Euro has hit new lows because of the Italian crisis, Pound is rebounding above 1.31 and Gold is down to 1183
The Italian bond futures traded near their session lows and the BTP-Bund spread widened to 311bps, as the Italian Finance Minister Tria defended the Government fiscal targets in Parliament after the local press suggested that the budget watchdog is likely to reject the whole thing.
Core yield curves bear-steepened, as bund and U.S. Treasury futures reversed their initial weakness as the Italian woes continue. The 10-Year U.S. Treasury yield climbed above 3.25%, while the U.S. 5s30s were capped by the 200-DMA so far.
The U.K. yields moved alongside the core European bonds lower, with the focus on the 2071 gilt syndication and make-or-break Brexit negotiations ahead of the October 17 European Union Summit.
The Bloomberg Dollar Spot Index traded around yesterday’s best levels, while cable and EUR/USD were knocked down to their respective session lows in the European session yesterday.
European equities were slightly offered, while the Italian FTSE MIB reversed its initial outperformance to revisit yesterday’s lows as Italian banks shed approximately 0.7%.
The European session yesterday was dominated once again with happenings of the Italian crisis with the Italian Finance Minister Giovanni Tria defending the Fiscal Policy of the Government before Parliament.
Over in the U.S., the government is planning to sell another round of Bills focusing on the 4- and 52-week bills as well as the 3- and 6-month bills. a plethora of speakers spoke yesterday, the Dallas Federal Reserve President Robert Kaplan, Philadelphia Fed President Patrick Harker, and New York Fed President John Williams.
In Brexit news, Arlene Foster, leader of Northern Ireland’s Democratic Unionist Party, will meet chief European Union negotiator Michel Barnier in Brussels.
Gold prices initially advanced while the dollar remained largely in consolidation following reports that the International Monetary Fund (IMF) cuts its global economic growth forecasts for 2018 and 2019. The IMF has updated its World Economic Outlook that it was now expecting a growth of 3.7%, down from the 3.9% forecast in July, which is seen as the first downgrade since July 2016.
The current situation which has revealed itself as worsening financial conditions and capital outflows are pressuring the emerging markets, while the mounting trade tensions between the US and its trade partners are also obscuring global economic Outlook. Similar, the fund also reduced its growth outlook for China to 6.2% from 6.4% for the year 2019.
The commodity has retreated by more than 13% since April, with a stronger dollar and an increasing Treasury yields cited as catalysts for the selling. In the final week of September, the Federal Reserve has added 25 bps to bring rates to between 2.0% and 2.25% and has indicated a potential increase in December.
Gold prices are seen trading modestly up during the early US trading session, while some short covering in the future markets and bottom-fishing in the cash markets seems to be in the menu Global indices are seen shaken by the ruse if government bond yields that are pulling market participants interests away from stocks.
The world’s largest economies continue to escalate their trade war, which has also now turned into a war of words, while the US secretary of state and Chinese foreign minister exchanged harsh words on Monday.
The dollar rose following the Tokyo fix as the U.S. curve steepened and the 10-year yield touched a fresh 7-year high. The greenback retained an overall bid tone as London flows sent the euro to fresh daily lows. Euro-area bonds traded in the red amid stabilizing signs for stocks and commodities.
EUR/USD – The pair remains under pressure and reached 1.1431 as a low for Tuesday. Completes a daily DeMark buy setup which could result in mean reversion toward 55-DMA, especially if RSI manages to move north; overall picture remains bearish. Immediate support can be found at 1.1420 followed by 1.1360. Looking forward to trading in a possible range today from 1.1420-1.1560
GBP/USD – Regain its upward trend and reached 1.3149 the resistance point that we mentioned yesterday. The immediate resistance for today is 1.3190 followed by 1.3275. Immediate support can be found at 1.3090 followed by 1.3010. Look for a possible trading range today from 1.3090-1.3220.
USD/JPY – Continued losing its upward move Momentum .studies showed signs of a pullback following 11-month high and price action satisfies; healthy correction could target baseline at 112.46, now tests 21-DMA support; weekly picture remains bullish, 200-weekly MA at 113.18. The immediate resistance is still at 113.55 followed by 114.06. Immediate support can be found at 112.55 followed by 111.90.
AUD/USD – The Australian dollar continued its upward move and reach 0.7104 as high for Tuesday and start making a new high in the Asian session now while writing this report. Immediate support still at 0.7025 with next support at 0.6980. The immediate resistance is at 0.7140 followed by 0.7280. Expected range today from 0.7060.7150.
USD/ZAR – The rand held gains made ahead of President Cyril Ramaphosa's announcement on Tuesday afternoon that former Reserve Bank Governor Tito Mboweni would be the new finance minister.
Ramaphosa made the announcement from Tuynhys in Parliament. Mboweni is replacing Nhlanhla Nene with immediate effect.
The rand was trading 0.67% stronger at R14.75 ahead of Ramaphosa's announcement, having firmed on speculation that Mboweni would get the post. At 16:56, after the president made the announcement, it was changing hands at R14.76 to the greenback.
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