- Dollar drops as Fed rate hike expectations fade, weakest in almost 3 weeks.
- DXY fell to 94.913, weakest since August 26.
- EUR/USD hit 2-1/2 week high at 1.1373, 7th day of gains.
- AUD unsettled by China stocks, political uncertainty.
- Australian prime minister to stand in leadership vote on Monday.
- European shares rebound, shrugging off weak China data.
- SSEC closes down 2.7% at 3,114.80 points.
- CS1300 ended down 2.0% to 3,281.12.
- China net Forex selling at 723.8bln Yuan in August.
- UK opposition labour party will campaign to stay inside EU.
- Euro zone July Industrial output 0.6% m/m, 1.9% y/y vs previous -0.3%/1.5% revised. 0.3%/0.6% expected.
- Switzerland August Producer/Import price -0.7% m/m, -6.8% y/y vs previous -0.3%/-6.4%.
- Switzerland sight deposits 398.242 bln w/e Sept 11 vs previous 395.064bln.
- US name sees USD/JPY at130 in 12 months time due to more Japan QE.
- The Bank of Japan holds a two-day monetary policy meeting and announces its rate decisionon Tuesday. Governor Haruhiko Kuroda is expected to offer a bleaker view on overseas economies and may lower its assessment on the country’s exports next week. The BoJ is likely to maintain its commitment to raising the monetary base by ¥80trn on an annual basis until its 2% price stability target is both achieved and maintained.
- Brazil’s central bank will release results of a weekly economic survey with more than 100 financial institutions. This will include forecasts for GDP, interest rates and inflation rates.
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade operation 30-year Fannie Mae / Freddie Mac (max $1.525 bn).
- (1430 ET/1830 GMT) Fed Trade operation 15-year Fannie Mae / Freddie Mac (max $500 mn).
FX Recap
USD: The dollar dropped to an almost 3-week low against a basket of major currencies ahead of Federal Reserve meeting, as investors bet interest rates would be kept at their record lows until at least December. The dollar was 0.3 pct lower against the yen at 120.20 yen.Euro keeps losing ground vs. the dollar albeit at snail pace, pushing EUR/USD to session lows in the 1.1320/15 band. It is worth noting that poor results in the Chinese economy over the weekend have sparked a wave of risk aversion in the global markets, although the trend lost vigour after the Asian session. Absent data across the pond, the only releases in Euro land showed consumer prices in the Italian economy advancing 0.2% MoM in August, while EMU’s Industrial Production surprised markets to the upside, expanding at a seasonally adjusted monthly pace of 0.6% in July. With nothing significant on the macro calendar reported today, the Asian traders shifted their focus to Fed’s rate decision. Pair is currently trading at 1.1317levels. It made Intraday high at 1.1373 levels and low at 1.1312 levels. Initial support is seen around at 1.1015 and resistance at 1.1363 levels. Option expiries are at 1.1150 (1BLN), 1.1450 (1.1BLN).Japanese industrial output returned to red numbers in July, with worries about the increasing likelihood of a contraction in Japan’s economy in the third quarter. The combined production from Japan’s mines, manufacturers, and utilities fell 0.8% month-on-month in July, final data from the Ministry of Economy, Trade, and Industry (METI) showed on Monday, coming in worse than the preliminary result of a 0.6% decline. Production was flat at 0.0% annually in July, the final figure shows, and compared to a 2.3% advance in production a month ago. USD/JPY keeps range below 121 handle, consolidating the gains seen in the previous session. Pair is currently trading at 120.31 levels. It made intraday high at 120.84 and low at 120.09 levels. