Market Roundup
- EUR/USD neutral, plays 1.0817/1.0752 ahead of U.S retail sales.
- USD off recent highs vs JPY, CHF as risk appetite wanes.
- USD/JPY tests 122.50 fm Mon’s 2-1/2 month peak at 123.60. 122.80 Fri’s high.
- USD/CHF off 1.0087/85 double day high, 0.9990 p/back low. 1.0043 high Fri.
- USD/CAD size C$1.8 bln 1.33 strikes expiry NY cut today.
- SSEC closes down 1.4%. Manufacturing, energy shares weigh.
- FTSE led lower by 3.4% drop in Rolls Royce after 4th profit warning in just over year.
- Copper plunges to new multi-year USD 4787/ton low (since mid-2009).
- EZ Q3 GDP flash estimate 0.3% q/q, 1.6% y/y vs previous 0.4%/1.5%. 0.4%/1.7% expected.
- UK Sept Construction Output Vol -1.6% y/y. -0.3% exp. Biggest fall since May 2013.
- Swiss Oct Producer/import price 0.2% m/m, -6.6% y/y vs previous -0.1%/-6.8%. -0.2%/-6.9% expected.
- Norway CB Dep Gov says about zero rates “I hope we avoid it”.
- Japan Sept industrial output revised up small.
- Amari: No extra stimulus despite technical recession risk
Economic Data Ahead
- (0830 ET/1330 GMT) U.S. retail sales likely rose 0.3 percent in October after edging up 0.1 in September as households started purchasing automobiles and a range of other goods, signalling a solid momentum in the economy that could further strengthen expectations of rate hike next month.
- (0830 ET/1330 GMT) U.S. Labor Department will release its producer price index (PPI) for October. The PPI is expected to have risen 0.2 percent last month after dropping 0.5 percent in September. At an annual rate it is expected to drop 1.2 pct.
- (1000 ET/1500 GMT) The University of Michigan’s preliminary index on overall consumer sentiment is expected to have risen to 91.5 in November from 90.0 in October.
- (1000 ET/1500 GMT) The U.S. business inventories probably remained flat in September for a third straight month.
- (1030 ET/1530 GMT) EIA Natural Gas Storage Change (Nov 6), previous 52B.
- (1400 ET/1900 GMT) Argentina is scheduled to release October consumer inflation data. The consumer prices are expected to have risen 1.0 percent in October versus the prior month.
- (1900 ET/0000 GMT) Peru’s central bank is expected to hold the benchmark interest rate unchanged at 3.50 percent, according to a survey of economists.
Key Events Ahead
- (1230 ET/1730 GMT) Federal Reserve Bank of Cleveland President Loretta Mester, who will be a voting member of the Fed’s rate setting committee in 2016, is scheduled to speak on the economic outlook and monetary policy before the Nelson E. Weiss Memorial Forum hosted by the City Club of Cleveland.
- (1045 ET/1545 GMT) FedTrade Operation 30-Yr Fannie Mae/Freddie Mac (max $1.925 bn)
- Bank of Canada Senior Deputy Governor Carolyn Wilkins will be giving a speech at the University of Toronto, entitled “Innovation, Central-Bank Style”.
- The Economic Club of Canada holds the 4th Annual Energy Summit in Calgary, with speakers including Kinder Morgan Canada president Ian Anderson and Alberta Energy Minister Margaret McCuaig Boyd.
