Asian stocks were mixed, while regional bonds declined ahead of tomorrow’s much-anticipated central bank policy decisions in Japan and the US. The dollar was little changed, while oil fell and gold gained.
- Two of the Fed’s 23 preferred bond-trading partners – Barclays and BNP Paribas, are betting against the peers and the bond market by forecasting officials will raise rates Wednesday, the first time more than one dealer has gone against the consensus during the week of a policy meeting since last September, data compiled by Bloomberg show.
- Fed funds futures pricing indicate just a 20% chance of a Fed hike at its 20-21 Sep meeting, and a 56% chance by year-end.
- US data showed September’s NAHB homebuilder index rose to 65, the highest in 11 months, beating the median estimate of 60. Weak housing investment was a negative drag on 2Q GDP, however signs now indicate a 3Q rebound.
- The greenback fell against most major peers has investors largely ruled out a Fed hike this week, however economists remain split on whether the BOJ will boost stimulus. The Bloomberg Dollar Spot Index declined 0.2%; hedge fund and institutional investors cut net bullish futures positions on the dollar for the week ended 13th Sep, according to a COT report.
- The benchmark 10yr Treasury yield rose 2bps overnight to 1.71%, after gaining 2bps last week.
- The S&P 500 Index ended little changed, paring back initial gains of as much as 0.7%.
- The Topix index rose more than twice as much as the Nikkei 225 index amid speculation the BOJ may switch to favouring the former broader benchmark in its purchases of ETFs.
- New home prices rose the most in 6 years in August, jumping 1.2% from July, according to Bloomberg data. The gains suggest moves by authorities to cool surging home prices over the past 6 months are doing little to damp demand from investors looking for alternatives to stocks and overseas property, which may prove to be a challenge for policy makers on how to respond without choking off growth by squeezing credit.
- According to a Bloomberg report, China’s Ministry of Finance has selected about 1 trillion yuan worth of additional public-private partnership projects, as authorities plan to focus on fiscal policy and infrastructure investments in order to help prop up economic growth.
- In its rather-hawkish minutes of its Sep 6th policy meeting, the RBA noted that the country’s record-low interest rates are helping the economy weather a plunge in resource investment. The central bank also noted the economy is enjoying an unexpected fillip from a 30% jump in the price of commodity exports from their trough earlier in the year.
- Spot gold continued to be supported above the $1,300/Oz level, gaining 0.2% to $1,316.83 last night.
- Speculators cut their bets on a bullion rally by the most in more than 3 months during the week ended 13th Sep and holdings in global ETFs backed by gold are heading for the biggest monthly decline this year.
- Silver for immediate delivery rose 1.1% to $19.3136/Oz, its highest point in more than a week.
- Crude oil for October delivery settled 0.6% higher at $43.30/bbl, retreating from its high of more than $44/bbl. A tanker returned to Libya’s Ras Lanuf export terminal to load oil after clashes halted what would have been the first overseas crude shipment from the site since 2014.
- Spot 1.3642
- USDSGD declined 0.2% to the 1.3600 handle last night before recovering back some of its losses this morning.
- OCBC noted that any disappointment for August’s CPI due out this Friday could fuel easing expectations by MAS next month.
- Spot 0.7447
- AUDUSD initially rose 0.4% to 0.7573 following the release of the RBA’s minutes which indicated the central bank could be less likely to cut rates in the near future. However the currency pair soon pared most gains to its previous day’s close.
- Spot 1.3199
- USDCAD gained 0.4% to 1.3212 amid renewed weakness in the Canadian dollar.
- 3253 is the key resistance level; a renewed weakness in oil prices or weak retail and inflation numbers later this week could drive the currency pair above it.
- Spot 6.6728
- The PBOC strengthened its reference rate by the most in 2 weeks, raising it to 6.6595 against the dollar.
- USDCNH reversed overnight losses to gain 0.1% t0 6.6744 earlier this morning.
- Spot 101.90
- USDJPY was little changed with the currency pair largely fluctuating around the 102 handle, as traders and investors look ahead to tomorrow’s much-anticipated policy decisions of the Fed and BOJ.
- The yen is set for 3 straight quarters of gains, the longest rally since 2011. Currency strategists say the biggest threat to the yen would be signs of hawkishness from the Fed as over the past 2 years, the yen has a greater tendency to move with changes in US short-term yields rather than with those in Japan.
- Spot 1.3041
- GBPUSD was little change as the currency pair continues to be supported at the key 1.3000 psychological level.