Market Roundup
- EUR/SEK drops from 9.3400 to 9.2580 then steadies.
- EUR/USD plays 1.0990-1.1060 and heavy through Europe.
- EUR/CHF in tight range 1.0824-1.0844 after big Monday recovery.
- UK Nov core CPI +1.2% y/y vs +1.1% previous, +1.2% expected.
- UK Nov core Output prices -0.1% y/y vs +0.3% previous, +0.1% expected.
- Germany Dec ZEW Economic Sentiment vs 10.4 previous, 15.0 expected.
- Germany Dec ZEW Current Conditions vs 54.4 previous, 54.2 expected.
- Swiss Nov Produciton/Import prices -5.5% y/y vs -6.6% previous.
- Riksbank unchanged at -0.35%, says still ready to act.
- China ready to moderate sharp offshore yuan falls- Sources.
- China comfortable with modest yuan depreciation- Source.
- BoJ Tankan price expectations survey – Firms see CPI +1%.
- RBA Dec 1 minutes – Room to ease if necessary, inflation affords scope.
Economic Data Ahead
- (0830 ET/1330 GMT) U.S. consumer prices likely to have remained unchanged at 0.2 pct in November, as energy prices resumed their downward trend, offsetting increases in the cost of food and other goods. In the 12 months through November, the CPI is expected to have risen 0.4 percent. Core CPI is likely to have advanced 0.2 percent after a similar gain in October. It is seen rising 2.0 percent in the 12 months through November.
- (0830 ET/1330 GMT) Canadian manufacturing sales are expected to have dropped by 0.5 percent in October compared with an unexpected fall of 1.5 percent in September.
- (1000 ET/1500 GMT) The NAHB/Wells Fargo Housing Market index is expected to have risen to 63 in December from 62 in November.
- (1100 ET/1600 GMT) Economic growth in Peru is expected to have quickened slightly to 3.2 percent in October as surging copper production offset weak manufacturing and construction activity.
- (1600 ET/2100 GMT) Treasury International Capital Statistics TIC Data Oct.
Key Events Ahead
- (1300 ET/1800 GMT) Federal Open Market Committee starts a two-day meeting on interest rate policy. Chair Janet Yellen is set to decide whether to raise rates and also on the tone of likely path of future rate hikes. A hike will create further volatility in the market, even if most investors have priced in a move for when the Fed ends its policy meeting.
- (1100 ET/1600 GMT) Bank of Canada releases the semi-annual Financial System Review, which deals with the main risks to financial stability. This issue will also feature the reports “Residential Mortgage Securitization in Canada: A Review” and “Indebted Households and Potential Vulnerabilities for the Canadian Financial System: A Microdata Analysis”. Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins will hold a news conference after the release.
- (1145 ET/1645 GMT) FedTrade Ops 15-Yr F.Mae/ max $600mln.The guidelines for Brazil’s 2016 budget, known as LDO, will probably be out to vote in Congress. Members of President Dilma Rousseff’s party have called for the reduction of a key budget goal, allowing more room for public spending as the government battles against a deep recession. The current budget bill sets a primary surplus target equivalent to 0.7 percent of gross domestic product (GDP), a very ambitious goal for a country expected to record a deficit greater than 1 pct of GDP in 2015.