FX BeatUSD: The dollar inched higher 0.4 pct on the day at $1.0777 per euro by 0801 GMT, down around half a cent compared to opening levels at the start of the week. It rose 0.1 percent to 122.74 yen, off Monday’s 2 1/2-month peak of 123.60, as risk appetite receded. The dollar index has slipped back from Tuesday’s 7-month high of 99.50 to last trade at 98.904, slightly higher for the day. EUR/USD: The euro dropped 0.6 pct to $1.0755 on Friday, still under pressure after ECB’s Draghi singled out the currency’s more robust performance since May as one driver for a “weakening” outlook on inflation. It is likely to end the week in positive territory, its loss on the day leaving it well above $1.0700. The pair has made a low of 1.06911 yesterday and recovered till 1.08280. Intraday trend is still weak as long as resistance 1.0830 holds. Its major support is around 1.0660 and break below targets 1.0600, on the higher side major resistance is around 1.0830 and any break above targets 1.0900/1.100. The overall bullishness can be seen only above 1.0900. Option expiries at 1.0600 (822M), 1.0700 (1.4B), 1.0745-50 (812M), 1.0775 (448M) 1,0790 (303M), 1.0800 (1B), 1.0850 (425M).USD/JPY: The pair has retreated till 122.49 at the time of writing and it was trading at 122.65. 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 is only below 122.30. Option expiries at 123.00 (980M), 123.50 (505M).GBP/USD: Sterling dropped against the dollar as a senior BoE policymaker, Haldane said a interest rate hike by the Federal Reserve would not automatically lead to a response in Britain. It was down 0.1 pct at $1.5220, although it held its ground against the euro, trading 0.4 percent higher at 70.65 pence, not far from a three-month high of 70.41 pence hit on Thursday. The pair recovered till 1.5246 yesterday and retreated till 1.5176. On the higher side 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 1.5200 and any break below 1.5200 will target 1.5160/1.5130. USD/CHF: The pair has retreated till 0.9980 and recovered from that level. It was trading around 1.00213 at the time of writing. Its minor resistance is around 1.0050 and any break above 1.005 will take the pair to new level 1.0085/1.01250 in short term. On the downside major support is around 0.9980 and break below targets 0.9950/0.9930. Overall weakness can be seen only below 0.9930 levels.AUD/USD: The Australian dollar was on track to post a 1 pct weekly gain, indicating remarkable resilience amid a commodity tumble and increasing speculation of a Fed’s rate hike next month. It held firm at $0.7132, having jumped 0.9 pct on Thursday after a strong jobs report led markets to widen the odds of an interest rate cut. The pair has recovered till 0.7154 yesterday and slightly retreated till 0.7080 from that level. It is facing major resistance around 0.7170 and any slight trend reversal only above thate level. Any break above that level will take the pair till 0.7225/0.7250. On the lower side minor support is around 0.7080 and break below targets 0.7050/0.7020.NZD/USD: The New Zealand dollar held at $0.6541, having edged off a 1-month trough around 65 cents on Thursday. For the week, it was mostly flat, having been stuck in a thin band of $0.6499 to $0.6589. But it was nursing losses against Aussie on a diverging rate outlook between Australia and New Zealand. Equities RecapEuropean shares were on track to post biggest weekly lossses since September on Friday after commodity prices suddenly fell to multi-year lows on fears over sluggish global growth and an oversupply.The FTSEurofirst 300 dropped 0.4 pct, down 2.3 pct for the week, France’s CAC slipped 0.36 pct, Germany’s DAX fell 0.12 pct and Britain’s FTSE 100 plunged 0.27 pct in early deals.Japan’s Nikkei ended down 0.5 percent, recording a 7-day winning streak, but edged up 1.7 pct for the week, MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 1.4 pct, driven by losses in resource shares. China’s CSI300 index ended down 1.3 pct at 3,746.24 points, HK’s Hang Seng Index closed down 2.2 pct at 22,396.14 points and Shanghai Composite Index was down 1.4 pct at 3,580.84 points.Treasuries RecapUS 10-year Treasury yield stood at 2.318 pct vs US close of 2.319, pct on Thursday.Most euro zone bond yields dropped, underpinned by expectations of further easing by the ECB, possibly next month. Germany’s 10-year Bund yield fell 2.8 bps to 0.58 percent. Yields on 10-year Portuguese bonds climbed 1 bp to 2.78 percent, holding near a 4-month high hit on Monday at 2.93 percent. Expectations that the Federal Reserve may hike rates, with the European Central Bank expected to ease policy further in December, has pushed the two-year US-German yield gap to its widest in 9 years and the 5-year spread to its widest since 1999.JGB prices ended the morning session steady to slightly higher in quiet trading, sending yields on 10-yr to 20-yr JGBs down 1bp from yesterday’s afternoon close. JGB prices closed the day marginally mixed, with the 20s/40s curve steepening modestly by 1bp on the day.UK Dec Gilts were 3 ticks higher on the construction data at 117.02, but a good deal of buy side work has already been done this morning by a softer equity complex and the fact that 10-year cash yields broke support at 2.00%. New Zealand government bonds earned, pushing yields a couple of basis points lower. Australian government bond futures tumbled near multi-month lows, with the 3-year bond contract were up 1 tick at 97.860. The 10-year contract was also 1 tick higher at 97.0250, while the 20-year contract gained 1.5 ticks to 96.4900.Commodities RecapBrent crude was up from a sharp drop on Friday, but it was on track for the biggest weekly loss in more than 2 months as swelling stocks weighed on the market. Brent crude was trading 70 cents higher at $44.76 per barrel. U.S. crude was 15 cents higher at $41.90 a barrel. Gold was on track towards a fourth straight weekly loss on Friday, as investors shied away from the metal on expectations that US Fed is set to raise interest rates next month. Spot gold dropped down 0.1 pct at $1,083.30 an ounce, while U.S. gold futures for December delivery were up $1.90 an ounce at $1,082.90.
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