Mrket Roundup
- GBP/USD rallies to 1.5510 fm 1.5410. EUR/GBP down to 0.7295 fm 0.7358.
- Euro edges down before ECB, to 1.1302 fm 1.1351.
- USD/JPY option volatility falls to lowest since August.
- NZD bounces almost 1%. Plays 0.6702/0.6785.
- UK Sept Retail Sales +1.9% m/m, +6.5% y/y vs previous -0.4%/+3.5% revised. 0.3%/4.8% expected.
- Await a letter in November”, Britain’s Cameron tells EU on renegotiation.
- UK Osborne: Autumn will see more and more detail as EU talks move to new phase.
- Osborne: Getting into technical discussions about EU renegotiation with EU.
- Germany’s DHK Chambers of Commerce lower growth forecast to 1.3% 2016 vs previous forecast of 1.8%.
- Moody’s says Japan may have more room to expand QQE.
- Dai-ichi Life to buy foreign bonds if yen temporarily strengthens.
- JPN Meiji Yasuda looks to increase unhedged foreign bonds, foreign stocks.
Economic Data Ahead
- (0730 ET/1130 GMT) Brazil’s non-seasonally adjusted jobless rate is expectedto have risen for a ninth straight month in September, to 7.8 percent, the highest in over five years, from 7.6 percent in August.
- (0830 ET/1230 GMT) New applications for U.S. unemployment benefits likely rose from a 42 year-low last week, while remaining at levels consistent with a healthy labor market. A survey forecast initial claims for jobless benefits increasing to 265,000 from 255,000. Last week’s data covered the survey period for October non-farm payrolls. Despite the anticipated increase, claims probably fell between the September and October survey periods. This would suggest a pick-up in job growth after an abrupt slowdown in August and September. Continued jobless claims likely fell to 2.188 mln from 2.158 mln previous week.
- (0830 ET/1230 GMT) Federal Reserve Bank of Chicago releases National Activity Index, previous -0.41.
- (0830 ET/1230 GMT) Canadian retail sales are forecast to have edged up 0.1 percent in August, making for the fourth monthly gain in a row. Excluding autos, analysts expect a 0.1 percent gain.
- (0900 ET/1300 GMT) Data from Mexico’s national statistics institute is expected to suggest that the annual inflation rate cooled further in early October after consumer prices hit a record low in September. Economists said inflation in the 12 months through mid-October probably cooled to 2.51 percent from 2.53 percent in the first half of September.
- (1000 ET/1400 GMT) The National Association of Realtors is set to release the data on U.S. home resales, which probably rose in September. Existing home sales are expected to have increased 1.4 percent to an annual rate of 5.38 million units.
- (1000 ET/1400 GMT) Conference Board’s Leading Index for Sep is expected to be at 0.0 pct vs 0.1 pct in August.
- (1000 ET/1400 GMT) European Commission releases Consumer Confidence data for October, which likely dropped to 7.5 from previous dip at 7.1.
- (1030 ET/1430 GMT) EIA Natural Gas Shortage (Oct 16), market expectation 88B, previous 100B.
- (1100 ET/1500 GMT) Kansas Fed Manufacturing Activity (Oct), Previous 1.0.
Key Events Ahead
- (0745 ET/ 1145 GMT) ECB policy announcement, most see no changes to rates, QQE.
- (0830 ET/1230 GMT) ECB President Draghi press conference (in Malta).
- (0945 ET/1345 GMT) FedTrade operation 30-year Ginnie Mae (max $1.275 bn).
- (1000 ET/1400 GMT) Former Fed Vice Chair Kohn on “The politics of the Fed”; Washington.
FX Beat
EUR/USD: The euro edged lower on Thursday ahead of a ECB policy decision, with most major banks expecting President Mario Draghi to talk down the currency, up more than 8 percent since the ECB began its bond-buying programme in March. The euro dropped 0.2 percent to $1.1313 in early trade in Europe, and around 0.4 percent to 135.48 yen. The pair has been trading in narrow range between 1.1300 and 1.1400 for the past three trading session. Overall trend is still bullish as long as short term support 1.1300 holds. On the higher side minor resistance is around 1.1350 and any break above targets 1.1380/1. pair’s further bullishness only above 1.14600.
