- Sterling up near 3 week high vs euro at 0.7319. Reclaims 1.5500 vs USD.
- CAD recovers after early post-election losses. USD/CAD trading in between 1.3048/1.2988 range.
- European shares fall after solid ECB bank lending data. FTE3 down 0.7%.
- China stocks hit near 2 month high as recovery continues. CS1300 up 1.23%.
- McCafferty – BoE must not fall behind curve on rates.
- BoS Gov Linde – ECB could extend, modify asset purchasing programme.
- EZ August current account NSA 13.7bln vs previous 37.9bln revised. SA 17.7bln vs previous 25.6bln revised.
- Euro zone August Net investment flow 32.6bln vs previous 93.0bln revised.
- Switzerland September trade surplus widens to 3.0 bln but exports down near 3% on year.
- Switzerland watch exports post biggest quarterly drop since 2009 in Q3.
- (0830 ET/1230 GMT) US September housing starts, 1.15 mln AR eyed; last 1.13 mln, -3.0% m/m.
- (0830 ET/1230 GMT) US September building permits, 1.16 mln AR eyed; last 1.16 mln, +2.7% m/m.
- (0830 ET/1230 GMT) Canadian Wholesale trade, consensus 0.2%.
- (0900 ET/1300 GMT) Belgium October consumer confidence index; last -10.0.
Key Events Ahead
- (0915 ET/1315 GMT) Fed Gov Powell speech at NY Fed conference.
- (0930 ET/1330 GMT) Fed’s William Dudley Speech.
- (1100 ET/1500 GMT) FOMC Chair Yellen speech at Washington, DC event.
FX Recap
EUR/USD: The euro has recovered from a 10-day low against the dollar, after ECB governing council member Christian Noyer said ‘no need for more easing’ and pointed out the need to look for further ways to stimulate a still struggling euro zone economy. The euro gained just over 0.1 percent on the day to $1.1343, after dropping as low as $1.1306 on Monday. Earlier in the session, German PPI indices fell short of expectations, when the monthly change for September came out at -0.4%, up from -0.5%, while the year-on-year number printed -2.1%, well down from -1.7% previously. Moreover, the current account in the euro zone for August dropped notably, from an upwardly revised €25.6 billion to €17.7 billion. It made intraday high at 1.1384 and low at 1.1322 levels. Initial support is seen around at 1.1015 and resistance at 1.1560 levels. Option expiries are at 1.1300 (528M), 1.1500 (1.6BLN).USD/JPY: The Japanese yen continued its narrow range trading on Tuesday, and even though weak Chinese data added to the USD strength in the previous session, the currency pair seemed to lack a clear direction on Tuesday. The currency pair will most likely wait for further direction coming from the Bank of Japan rate decision on October 30. Moreover, the focus remains on the Federal Reserve’s (Fed) rate hike timing, with the next Federal Open Market Committee meeting scheduled for October 29. Pair made intraday high at 119.77 and low at 119.41 levels. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.00 (420M), 120.00 (250M).GBP/USD: Sterling was trading near a 3-week high against the euro and rising past $1.55 against the dollar with investors awaiting cues from BoE policymakers scheduled to speak in coming days. Against the dollar, sterling was up 0.2 percent at $1.5495, having risen to a high of $1.5506 earlier in the day. The euro was slightly lower at 73.19 pence, having dropped to 73.10 pence on Monday. The BOE policymaker noted that the credit conditions for the business sector in the UK have eased and this calls for a rate-hike sooner rather than later. While BOE Governor Carney’s testimony on the Bank of England (BOE) Bill before the Treasury Select Committee turned out to be a non-event, as the central bank chief didn’t touch upon the monetary policy. Pair made intraday high at 1.5506 and low at 1.5454 levels. Initial support is seen at 1.5107 and resistance is seen around 1.5725 levels. Option expiries are at 1.5400 (170M), 1.5540 (193M).NZD/USD: New Zealand’s so-called kiwi bounced back above $0.68 against the US dollar on Tuesday, with fundamentals helping to drive the currency towards its highest level since June. Fonterra’s Global Dairy Trade (GDT) Index has risen sharply at the last four fortnightly auctions, rebounding more than 30% from a trough in August. The next auction due to take place on Wednesday morning (NZ time) is likely to mark the fifth-consecutive rise in prices, which will continue to drive gains in the kiwi. Pair made intraday high at 0.6841 and low at 0.6783 levels. Initial support is seen at 0.6235 and resistance at 0.6896 levels.AUD/USD: Following the release of the Reserve Bank of Australia’s meeting minutes from its October 6 meeting, the Aussie rose 0.31% in Tuesday, trading around $0.7280. The Reserve Bank of Australia continues to see a period of weak economic activity ahead. The policy meeting minutes suggest the bank is not currently expecting to lower interest rates again, particularly as the economy’s rebalancing evolves. Tuesday’s minutes from the RBA’s October meeting suggested that the bank is continuing to see the necessary economic transition take place, with the help of the lower Australian dollar. Pair made intraday high at 0.7296 levels and low around 0.7242 levels. Initial support is seen at 0.6908 and resistance at 0.7438 levels. Option expiry is at 0.7300 (508M).
European shares dropped on Tuesday, with mining and energy stocks extending losses on China’s weak data this week.The pan-European FTSEurofirst 300 index opened flat and slipped 0.6 pct, the blue-chip Euro STOXX 50 index edged up by 0.1 pct in early deals, Germany’s DAX remained flat.China’s CSI300 index closed up 1.2 pct at 3,577.70 points, HK’s Hang Seng index ended down 0.4 pct at 22,989.22 points and Shanghai composite index rose up 1.1 pct at 3,425.33 points.
Commodities Recap
Oil prices were flat on Tuesday as traders covered short positions after a week of falls, but profits were capped by worries about oversupply and the health of the global economy. Brent crude slipped $1.85 a barrel, or 3.7 pct, on Monday and was steady at $48.61 by 0810 on Tuesday. U.S. light crude went up 20 cents at $46.09 after closing down $1.37, or 3 pct.Gold struggled after three days of losses on Tuesday, dragged down by a stronger dollar and fears the Federal Reserve could still raise U.S. interest rates this year. Spot gold was trading at $1,171.75 an ounce by 0653 GMT, after losing about 1.2 pct in the past three sessions.
Treasuries Recap
US 10-year Treasury bond yeilds stood at 2.0422, while German 10-year bund yields were seen at 0.601.JGB prices finished the day mixed, with the 7-yr to 10-yr JGBs modestly firmer (-1bp). In the early trading session, the current 20-yr and 30-yr JGBs saw unusually good two-way flows among dealers, sending yields down by 0.5bp from their intraday highs of 1.085% (+0.5bp) and 1.36% (+0.5bp), ahead of today’s monthly JPY1.2tn 20-yr JGB auction.UK Gilts opened 19 ticks higher than the settlement of 118.65, as expected, as core fixed income markets were elevated by another slide in commodity prices.New Zealand government bonds were little changed. Australian government bond futures dropped, with the 3-yr bond contract slipping one tick at 98.210. The 10-yr contract dropped 2 ticks to 97.3550, while the 20-yr contract also shed 2 ticks to 96.8050.
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