FX BeatUSD: The dollar dropped to a 7-week low against a basket of currencies on Tuesday, with investors reducing favorable bets in the currency ahead of FOMC meeting. The dollar index fell to a low of 97.19 and was last trading at 97.355, down 0.3 percent on the day. The dollar was down 0.2 percent at 120.75 yen, having pulled back from a 6-week low of 120.35 on Monday.EUR/USD: The euro was up 0.4 percent at $1.1040, having hit a seven-week high of $1.1060 earlier in the London session. The pair’s major resistance is around 1.0623 and break above targets 1.1100 level. But further bullishness can be seen above this 1.1100 level. On break above 1.1100 will take the pair till 1.11385/1.1178. On the lower side slight weakness can be seen below 1.09800 and below that a decline till 1.09500/1.09000 cannot be ruled out minor support is around 1.1000 level. The euro fell 0.5 percent to 9.27 crowns from around 9.34 crowns before Riksbank’s decision to keep rates unchanged. USD/JPY: The pair has recovered slightly till 121.18 at the time of writing after making a low of 120.37 level. It is currently trading around 120.98. Intraday trend is still weak as long as resistance 121.50 holds. On the higher side minor intraday resistance is around 121.50 and any break above targets 121.85/122.25. Minor support is at 120.50 and break below targets 120/119.15.GBP/USD: The sterling was up 0.15 percent at $1.5165, it struggled marginally after the November CPI data stood flat. It was down 0.15 percent to 72.725 per euro. On the lower side, the pair sees major support around 1.5100 and break below targets 1.5050/1.5000 level. It is facing minor resistance around 1.5190 and break above will take the pair to next level around 1.5220/1.52500. Further bullishness is only above 1.5250. USD/CHF: The pair has recovered slightly after making a low of 0.9786 and was trading around 0.98287. Major intraday resistance is around 0.9880 and break higher will take the pair to next level around 0.9910/0.9957/0.9975. Overall bearish invalidation is only above 1.00350 level. On the other hand minor support is around 0.9820 and break below will drag down the pair further lower till 09798 (61.8% retracement of 0.9476 and 1.03280) /0.9766.AUD/USD: The Australian dollar bounced off 3-week lows. It drew some support from a slight bounce in prices of iron ore following nine sessions of losses. Aussie has recovered after making a low of 0.7159, short term trend is still weak as long as resistance 0.7350. The pair’s major intraday resistance is around 0.7280 and break above targets 7300/0.7350. On the lower side major support is around 0.7150 and any break below will target 0.7100/0.7050. NZD/USD: The New Zealand dollar rose to 7-week highs on Tuesday as investors pared short positions ahead of a dairy auction later in the session. It rose as far as $0.6795, its highest since late October, from $0.6781 in early trade. It is up more than 2 cents since the central bank last week said it might be done cutting interest rates. A sustained break above key resistance around $0.6786 would open the way to 69 cents, a level last touched in June. Equities RecapStocks markets in Europe and Asia rsoe on Tuesday, despite volatile oil prices kept investors cautious before a widely anticipated U.S. rate hike tomorrow.European shares started the day higher after touching 2-1/2-month lows on Monday when oil prices dropped to their weakest since 2008. The pan-European FTSEurofirst 300 index rose 1.2 percent. UK’s FTSE climbed 0.3 pct, France’s CAC inched higher 1.1 pct and Germany’s DAX added 1 pct gains in early deals. MSCI’s broadest index of Asia-Pacific shares outside Japan was higher about 0.1 percent. Japan’s Nikkei stock index ended down 1.7 percent at a 7-1/2-week low and China’s CSI300 Index finished down 0.5 pct at 3,694.39 points, Shanghai Composite Index ended down 0.3 pct at 3,510.35 points.Commodities RecapOil prices climbed on Tuesday as a slump to near 11-year lows in the previous session triggered investors’ buying appetite, but the crude glut kept gains capped. Brent crude traded up 40 cents, or 1 percent, at $38.32 a barrel at 0913 GMT, levels last seen in late 2008. U.S. crude was trading at $36.49, up 18 cents.Gold was still recovering from overnight losses on Tuesday and looked vulnerable to a drop back to multi-year lows on expectations of a U.S. rate hike tomorrow. Spot gold ticked up 0.1 percent to $1,063.80 an ounce by 0613 GMT, after a 1.1-percent slide on Monday. Treasuries RecapU.S. 10-year Treasury yield stood at 2.209 percent vs U.S. close of 2.225 pct on Monday.Concerns in the high-risk U.S. corporate debt market about the possible impact of a rate hike weighed on low-rated euro zone government bonds.JGB prices finished the day modestly higher, sending yields down by 0.5bp to 1bp on the day in the 5-yr and longer zone. JGB yields moved in a very narrow range of 0.5bp or less after the initial modest fall of 0.5bp to 1bp. The results of today’s monthly JPY2.5tn 5-yr JGB auction were largely in line with market expectations. The highest accepted yield came in at 0.037%. It was very close to the pre-auction secondary market level of 0.0375% on a when-issued basis.UK Gilts opened 17 ticks higher than the close, as predicted, as core fixed income markets remained elevated in light of a soft Asian equity session. Buyers respected Friday’s low on 10-year cash yields at 1.794% and then the market went into reverse as eurozone equities bounced helped by corporate restructuring headlines in the pharmaceutical sector. Gilt futures fell about 10 ticks after inflation data.Australian government bond futures were softer with the 3-year bond contract off 2 ticks at 97.845. The 10-year contract dropped 2 ticks to 97.0925, while the 20-year contract was steady at 96.6100. New Zealand government bonds gained sending yields lower across the curve, in particular at the long end.
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