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.90-120.00 (1.1BLN).Sterling inched towards a 3-week high against the dollar ahead of Federal Reserve meeting. It gained just over 0.1 pct against both the euro and the dollar, to $1.5455 and 73.34 pence per euro in morning trade in London to trade. It made an intraday high at 1.5470 and low at 1.5423 levels. Moreover, markets remain wary ahead of Thursday’s Fed decision, on increased speculations that the Fed rate hike could be pushed back to early 2016, thus reducing the demand for the US currency. While the US calendar remains absolutely empty today, with the traders’ now shifting focus towards Tuesday’s economic releases from the UK. Initial support is seen at 1.5185 and resistance is seen around 1.5507 levels. Option expiries are at 1.5200 (268M), 1.5370 (255M).New Zealand’s dollar managed to register some gains on Monday after taking a thumping on last week due to a dovish RBNZ. As expected the RBNZ cut rates to 2.75% but it was the dovish commentary from the bank which hit the kiwi yesterday. The bank still sees the New Zealand dollar as overvalued and signalled further monetary easing to come in the near future. It made an intraday high at 0.6344 and low at 0.6303 levels. Pair is currently trading at 0.6334 levels. As for China, the latest report showed over the weekend that the country’s industrial production rose 6.1% in August year-on-year, up from 6% a month before, but weaker than the 6.5% growth expected by analysts. China’s retail sales, however, hiked 10.8% on a yearly basis, better than in July and also beating estimates. Initial support is seen at 0.6195 and resistance at 0.6511 levels.The AUD/USD pair was seen higher on Monday, changing hands above the $0.71 handle and with further upside possible in the coming days. Data at the weekend showed industrial production in China in August ticked higher from 6.0% to 6.1% on a yearly basis, but missed the forecast of 6.5%. Moreover, retail sales for August in China improved from 10.5% to 10.8% year-on-year. The Australian dollar was not influenced by these numbers and continued to test the $0.7100 levels. It has made intraday high at 0.7135 levels and low at 0.7063 levels. Market will focus on monetary policy meeting minutes due for release tomorrow. Initial support is seen at 0.6908 and resistance at 0.7152 levels.
Markets Recap
Stocks climbed on Monday, amid weak Chinese economic data ahead of U.S. Federal Reserve meeting later this week.The pan-European FTSEurofirst 300 index rose almost 1 pct with Britain’s FTSE 100 index up 1.2 pct. France’s CAC 40 was up 0.2 pct and Germany’s DAX was flat in early deals.Tokyo’s Nikkei closed down 1.6 pct. MSCI’s main index of Asia-Pacific stocks, excluding Japan rose 0.5 pct. China’s Shanghai Composite index dropped 2.8 pct and the CSI 300 lost 2 pct.
Commodities Recap
Brent crude oil dropped as weaker-than-expected Chinese data weighed on markets, adding to concerns that declining global demand would exacerbate a surplus of crude. Front-month Brent crude futures were down 38 cents at $47.76 a barrel by 0940 GMT. U.S. crude futures were flat at $44.63 a barrel.Gold was trading near its lowest in a month on Monday, Spot gold was steady at $1,108.06 an ounce by 0633 GMT, after losing 0.3 pct on Friday. U.S. gold edged up 0.4 percent to $1,107.40, but also near it’s lowest in a month.
Treasuries Recap
Broadly stronger stocks weighed on core government debt. German 10-year Bunds rose 1 bp to 0.66 pct while U.S. 10-year Treasuries yielded 2.19 pct, up from 2.18 pct at Friday’s New York close. Lower-rated equivalents in Portugal, Spain and Italy were also higher around 1 bp at 2.63 pct, 2.12 pct and 1.84 pct, respectively.UK Gilts opened down 5 ticks at 118.38 and fell further to print a 118.17 low for the day so far. They have subsequently recovered to 118.40 currently, as European government bond markets find a bid.JGB prices finished the day marginally mixed, with the 10s/30s curve flattening modestly by 1.5bp on the day from last Friday’s afternoon close. Uncertainty over the Fed’s timing of raising interest rates prevented both dealers and investors from taking large risks today. JGB yields in the 20-yr and shorter zone inched up today. JGBs in the 20-yr zone also turned softer in quiet trading despite weaker Tokyo stocks on caution ahead of Wednesday’s 20-yr auction.New Zealand government bonds were largely flat with yields a touch softer on the long end of the curve. Australian government bond futures were mixed, with the 3-year bond contract off half a tick at 98.095. The 10-year contract was up 1.25 ticks to 97.2450.
The material has been provided by InstaForex Company – www.instaforex.com