- Dollar index off Monday 2 week 94.913 low, 95.407/95.748 range.
- EUR/USD down to 1.1228 from 1.1298.
- GBP strengthens as UK wage growth picks up speed. GBP/USD rallied to 1.5418.
- EUR/GBP fell to 0.7290 from 0.7360 sessions high.
- UK Average weekly earnings +2.9% y/y in 3months through July vs 2.5% expected July +3.7%.
- UK ILO jobless +10,000 to 1.823mln in 3 months through July Rate 5.5%. 5.6% expected.
- Euro zone August final inflation 0.0% m/m, 0.1% y/y vs previous -0.6%/0.2%. 0.0%/0.2% expected.
- Euro zone Q2 labour costs 1.6% y/y vs previous 1.9% revised.
- Euro zone Q2 Wages in EZ 1.9% vs previous 2.0% revised.
- Switzerland September ZEW Investor sentiment 9.7 vs previous 5.9.
- Swedish C/B Ohlsson did not feel repo rate should be cut further in current econ climate.
- ECB Constancio- Euro area facing a protracted period of low growth.
- Average yield on German 30-year bond highest in auction in nearly a year, 1.49% vs 1.18% previous.
- S&P cut Japan rating to A+ from AA- before revising up to stable from negative.
- OECD cut its forecast for worldwide improvement in GDP to 3% from 3.1% in 2015.
- (0800 ET/1200 GMT Brazilian statistics agency IBGE releases retail sales data.
- (0830 ET/1230 GMT) US August CPI, unchanged m/m, +0.2% y/y eyed; last +0.1%, +0.2%.
- (0830 ET/1230 GMT) US August core, +0.1% m/m, +1.9% y/y eyed; last +0.1%, +1.8%.
- (0830 ET/1230 GMT) US August real weekly earnings; last +0.4%.
- (0830 ET/1230 GMT) Canadian manufacturing sales.
- (1000 ET/1400 GMT) US September NAHB housing market index, 61 eyed; last 61.
- (1130 ET/1530 GMT) US August Cleveland Fed CPI; last +0.2%.
- (1400 ET/1800 GMT) Investors wait for the much-anticipated the U.S. Federal Reserve’s a two-day meeting on interest rates. A volatile financial market could be the latest reason for the central bank to delay an interest rate hike when policymakers meet. Fed officials have expressed concern about inflation persistently running below the Fed’s 2 percent target.
Key Events Ahead
- (0915 ET/1315 GMT) BoE Gov Carney et al parliamentary testimony on August inflation report.
- (1300 ET/1700 GMT) FOMC Two-Day Meeting Begins.
FX Recap
USD: The dollar rose against a basket of currencies, strengthened by higher U.S. yields after optimistic consumer spending data kept alive expectations the U.S. Fed would hike rates. The dollar index inched higher at 95.659, off a 2-week low struck on Monday, it was flat against the yen at 120.39 yen.EURUSD: The latest CPI figures from the euro zone failed to spur any bold trading activity and the US dollar remained stronger on the day. CPI from the euro zone for August posted a sharp rise from -0.6% to 0.0% month-on-month, while the yearly change decreased from 0.2% to 0.1%. The same applied for the core gauge on a yearly basis, which also shed 0.1% to 0.9%. The main focus today remains on US CPI figures for August, which are expected to remain without any significant deviations from the slow inflation trend. Markets may remain cautious as the Fed meeting commences later today, with final verdict on the rates due to be announced tomorrow. Pair is trading at 1.1236. It made intraday high at 1.1298 and low at 1.1227. Initial support is seen around at 1.1015 and resistance at 1.1363 levels. Option expiries are at 1.1230 (431M), 113.00 (292M), 1.1350 (251M).USDJPY: After the Bank of Japan left rates unchanged at its monetary policy meeting earlier on Tuesday, the Yen extended overnight gains and strengthened below the ¥120 handle. But the US dollar managed to recover lost ground somewhat against the Japanese yen in the mid-European session, lifting USD/JPY to fresh highs at 120.48 levels. Currently pair is trading at 120.40 levels and made intraday low at 120.10 levels. Today BOJ published monthly report indicating Japan’s economy has continued to recover moderately, although exports and production are affected by the slowdown in emerging economies. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.70-75 (1BLN), 120.00 (1BLN).GBPUSD: Sterling touched intraday highs vs the dollar and euro after the data showed UK earnings, excluding bonuses, grew at their fastest rate in more than six years in the three months to July. It rose to $1.5418 after the data, up 0.5 pct on the day, having traded at $1.5350 just before the release. The pound strengthened to 73.025 pence per euro, 0.6 pct higher on the day. Both total average earnings and average earnings excluding bonuses rose 2.9% in July, up from 2.6% and 2.8%, respectively, reported in the previous month. The ILO unemployment rate for July ticked down to 5.5%, while August jobless claims rose by 1,200. Later in the UK session, Bank of England (BoE) Governor Mark Carney and Monetary Policy Committee members Ian McCafferty, Kristin Forbes and Martin Weale will be answering questions at the Treasury Select Committee on the Inflation Report. 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. It made intraday high at $1.5434 and low at $1.5330 levels. Initial support is seen at 1.5185 and resistance is seen around 1.5507 levels. Option expiries are at 1.5000 (513M), 1.5650 (621M).NZDUSD: New Zealand’s current account recorded a deficit of $1.22 billion in the June quarter, following a revised surplus of $821 million in the first quarter. The current account deficit was $8.3 billion for the year ended June 2015, or 3.5% of GDP, rising from 3.4% of GDP in the March quarter, after the first quarter was revised down from 3.6%. Pair made an intraday high at 0.6377 and low at 0.6340 levels. Pair is currently trading at 0.6341 levels. Initial support is seen at 0.6195 and resistance at 0.6511 levels.
