Market Roundup
- ECB expectations weigh on EUR/USD. Plays 1.0619-1.0552. 1.0550 Wed low.
- EUR/GBP under pressure 0.7104/0.7060. EUR/CHF tight 1.0800/1.0830 range.
- Cable rose to 1.4947 then fell to 1.4903 after UK service PMI.
- DXY holds firm after new multi-year 100.51 high Wed. Today 100.00/100.41.
- ECB board members will not talk to media in week before policy meetings.
- A new record low for 2 year bund yield 0.438%.
- UK Nov Markit/CIPS Services PMI 55.9 vs previous 54.9. 55.0 expected.
- EZ Nov Markit Services Final PMI 54.2 vs previous 54.6. 54.6 expected.
- EZ Nov Markit Composite Final PMI 54.2 vs previous 54.4. 54.4 expected.
- EZ Oct Retail Sales -0.1% m/m, 2.5% y/y vs pevious -0.1%/2.9%. 0.2%/2.7% expected.
- Putin says Turkey “will regret” shooting down of Russian bomber.
- Iran Oil Min: Ready to discuss new OPEC ceiling after full return to market.
- Saudi oil source says report of proposed Saudi cut is baseless.
- Energy Intelligence: Saudi to propose global deal to balance oil markets.
- Japan tax revenues to hit 24-yr high on Abenomics windfall- Sources.
- BOJ’s Kiuchi doesn’t expect CPI to accelerate, worries about QE risks.
Economic Data Ahead
- (0745 ET/1245 GMT) The European Central Bank is almost certain to ease policy but what measures it will take is up in the air. The Governing Council is expected to debate a wide range of options, from a fairly uncontroversial deposit rate cut to a highly unorthodox scheme to buy up bundled non-performing loans. Markets expect the bank to settle on a 10 basis point rate cut, a slight increase in monthly asset buys and a modest extension of the quantitative easing programme.
- (0830 ET/1330 GMT) New applications for U.S. jobless benefits probably rose to 268,000 last week from 260,000, but remaining near 43-year lows as the labor market continues to tighten, according to a survey of economists. Claims are close to levels last seen in 1973 and probably do not have much room for further declines.
- (1000 ET/1500 GMT) The Institute for Supply Management’s non-manufacturing index is likely to have dropped to 58.0 last month from 59.1 in October.
- (1000 ET/1500 GMT) The new orders for U.S. factory goods in October are likely to have risen 1.4 percent after it dropped for a second straight month in September. New orders for manufactured goods declined 1.0 percent after a downwardly revised 2.1 percent drop in August.
- (0900 ET/1400 GMT) Mexican gross fixed investment, the measure of spending on machinery, equipment and new construction, is expected to have risen 5.2 percent in September on an annual basis. It was up 2.9 percent from the same month a year earlier.
- (1030 ET/1530 GMT) EIA Natural Gas Storage Change (Nov 27), Previous 9B.
- Canada Mortgage and Housing Corp releases data on the number of vacant completed condominiums in Canada. Condo vacancies have been at or near a record high in 2015 and the absorption rate has been falling, suggesting the number of vacancies could increase.
Key Events Ahead
- (0840 ET/1340 GMT) ECB President Draghi’s press conference.
- (0840 ET/1340 GMT) The Federal Reserve Bank of Cleveland President Loretta Mester and Treasury Office of Financial Research Director Richard Berner will give welcome remarks before the “Financial Stability: Policy Analysis and Data Needs” conference sponsored by the Federal Reserve Bank of Cleveland and the Treasury Dept. Office of Financial Research, in Washington.
- (1000 ET/1500 GMT) Federal Reserve Chair Janet Yellen will appear before the congressional Joint Economic Committee and could give indications of how close the central bank is to raising interest rates.
- (1310 ET/1810 GMT) The Federal Reserve Vice Chair Stanley Fischer, who will speak on “Financial Stability and Shadow Banks”, will be introduced by Mester.
