- Dollar hits 3-week low after Fed keeps rates at record lows.
- DXY hits 94.063, lowest since late August.
- EUR/USD rises to post Fed high at 1.1460 from 1.1390.
- High yielding AUD, NZD gain sharply. AUD/USD 0.7266 tops (0.7277 post Fed).
- Risk/EM ccys generally firmer, Rand revisits post Fed highs after retrace.
- Gold extends climb out of September 11 1098.35 hole to reach 1138, 3.5% gain.
- DAX down 2.26% to 9964.
- SSEC closes up 0.4% at 3,097.92 points.
- Euro zone July current account NSA 33.8bln vs previous 30.6bln revised.
- Euro zone July current account SA 22.6bln vs previous 24.9bln revised.
- Euro zone July Net investment flow 88.2bln vs previous 51.7bln.
- PBOC orders banks to tighten supervision of clients’ FX deals.
- Russian Finmin- If Central bank cuts rates, it will impact inflation.
- (1000 ET/1400 GMT) US August leading indicators index, +0.2% m/m eyed; last -0.2%.
- (1200 ET/1600 GMT) US Q2 flow of funds data.
- (1500 ET/1900 GMT) Argentina is due to release the gross domestic product figures for the second quarter.
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade operation 30-year Ginnie Mae (max $975 mn).
FX Recap
USD: The dollar hit a three-week low against a basket of major currencies on Friday, after the U.S. Fed kept interest rate steady on Thursday. The dollar index hit 94.282; it’s weakest since late August and fell half a percent against the yen to 119.455 yen.EUR/USD: Euro hits three-week high vs dollar after Fed decision, as investors digested the outcome of the long-awaited Federal Open Market Committee meeting. The Federal Open Market Committee (FOMC) decided to keep monetary policy settings unchanged on Thursday, with global financial developments deterring the bank from what would have been its first rate hike in more than nine years. As for overseas updates, the European Central Bank published its monthly economic bulletin, saying it expects a weaker recovery than previously anticipated. The bank added that an increase in inflation rates will be slower than earlier projections had suggested. In the data front, EMU’s Current Account surplus has surpassed previous estimates, coming in at a seasonally adjusted €22.6 billion during July, down from June’s €24.9 billion. It made intraday high at 1.1460 and low at 1.1390. Initial support is seen around at 1.1015 and resistance at 1.1560 levels. Option expiries are at 1.1300 (1.1BLN), 1.1400 (1.2BLN), 1.1440 (543M), 1.1500 (1.7BLN).USD/JPY: The pair has popped back below 120 handle in a spike that rallied from 120.40 to 119.05. A weaker USD/JPY is at the heart of falling Japanese equities. The Nikkei closed 2% lower as the yen consolidates under ¥120. The US dollar was left empty handed after the Federal Reserve (Fed) left its monetary policy on hold, while Janet Yellen delivered a speech seen as highly dovish. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 120.00 (561M), 120.25 (416M), 120.50 (560M), 121.00 (849M).GBP/USD: Pound accelerated higher and reached a fresh 3-week high near 1.5658, as broad dollar weakness leads the Forex board. It is currently trading at 1.5639 and low at $1.5556 levels. UK retail sales volumes grew in line with estimates between July and August, helped by increased sales in both small and large retailing, official figures showed on Thursday. Moreover US FED decision helped the pair to drag above $1.56 levels. Initial support is seen at 1.5185 and resistance is seen around 1.5725 levels.NZD/USD: The Kiwi is supported above $0.6400 levels after markets had enough time to digest the Federal Open Market Committee’s (FOMC) statement. U.S. interest rates remained unchanged at near-zero levels on Thursday, somewhat unexpectedly, as the monetary-policy setting committee decided global conditions were not ripe enough to tighten policy. The New Zealand economy expanded 0.4% in the June quarter, according to Statistics New Zealand data released on Thursday, missing the market forecast of 0.6% growth, which was also the Reserve Bank of New Zealand’s (RBNZ) estimate. The pair made an intraday high at 0.6455 and low at 0.6336 levels. Pair is currently trading at 0.6447 levels. Initial support is seen at 0.6195 and resistance at 0.6511 levels. Option expiry is at 0.6325 (1BLN).AUD/USD: The