AUDUSD: The Australian dollar fell slightly on Wednesday after a central banker said Australia’s medium-term growth rate has slowed, due to weaker population growth. Slower population growth has also had a positive impact on Australia’s unemployment rate, keeping it fairly steady over the last year, contrary to the RBA’s earlier predictions that it would peak at a higher level. It made intraday high at 0.7183 and low at 0.7123 levels. Initial support is seen at 0.6908 and resistance at 0.7182 levels.
Equities Recap
Global stocks rose on Wednesday, although in thin volume, and short-term U.S. bond yields were near 4 1/2-year highs as investors eye on the possibility of the Fed’s rate hike.
Europe’s FTSEurofirst 300 was up 0.6 pct to 1,414.26 points in early deals, U.K’s FTSE rose 0.5 pct, France’s CAC inched higher 0.8 pct and Germany’s DAX climbed 1 pct.
Tokyo’s Nikkei closed up 0.81 pct at 18,171.60, China’s CSI300 Index closed up 5.0 pct at 3,309.25 points, while Shanghai Composite Index ended up 4.9 pct at 3,152.26 points. Hong Kong’s Hang Seng index closed 2.4 percent higher.
Commodities Recap
Oil prices climbed after an unexpected U.S. stockpile drawdown and higher gasoline prices, but concerns remained about a global surplus, falling Asian demand and whether the U.S. Fed would raise interest rates. Front-month U.S. West Texas Intermediate (WTI) crude futures traded up 55 cents at $45.14 per barrel at 0755 GMT. Brent was up 45 cents at $48.20 a barrel.
Gold struggled to break out of a tight range near a one-month low on Wednesday, as investors waited to hear the outlook for U.S. interest rates from a Federal Reserve policy meeting that kicks off later in the session. Spot gold was little changed at $1,105.10 an ounce by 0629 GMT.
Treasuries Recap
The 2-year U.S. treasury yield rose to 0.815 pct, its highest level since April 2011. The 10-year notes’ yield stood at 2.2616 pct.Yields in benchmark European markets dropped as the ECB stressed its openness to more money printing. German 10-year Bund yields hit their highest in nearly two weeks at 0.75 percent.The U.K. government bond futures extended losses by 25 ticks after the labor data and 5-year gilt yields rose to their highest since Sept. 3 after the data at 1.355 pct, 3 bps up on the day. Gilts also underperformed versus German government debt, with the spread between 10-year gilts and Bunds widening by 2 bps after the data to just under 120 bps.JGB prices finished the day marginally mixed, with the 10s/20s curve steepening slightly by 1bp from yesterday’s afternoon close. In mid-afternoon trading, yields on the current 10-yr and 20-yr JGBs briefly rose as much as 2bp from yesterday’s afternoon close, or as much as 2.5bp from yesterday’s final close (17:00JST), after the MoF published sharply weaker-than-expected results of today’s monthly JPY1.2tn 20-yr JGB auction.New Zealand government bonds eased, sending yields as much as 7 ticks higher on the long end of the curve. Australian government bond futures also fell, with the 3-year bond contract off 7.5 ticks at 98.050. The 10-year contract dropped 12 ticks to 97.1700, having touched their lowest in a month.
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