1 October, 2013
US government has partially shutdown at midnight for the first time since 1996, as House Republicans refused to agree on the budget unless it involved a delay in Obamacare. As many as 800’000 workers are out of work today; the national parks, museum and many essential government services are suspended. No further negotiations have been planned, raising the more consequential question of how to avoid a US default by October 17th if the debt limit is not increased. USD heavily sold-off against all G10 and EM currencies.
In Japan, Tankan index beat the market expectations in the third quarter. USDJPY advanced to 98.73, yet failed to consolidate gains as US government shutdown sent the Nikkei stocks and JPY crosses lower. Option bids are seen at 97.90/98.00 then 97.50, while the upside is limited on the global increase in the risk aversion. Resistance is still tight at 99.00/10.
As widely expected, the RBA left the policy rate at the historical low of 2.50%. The neutral (meaning less dovish) accompanying statement sent AUDUSD above 0.9420, wiping out the early losses on weak Chinese PMI. The recent negative trend weakened, opening the way for further highs post-RBA. Next key resistances are seen at 0.9460, then 0.9525 double top.
Euro and sterling extended gains overnight. EURUSD saw resistance below 1.3555 in Asia and rallied hard as Europe walked in. GBPUSD hit 1.6252 - highest since January 3rd. The final manufacturing PMI numbers will be the main data focus in the morning. However, the US shutdown is likely to remain in the center of attention.
In Sweden, Krona rallied hard against USD as the manufacturing PMI showed faster-than-expected expansion in September. NOKSEK took a dive to 1.0613, hitting the lowest levels since March 2004.
Today, the economic agenda is dominated by a stream of September PMI Manufacturing numbers out of Sweden, Norway, Spain, Switzerland, Italy, France, Germany and Euro-Zone and UK, Italian, German and Euro-Zone Unemployment numbers, US aug Consumption Spending m/m, US September ISM Manufacturing & Prices, Total and Domestic Vehicle Sales and Italian September New Car Registrations.
The jitters in the market place raise on the unresolved US budget deadlock. As the budget deadline approaches, World leading officials urge Washington to find a resolution as concerns on US default denote a potential decline in governments treasury holdings in value...
In the October meeting, the BoJ decided to keep the policy unchanged. The annual rise in monetary base remains at Yen 60
The week starts with good sentiment as China prints better than expected manufacturing PMI in September (51.2, versus 60.9 expected & 50.1 prev). Shanghai
The FX markets are subject to high volatility, mainly triggered by dovish comments on Fed QE and the ongoing liquidity concerns in China. Though the PBOC sees the liquidity risk controllable, the abstention to add cash in the system generated significant swings in the equity and currency markets so far...
The currency markets are mostly dominated by profit taking and speculative positioning as the investors seek direction these days. The Wall Street rally gave a short-lived boost to risk-positive currencies in New York, yet the limited enthusiasm in Asia lead to some consolidation during the overnight session...