Global Markets:

  • Asian stock markets: Nikkei up 3.50 %, Shanghai Composite gained 0.25 %, Hang Seng gained 0.45 %, ASX rallied 1 %
  • Commodities: Gold at $1236 (-0.20 %), Silver at $17.30 (-0.15 %), Crude Oil at $82.37 (+0.40 %)
  • Rates: US 10 year yield at 2.222, German 10 year yield at 0.861, UK 10 year yield at 2.199

News & Data:

  • Talk that Japan’s $1.2 trillion Government Pension Investment Fund (GPIF) will raise its allocation for domestic stocks to about 25 %
  • RBA’s Assistant Governor Kent: Inflation expected to stay consistent with 2%-3% target; monetary policy configured to support demand growth
  • BOJ Governor Kuroda: Japan’s Economy has continue to recover moderately
  • Kuroda: Core inflation likely to be around 1.25% for some time; will continue easing until 2% inflation stable
  • Kuroda: BOJ easing has been exerting intended effects; BOJ will check risks, adjust policy as needed
  • Kuroda: Effects of sales tax increase to wane
  • Japan’s Chief Cabinet Secretary Suga: Don’t think Abe indicated that he would delay sales tax rise
  • Rosengren: Doesn’t rule out extending QE if severe problems; conditions right for Fed to end QE after October meeting
  • Rosengren: Ending bond buying warranted by drop in jobless rate; 3% growth still intact despite volatile market

CFTC Positioning Data:

  • EUR net short 155k vs net short 146k prior
  • JPY net short 101k vs net short 113k prior
  • GBP net short 3k vs net long 1k prior
  • AUD net short 30k vs net short 26k prior
  • CAD net short 16k vs net short 7k prior
  • CHF net short 18k vs net short 12.5k prior
  • NZD net short vs flat prior

FX Overview:

Asian equity markets gained overnight, inspired by the performance of US equitieson Friday. The Nikkei was the outperformer amid talk that the GPIF will boost it’s allocation for domestic stocks to 25 %, higher than the market previously expected. Precious metals are slightly lower as risk appetite has improved, while Crude Oil is 0.40 % up on the day.

In FX, USD/JPY opened in Sydney around 107.22 after a Friday close of 106.87. The rally in the Nikkei kept the pair bid and it eventually reached a high of 107.40. Offers are reported at 107.50 and above there, the next key resistance area lies at 108.15/20. Bids in good size towards 106.80 with stops noted through 106.70/85.

AUD and NZD gained in the Asian session, supported by cross flows, especially buying in the JPY crosses. AUD/USD hit a high of 0.8788, while NZD/USD reached 0.7960. Meanwhile, EUR/USD consolidated in a 1.2735-65 range and GBP/USD within 1.6080-1.6120, with flows being light. Dealers report solid bids around the 1.2720 support area in EUR/USD.

The Week Ahead in FX:

It could be a quiet start into the new trading week, given the lack of Tier 1 data releases on Monday. In the European session, we’ll see Euro Zone Current Account data and later in the day, Canada will release Wholesale Sales data. The following day, we’ll get the Chinese GDP, Industrial Production and Retail Sales figures. The Chinese economy is expected to have grown 7.2 % y/y in the third quarter. Later in the day, the US will publish their Existing Home Sales figures.

On Wednesday, the main event in the Asian session will be Australian inflation figures, expect at 0.4 % quarter-on-quarter and 2.3 % year-on-year. In the European session, the Bank of England will release the MPC meeting minutes. The market is expecting that 2 members have voted for a rate hike, while 7 members have voted to keep rates unchanged. In the afternoon, US will release their inflation figures, expect at 0.1 % month-on-month and 1.6 % year-on-year. Further, the Bank of Canada will decide on interest rates and publish their Monetary Policy report.

The following day, we’ll see the Chinese HSBC Manufacturing PMI number and Manufacturing/Services PMI figures out of Germany, France and the Euro-Zone. In the US session, we’ll get US retail sales numbers. Finally, on Friday, the UK will release GDP numbers and the US will publish New Home Sales data.

Upcoming Events:

  • 06:00 GMT – German PPI (0.1 % MoM, -1.0 % YoY)
  • 08:00 GMT – Euro Zone Current Account (21.3bln)
  • 12:30 GMT – Canadian Wholesale Sales (0.2 % MoM)