USD/JPY: The pair has made a high of 120.09 yesterday and retreated till 119.61 today in Asian session. It is currently trading at 119.77. Overall trend is still weak as long as resistance 120.35 holds. Any further weakness can be seen only below 119.50 (200 day HMA) level. Any break below 119 will drag the pair further down till 119.20/118.90 in short term. The pair is facing short term resistance around 120.35 and any indicative break above would extend gains till 120.75/121.20.
GBP/USD: Sterling touched one-month highs against the dollar and euro on Thursday after data showed British retail sales grew at the fastest rate in almost two years last month, boosted by beer sales linked to the Rugby World Cup. Retail sales volumes surged by 1.9 percent on the month, far higher than economists’ forecasts for a 0.3 percent rise, the Office for National Statistics said on Thursday. Sterling rose to $1.5510 after the data, its strongest since Sept. 22, before edging down to $1.5470, to leave the pound a third of a percent up on the day. Against the single currency, sterling hit a one-month high of 72.95 pence per euro, before easing to 73.11 pence, leaving it up 0.6 percent on the day. The break above 1.5500 will take the pair further to new level around 1.5550/1.55600. On the downside any break below 1.54800 will drag the pair further down till 1.5450/1.5430/1.5410 level.
AUD/USD: The Australian dollar dropped after Commonwealth Bank of Australia raised its mortgage rates by 15 bps, fueling speculation official policy would have to be eased to counteract the tightening in financial conditions. The Aussie fell around a third of a U.S. cent to $0.7201. The pair is facing strong support around 0.7160 and sees further weakness only below that level. It is currently trading at 0.7222. Short term bullishness can be seen only above 0.7300 and break above targets 0.7360/0. the lower side minor support is around 0.7160 and break below targets 0.7100/0.7030.
NZD/USD: The kiwi gained as much as 1 percent, recovering from a poor milk auction earlier in the week and helped by comments attributed by media to Finance Minister Bill English that the currency had already adjusted “quite considerably”. Support is seen at $0.6644, the 38.2 percent retracement level of its rally from $0.6235 to $0.6897.
Equities Recap
Shares edged up in Europe and the dollar made slight gains on Thursday, with investors focusing on the European Central Bank, which is expected to keep the door open to more economic stimulus after its latest policy-setting meeting.
The pan-European FTSEurofirst 300 stocks index climbed less than 0.1 pct in early deals, helped by an increased full-year sales outlook from Swiss drugmaker Roche, Germany’s DAX went up 0.25 pct.
Japan’s Nikkei was down 0.6 pct, while MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.3 pct in early trades.However, China bucked the trend, rebounding from Wednesday’s roughly 3 pct dive. The China’s CSI300 and the Shanghai Composite index both went up 1.5 pct and HK’s Hang Seng Index ended down 0.6 pct at 22845.37 points.
Commodities Recap
Oil prices rose on Thursday, moving over $48 a barrel, after dropping around a dollar in the previous session on higher inventories. Brent for December delivery climbed 38 cents to $48.23 a barrel. U.S. crude for December delivery climbed 40 cents to $45.60 a barrel, having settled down $1.09, or 2.4 pct, in the previous session.
Gold was trading near its lowest in more than a week on Thursday, hurt by a stronger dollar and uncertainty over when the Federal Reserve will begin to raise U.S. rates. Spot gold was steady at $1,168.20 an ounce.
Treasuries Recap
U.S. 10 year Treasury yeild stood at 2.029 pct vs U.S. close of 2.030 pct on Wednesday.
Euro zone government bonds reflected the wait-and-see mood before the ECB and Draghi’s news conference. Benchmark German 10-year Bund yields were steady at 0.57 pct.JGB prices closed the day slightly higher, with the 5s/20s curve flattening modestly by 1bp from yesterday. Yields on the current 20 -yr and 30-yr JGBs opened moderately firmer on the back of stronger German Bunds and US TSY bonds overnight. They finished the day down 1bp from yesterday’s final close.
As expected, Dec Gilts opened down 10 ticks from yesterday’s 118.94 settlement at 118.84.
New Zealand government bonds were up, sending yields 1.5 bps lower along the curve. Australian government bond futures edged higher, with the 3-year bond contract up 2 ticks at 98.190. The 10-year contract surged 3 ticks to 97.3450, while the 20-year contract went up 3 ticks to 96.7900.
The material has been provided by InstaForex Company – www.instaforex.com