Market Roundup

  • EUR/USD knocked below 1.07 on Draghi. 1.0691 low before recovering.
  • EUR/GBP down to 0.7041, EUR/CHF to 1.0757 on euro weakness.
  • Draghi: Inflation dynamic somewhat weaker, due to lower oil/delayed effect of stronger euro.
  • Draghi: EZ recovery slow but stronger/broader than in past.
  • AUD up after strong Oct jobs data. 0.7155 high fm 0.7061, easier in Europe.
  • UK Oct RICS housing survey +49 vs previous 44, 45 expected.
  • EZ Sept Industrial production -0.3% m/m, 1.7% y/y vs previous -0.4%/2.2% rvsd. -0.1%/1.3% expected.
  • European shares partly recover after Draghi.
  • Copper nears lowest since mid-2009. 4882 today from 4950. 4855 Aug low.
  • BoJ’s bullish view of corp sector still in doubt.
  • Japan Oct wholesale prices fall 3.8%.
  • BOJ could ease further next year on weak prices.

Economic Data Ahead

  • (0830 ET/1330 GMT) U.S. applications for new jobless benefits likely fell 6,000 to a seasonally adjusted 270,000 for the week ended Nov. 6, almost reversing the prior week’s gain, indicating the labor market recovery continued to gain momentum in early November. Continuing jobless claims for the week ending October 30 is expected to have fallen slightly to 2.160 mln from previous 2.163 mln. The Labor Department will also be releasing the job openings data for September.
  • (0830 ET/1330 GMT) New home prices in Canada are expected to have inched higher 0.2 percent in September. Some analysts worry that Canadian homes, particularly in the hot markets of Toronto and Vancouver, have become overpriced.
  • (1000 ET/1500 GMT) EIA Weekly Petroleum Statistics.
  • (1400 ET/1900 GMT) The U.S. budget deficit is expected to have widened to $130 billion in October from the previous deficit $121.7 bln.
  • (1600 ET/2100 GMT) Chile’s central bank is expected to hold its benchmark rate steady at 3.25 percent.
  • Minutes from the latest policy decision of Banxico could provide some hints of whether policymakers are moving towards raising interest rates in December, when the U.S. Federal Reserve may lift borrowing costs.

Key Events Ahead

  • (0905 ET/1405 GMT) Federal Reserve Bank of St. Louis President James Bullard speaks on the economy and monetary policy before the Cato Institute 33rd Annual Monetary Conference, “Rethinking Monetary Policy”.
  • (0930 ET/1430 GMT) Federal Reserve Chair Janet Yellen will give welcome remarks in Washington before the “Federal Reserve Conference on Monetary Policy Implementation and Transmission in the Post-Crisis Period”.
  • (0945 ET/1445 GMT) Federal Reserve Bank of Richmond President Jeffrey Lacker will also be speaking at the event.
  • (1015 ET/1515 GMT) Federal Reserve Bank of Chicago President Charles Evans will be speaking on current economic conditions and monetary policy before the Communities Council Fall Leadership Forum: “Inspiring Ideas, Transforming Communities”.
  • (1045 ET/1545 GMT) FedTrade 30-year Ginnie Mae (max $1.075 bn).
  • (1210 ET/1710 GMT) Federal Reserve Bank of New York President William Dudley speaks on “The Economic Outlook and What it Means for Monetary Policy,” before the Economic Club of New York.
  • (1800 ET/2300 GMT) Fed Vice Chair Stanley Fischer will speak on “Incorporating Financial Stability into Monetary Policy”.

