/USD plays in between 1.1173-1.1219 range into NY session.
- VIX closed below 20 Monday, first close below since August 21 rally.
- USD/JPY tight and offered 120.57-120.12 range.
- Germany August Industrial Orders -1.8% m/m vs -1.4% previous, +0.5% expected.
- UK September Halifax HPI Prices +8.6% y/y vs 9.0% previous, 9.0% expected.
- Switzerland September CPI -1.4% y/y vs -1.4% previous, -1.4% expected.
- Pressure on yen- BoJ may need to ease as prospect of Fed hike fades.
- RBA OCR unchanged at 2%, policy appropriate, needs to remain accommodative.
- Banks face erosion of business around currency fix.
- Japan PM Abe – Will speed up EPA talks with EU post-TPP, wants China to join TPP.
- (0830 ET/1230 GMT) Canada August Trades C-1.2bln consensus, -C590mln previous.
- (0830 ET/1230 GMT) US August int’l trade balance, $47.4 bln deficit eyed; last $41.9 bln deficit.
- (0855 ET/1255 GMT) Redbook Same St Sales Index w/e Oct 3 previous +0.9% y/y.
- (1000 ET/1400 GMT) US Oct IBD/TIPP economic optimism index; last 42.0.
Key Events Ahead
- (0915 ET/1315 GMT) FRB Kansas City’s George (non-voter, hawk) speaks.
- (1000 ET/1400 GMT) IMF’s press briefing on the World economic outlook.
- (1145 ET/1545 GMT) Fed Trade operation 15-year Fannie Mae / Freddie Mac (max $600 mn).
- (1730 ET/2130 GMT) FRB San Fran’s Williams speaks on the economic outlook; San Fran.
FX Recap
USD: The dollar dropped 0.2 pct to 120.23 yen having touched a 1-week high overnight. It was also 0.2 pct weaker against the euro at $1.1215.EUR/USD: The European currency continues choppy trading on Tuesday, swinging between mild gains and losses during European session, while managing to pass the $1.12 handle after the market open in Europe. Industrial orders in the euro area’s number one economy powerhouse Germany fell 1.8% in the reported period, measured on a monthly and seasonally adjusted basis, while analysts had expected the reading to post a 0.5% increase. In the prior month, the revised gauge declined 2.2%. European Central Bank President Mario Draghi’s speech at the Art on Site Inauguration event in Frankfurt will wrap up today’s trading session. It made intraday high at 1.1219 and low at 1.1171 levels. Initial support is seen around at 1.1015 and resistance at 1.1560 levels. Option expiries are at 1.1120 (320M), 1.1170 (250M), 1.1225 (200M).USD/JPY: Pair declined on Tuesday, and was trading 0.20% weaker at ¥120.32, while not veering far from the ¥120 zone. Markets await the outcome from the immediate two central banks’ events – BOJ and FOMC minutes due tomorrow for further direction on the major. Pair made intraday high at 120.56 and low at 120.12 levels. Later today market will focus on US macroeconomic data for the further directions. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.90 (250M), 120.00 (1.1BLN), 120.05 (250M), 121 (410M).GBP/USD: Sterling slipped against the euro as soft economic data pushed back market expectations of BoE’s tightening towards the end of next year. The euro was up 0.2 pct at 74.06 pence, while sterling was broadly steady against the dollar at $1.5155. The British pound managed to book minor gains after the opening bell in Europe, despite the weakest reading of UK services in 2 years continues to weigh on the currency. Pair made intraday high at 1.5180 and low at 1.5140 levels. Initial support is seen at 1.5107 and resistance is seen around 1.5725 levels.NZD/USD: US dollar remains largely subdued against the NZD, as Friday’s weak US labor market report continues to weigh on the buck. Today the NZ business confidence index showed sharp deterioration. The latest NZIER Quarterly Survey of Business Opinion shows business confidence falling to its lowest level since March 2011. The index dropped to -14 against a 5 point reading booked previously. It made intraday high at 0.6515 and low at 0.6478 levels. Initial support is seen at 0.6195 and resistance at 0.6605 levels. Option expiry is at 0.6640 (602M).AUD/USD: The Australian dollar rallied after the RBA’s robust message about threats to growth, by 0737 GMT, it was up 0.4 percent at $0.7111 after touching a 2-week peak of $0.7120. The Aussie jumped to fresh two-week highs as the Reserve Bank of Australia (RBA) kept rates on hold for the fifth month in a row. The central bank sounded optimistic on the economic growth prospects, while it noted that further assessment of the monetary policy outlook will remain data-dependent. The statement itself was also mostly unchanged. The most significant change was the RBA acknowledging that housing regulations are starting to have an effect. Pair made intraday low at 0.7066 levels and high around 0.7134 levels. Initial support is seen at 0.6908 and resistance at 0.7245 levels. Option expiry is at 0.7200 (350M).
Equities Recap
World shares dropped as weak data from Germany and a dip in commodity markets eroded a recent global recovery. London’s FTSE and Germany’s DAX were both down 0.1 percent in early deals, France’s CAC 40 was flat. Europe’s FTSEurofirst 300 inched higher 0.1 pct.Japan’s Nikkei closed up 1 percent, extending its rebound from an 8-month low hit a week ago. The MSCI All World index of global stocks rose 0.2 percent, while MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.6 percent to touch its highest since Sept. 18.Australia’s S&P/ASX 200 index closed up 0.31 pct at 5,166.70 points, HK’s Hang Seng Index ended down 0.1 pct at 21,831.62 points.
Commodities Recap
Oil dropped as some investors sold out of positions following a rally in the previous session that saw crude gain more than 2 percent on news that major producers may meet to counter the recent price decline. Brent crude was down 20 cents at $49.05 a barrel by 0812 GMT.The U.S. benchmark, West Texas Intermediate crude, was 37 cents lower at $45.89 a barrel.Gold held just below a 1-week high as investors bet sluggish U.S. nonfarm payrolls data would deter the Fed from raising rates this year, although some cautioned that profit taking could hurt the metal in the near term. Spot gold climbed 0.1 percent to $1,137.15 an ounce by 0629 GMT.
Treasuries Recap
U.S. 10-year treasury yield stood at 2.033 percent vs the close of 2.056 percent on Monday. While U.K. Gilts opened flat with the settlement of 118.92.Yields on 10-year German Bunds ticked down to 0.57 percent after industrial orders dropped unexpectedly.JGB prices ended the day slightly lower, sending yields up by 0.5bp to 1.5bp in the 5-yr and longer zone. JGBs opened softer on a rise in US TSY yields and stock prices overnight, and then moved in a very narrow range amid a lack of the BoJ’s JGB buying operations.New Zealand government bonds slipped, sending yields as much as 8 bps higher on the long end of the curve. Australian government bond futures fell, with the 3-year bond contract off 6 ticks at 98.210. The 10-year contract dropped 5.5 ticks to 97.3650.
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