Australian dollar moved well above the $0.72 handle, consolidating after the post-FOMC spike to $0.7272. RBA’s Glenn Stevens talked the Aussie down for a while, saying the lower AUD is now having a bigger impact on the economy. Australia’s exit from a decade-long mining boom has brought with it many challenges for the resource-rich economy, with growth slowing, unemployment rising, and confidence levels wavering. But policymakers are optimistic that Australia will make it through the commodity downturn without too much pain, with support from monetary policy and the weaker exchange rate. The Australian dollar has plunged 25% against the U.S. dollar over the last two years, and around 18% on a trade-weighted basis. The RBA believes that continuous improvement in non-mining growth is what is needed to bring down the unemployment rate. Australia’s unemployment rate has wavered around 6% for the last year, which is better than the RBA forecast six months ago, according to Stevens. Stevens also said that monetary policy is seeking to support Australia’s growth transition. Australia’s interest rates are currently at record low levels. It made intraday high at 0.7272 and low at 0.7161 levels. Initial support is seen at 0.6908 and resistance at 0.7245 levels. Option expiries are at 0.7200 (830M), 0.7300 (693M).
Equities Recap
European stocks dropped on Friday after the U.S. Fed kept interest rates steady by citing the weak global growth and the financial market volatility as its concerns for not raising interest rates.The FTSEuroFirst index of leading 300 shares fell 0.8 pct in early trade to 1,413 points, Germany’s DAX dropped 1 pct to 10,129 points, and France’s CAC 40 was down 0.9 pct at 4,615 points. Britain’s FTSE 100 index also inched lower 0.3 percent at 6,170 points.
Japan’s Nikkei average ended three days of gains to close 2 percent lower. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1 pct to a 4-week high. MSCI’s broadest emerging market index was up 0.6 pct and on track for the biggest weekly rise since early April, with 3.7 percent gains. China’s both CSI300 Index and Shanghai Composite Index ended up 0.4 pct for the day.
Commodities Recap
Oil prices eased on Friday after the U.S. Fed warned of a weakening global economy and on signs that the world’s biggest crude producers would keep pumping at high levels to maintain market share. U.S. West Texas Intermediate (WTI) crude futures were trading at $46.48 per barrel at 0832 GMT, down 42 cents from their last settlement. Brent crude was down 3 cents at $49.05 per barrel.Gold fell from a 2-week high on Friday, giving back some of the sharp gains from the last two days, as the Fed’s decision to hold interest rates steady added to uncertainty over the timing of an eventual rate hike. Spot gold fell 0.3 percent to $1,127.70 an ounce at 0641 GMT, after climbing to a 2-week high of $1,133.20 in the previous session.
Treasuries Recap
U.S. debt yields fell with the 2-year note yield dropping to 0.682 pct, returning to its familiar range only a day after it hit a 4-1/2-year high of 0.819 pct.The 10-year German Bund yield was down 10 bps in early trading, on course for the biggest one-day fall since early July and the third biggest this year. Spainish and Italian equivalents dropped 10 bps to near one-month lows of 2.00 pct and 1.81 pct, respectively.UK 10-year gilt yields were 11 bps lower on the day at 1.85 pct at 0917 GMT, while earlier in the day 2-year yields hit their lowest since Aug. 24 at 0.579 pct before rising to 0.64 pct.JGB prices finished the day higher in relatively active trading, with the 2s/40s curve flattening sharply by 4.5bp on the day. JGBs opened firmer on stronger US TSY overnight, sending yields down 1.5bp from yesterday in the 7-yr and longer zone, after the FOMC decided to keep rates intact. JGBs extended their earlier gains on weaker Tokyo stocks and JPY/USD today.
New Zealand government bonds, sending yields as much as 4.5 ticks lower on the long end of the curve. Australian government bond futures bounced off one-month lows, with the 3-year bond contract up 7 ticks at 98.090. The 10-year contract added 9.5 ticks to 97.1950, leading to a bearish flattening of the curve.
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