FX BeatUSD: The dollar edged up to 123 yen against Japanese yen, back within sight of this week’s 2-1/2-month high of 123.60. The dollar index edged up 0.1 percent to 99.03, moving back towards a 7-month peak of 99.504 scaled on Tuesday.EUR/USD: The euro slid below $1.07 to hit a low of $1.0694, down 0.5 percent on Thursday after ECB chief Mario Draghi singled out the currency’s more robust performance since May as one driver for a “weakening” outlook on inflation. He said the bank would re-examine the degree of monetary policy accommodation in place at the ECB’s December meeting, adding to expectations it could cut euro deposit rates and expand or extend its programme of bond-buying. The single currency dropped more than half a cent to as low as $1.0691 in the quarter of an hour after the release of the prepared text of Draghi’s testimony to the European parliament. It fell to 3-month low vs sterling of 70.41 pence. The pair’s intraday trend is still weak as long as resistance 1.0800 holds, major support is around 1.0660 and break below targets 1.0600. On the higher side minor resistance is around 1.0800 and any break above targets 1.0830/1.0900. Further bullishness can be seen only above 1.0900.USD/JPY: The pair has retreated till 122.71 and recovered from that level. Short term trend is bullish as long as support 122.48 holds. Any break below 122.48 will drag the pair till 121.99/121.80 in short term. On the higher side minor resistance is around 123.20 and break above targets 123.60/124.13. Overall bullish invalidation only below 122. NY Cut Expiries: 123.00 (453M), 123.20 (580M), 123.35 (1.1B), 123.50 (400M).GBP/USD: Sterling climbed to a 3-month high against the euro after comments from Draghi brought into focus the divergent monetary policy outlooks between UK and the euro zone. It rose 0.2 percent to 70.41 pence per euro, its highest since mid-August. Traders said a drop below 70.27 pence struck on August 18 would leave it on track to drop to July lows of 69.35 pence. Against the dollar, sterling was slightly lower at $1.5195. On the higher side pair’s major resistance is around 1.5262 and break above will take the pair to new level till 1.5300/1.5360 level. Its support is around 1.5130 and any break below 1.5130 will target 1.5080/1.5050. USD/CHF: The pair has made a high of 1.0085 at the time of writing and started to decline from that level. Any break above 1.0125 will take it to new level 1.0160/1.0240 in short term. On the downside major support is around 1.0025 and break below targets 0.9980/0.9950. Overall weakness can be seen only below 0.9930 levels.AUD/USD: The Aussie has recovered till 0.7154 after positive Australian jobs data and slightly retreated from that level. It was trading around 0.7134 level. The pair is facing major resistance around 0.7170 and any slight trend reversal only above that level. Any break above that level will take the pair till 0.7225/0.7250. On the lower side minor support is around 0.7110 and break below targets 0.7050/0.7020.Equities RecapEuropean markets rebounded briefly as ECB President Mario Draghi signals that there would be further policy easing in next month, driving the Euro and bonds lower.The pan-European FTSEurofirst Index opened lower and reversed early losses on Draghi’s comments, it slid 0.3 pct at 1489 points. Germany’s DAX dropped down 0.3 pct at 10,877 points, France’s CAC 40 and Britain’s FTSE 100 were both down 0.5 pct.Japan’s Nikkei ended flat on the day, while MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9 pct, China’s CSI300 Index ended down 1.0 pct at 3795.32 points, Shanghai Composite Index closed down 0.5 pct, and HK’s Hang Seng Index edged up 2.4 pct at 22888.92 points, while closing.Commodities RecapOil prices edged up modestly on Thursday to around $46 per barrel, which is supported by demand for gasoline and on technical buying after a sharp fall the previous day. Brent crude futures were at $45.90, rising 9 cents following a 3.4 pct fall on Wednesday. U.S. crude futures were at $43.10 a barrel, climbing 17 cents from Wednesday when prices tumbled 3 pct on high production, rising U.S. stocks and an economic slowdown in Asia.Gold was hovering near a 3-month low on Thursday as investors positioned themselves for a U.S. rate hike this year. Spot gold rose 0.2 pct to $1,087.80 an ounce as the dollar eased slightly from a seven-month high.Treasuries RecapU.S. 10-year Treasury yeild stood at 2.330 pct versus U.S. close of 2.253 pct on Tuesday.Euro zone bond yields reversed an early rise on Thursday after ECB president Mario Draghi said the euro zone’s inflation dynamics had weakened and the central bank stood ready to use all the instruments within its mandate. German 10-year yields fell 2 basis point to 0.59 percent, having initially risen 1 bps at the open. All other euro zone yields were 1-4 bps lower on the day. The gap between U.S. 5-year Treasury yeilds and German 5-year yields climbed to 181 bps, the highest since 1999.JGBs opened modestly firmer after decent 30-yr auction. Yields were down by 0.5bp to 1bp from yesterday in the 7-yr and longer zone. JGB prices ended the day very little changed to slightly higher, with the 7-yr to 10-yr zone outperforming the rest of the curve.UK Gilts started 15 ticks lower than the settlement of 116.58, as expected, as overnight data exceeded forecasts.Australian government bond futures tumbled to multi-month lows, with the 3-year bond contract off 15 ticks to 97.820. It went as far as 97.810, the lowest since June. The 10-year contract fell 11.5 ticks to 96.9850, while the 20-year contract dropped 9 ticks to 96.4650. New Zealand government bonds eased sending yields 4.5 basis points higher at the long end of the curve.

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