FX BeatUSD: The dollar index was hovering just below a 12-1/2-year high of 100.51 it had hit overnight. Yellen’s hawkish comments sent the greenback soaring to a 12-1/2-year high against a basket of six major peers. Against the yen, the dollar rose 0.2 percent to 123.49, close to a 3-month high of 123.77 yen. EUR/USD: The euro was hovering near a 7-1/2-year low as Draghi is expected to expand the European Central Bank’s money printing programme later and cut its deposit rate again. The single curency fell 0.6 percent to $1.0553 and recovered till 1.06226, was trading at 1.05617. ECB’s rate cuts will drag the Euro further below 1.0500. Major resistance is around 1.06400 (Dec 1st high) and break above targets 1.0690 (Nov 25th high)/1.0720. On the downside watch out 1.0550 (trend line joining 1.05657 and 1.05585) for further weakness and break below targets 1.0500 /1.04600.USD/JPY: The pair has retreated after making a high of 123.66 and is currently trading at 123.45. Intraday trend is slightly bullish as long as support 122.60 holds. On the higher side minor resistance is around 123.75 and any break above targets 124.15/125. Minor support is at 122.60 and break below targets 122.4/122.20.GBP/USD: The broader gains for the U.S. dollar drove sterling back towards 7-1/2 month lows, but it rallied against the euro ahead of the ECB meeting that may decide another cut in rates on deposits in the single currency. The pound was just 0.1 percent weaker at $1.4935, about a third of cent above the 7-1/2 month low hit on Wednesday. It gained almost half a percent to 70.66 pence per euro. Cable breaks major support 1.4980 and declined till 1.4900 level. Short term trend is bearish as long as resistance 1.4980 (support turned into resistance). Major support is seen at 1.4880 and break below will drag the pair to new level 1.4850/1.4800. On the higher side major resistance is around 1.4980 and break above targets 1.5030/1.5080.USD/CHF: The pair has recovered after making a low of 1.01794 and is currently trading around 1.02344. Overall trend is bullish as long as support 1.0140 holds. Any break below 1.0140 will drag the pair further down till 1.0100/1.00500. On the higher side any break above 1.0243 will take the pair to next level at 1.0300/1.03280.AUD/USD: The Australian dollar slipped from multi-week peaks on Thursday after hawkish-sounding comments from Fed’s Yellen, it lost some shine at $0.7287, from $0.7305 early, though it remained within reach of a 7-week high of $0.7345 touched on Wednesday. Support was found at $0.7250. Its major resistance is around 0.7380 and break below targets 0.7420/0.7460. On the lower side minor support is around 0.7280 and any break below will target 0.7230/0.7170. Short term bullish invalidation is only below 0.7170.NZD/USD: The New Zealand dollar edged down to $0.6633 on Thursday, after rising as high as $0.6681 the previous day, as the U.S. dollar strengthened on strong employment data. Equities RecapInvestors are waiting for another magic from Mario Draghi on Thursday, after risk assets were hurt by comments from Fed’s Yellen that she was “looking forward” to hiking U.S. rates. European stocks were 0.4 pct higher, Britain’s FTSE 100 dropped 0.13 pct, Germany’s DAX fell 0.16 pct and France’s CAC 40 was down 0.09 pct.MSCI’s main regional index ex Japan fell 0.4 pct as Tokyo’s Nikkei also ended flat. Australian shares dropped 0.6 pct and South Korea’s Kospi shed 1 pct. Shares in Hong Kong, Malaysia and Singapore also declined although Shanghai brushed off disappointing services sector data to close 0.7 pct higher and China’s CSI300 Index closed up 0.7 pct at 3,749.30 points.Commodities RecapOil prices edged higher from near-2015 lows after a report sourced from a senior OPEC delegate said Saudi Arabia would propose a deal to balance oil markets with non-OPEC help next year. Benchmark Brent crude futures went up 88 cents, more than 2 pct, at $43.37 a barrel . U.S. crude was trading 64 cents higher at $40.58 a barrel.Gold slipped to a near 6-year low, as USD surged after Yellen hinted at a U.S. rate hike later this month and investors nervously awaited the ECB’s policy decision later in the day. Spot gold dropped to $1,045.85 an ounce, the lowest since February 2010 in earlier trade and was down 0.3 pct at $1,050.31. U.S. gold futures slid to $1,045.40, the lowest since October 2009.Treasuries RecapUS 10-year Treasuries yield stood at 2.194 pct vs US close of 2.178 pct on Wednesday. German 2-year bond yield hits record low at -0.438 percent ahead of ECB decision, having hit an all-time low of -0.434 percent on Wednesday. 5-year yields were below the deposit rate at -0.206 percent and less than 2 basis points away from their trough.JGB prices closed the day steady to modestly higher, with the 20-yr tenor outperforming the rest of the curve.UK 10-year Gilt yields bumped up from 1.860 per cent at the market open to 1.875 per cent. They started 7 ticks lower than the settlement as the market played catch up with the core market reaction to Yellen’s speech last night. New Zealand government bonds earned, pushing yields 1 bp lower along the curve. Australian government bond futures were down, with the 3-year bond contract off 1 tick at 97.890. The 10-year contract eased 3 ticks to 97.1400, while the 20-year contract held steady at 96.6500.
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