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FX/RATES DAYBOOK EUROPE: USD Climbs; Riksbank’s Ingves to Speak

(Bloomberg) — The Bloomberg Dollar Spot Index advanced for a second day after strong factory data released Monday boosted the case for higher U.S. rates and as speculation rose the next Federal Reserve Chair could come from the hawkish camp. TODAY

  • Riksbank Governor Stefan Ingves speech
  • Eurozone PPI data
  • U.K. Markit/CIPS Construction PMI

OVERNIGHT TRADING SESSIONS

  • U.S.
    • Treasury yields ended within 1bp of Friday close as a quiet afternoon session saw 10Y yields ply narrow 1bp range; belly of the curve outperformed, pushing 5s30s to steepen ~1bp, as month- end flattening pressure subsided
    • Yields lower by up to 0.8bp across 5Y sector shortly after the close, 30Y yields marginally cheaper; UST 5s30s ended ~93.2bp after reversing early flattening move, which was again capped ahead of 91bp level
    • The Bloomberg Dollar Spot index advanced, with the greenback gaining versus all of its G-10 peers
  • EUROPEAN BONDS 
    • Bunds futures closed higher on Monday, after initially opening lower with Treasuries after strong China PMI data, bonds bounced as Spanish bonds snapped wider from the open following Catalonia vote, before finding support from Gilts after weaker-than forecast U.K. PMI manufacturing data
    • Spanish 10y bond yield climbed as much as 11bps, before paring the advance as tensions remained high following Sunday’s vote
  • ASIA TODAY
    • The greenback extended overnight gains as political risks following Catalonia’s bid for secession weighed on the euro
    • BBDXY rises 0.2%, adding to gain of 0.5% on Monday
    • EUR/USD falls 0.2% in a second day of declines, following a selloff in Spanish bonds overnight
    • AUD fell to session low after the RBA left benchmark policy unchanged and reiterated that growth and CPI may be slower than forecast if the Aussie dollar keeps rising

TOP OVERNIGHT NEWS

  • The White House ruled out talks with North Korea over its nuclear arsenal just days after Secretary of State Rex Tillerson said the U.S. was talking to North Korea “directly, through our own channels”
  • The Conservative Party annual conference is in full swing in the northern city of Manchester with the fate of two top Tories on the line: Prime Minister Theresa May and her Foreign Secretary Boris Johnson
  • ECB Executive Board member Peter Praet suggested that monetary authority may be able to drag out the final stages of its bond-buying plan when officials adjust their policy settings
  • Goldman Sachs Group is exploring how it could help clients trade bitcoin and other digital currencies, according to a person briefed on the plan

KEY VIEWS

  • Recent dollar gains are poised to continue thanks to U.S. economic strength and prospects for further interest-rate increases, Goldman Sachs snalysts said in recommending buying the currency against the euro
    • Euro to fall back to $1.15 by year- end, Goldman says
  • Australia’s dollar is set to fall to the mid-70s as U.S. currency strengthens toward year-end, according to Macquarie Bank
    • “That dip, in time, will help create the conditions to justify a hike in August 2018,” says Gareth Berry, a foreign-exchange and rates strategist in Singapore

ECONOMIC DATA RELEASED:

  • Australia Aug. Building Approvals Rise 0.4% m/m; Est. 1% Gain
  • Australia’s Aug. Private New Home Sales Rise 9.1% m/m
  • Australia ANZ Weekly Consumer Confidence Falls 0.6% to 113.4

ECONOMIC DATA (All times CET): * 9:00am: Norway September Manufacturing PMI; est. 56.2 (prior 55.7) * 9:00am: Spain September Unemployment M/M Net (’000s); est. 21.5 (prior 46.4) * 9:00am: Czech Republic 2Q F GDP Q/Q; no est. (prior 2.50%) * 9:00am: Czech Republic 2Q F GDP Y/Y; est. 4.70% (prior 4.70%) * 10:30am: United Kingdom September UK Construction PMI; est. 51.1 (prior 51.1) * 11:00am: Euro-Zone Aug PPI Y/Y; est. 2.30% (prior 2.00%) * 12:00pm: Ireland September Unemployment Rate; no est. (prior 6.30%) GOVERNMENT: * 8:30am: Swedish FSA Head Speaks in Stockholm * 12:00pm: Danish Premier Speaks as Parliament Starts 2017-18 Session * 12:30pm: Italian Finance Minister Pier Carlo Padoan Speaks to Lawmakers * 1:00pm: Finnish Government Responds to No-Confidence Motion CENTRAL BANKS (All times CET): * 10:30am: Record of the Financial Policy Committee’s September meeting * 11:30am: Riksbank Governor Ingves Gives Speech BOND SALES/PURCHASES (All times CET): * 11:15am: Switzerland to Sell 182-Day Bills * 11:30am: Belgium to Sell 98-Day Bills * 11:30am: Belgium to Sell 154-Day Bills * 11:30am: ECB Main Refinancing Operation Result MARKETS

  • USD/JPY +0.3% to 113.06 (range 112.66-113.17)
  • EUR/USD -0.2% to 1.1713 (range 1.1702-1.1740)
  • AUD/USD -0.2% to 0.7815 (range 0.7809-0.7835)
  • NZD/USD -0.2% to 0.7181 (range 0.7171-0.7198)
  • GBP/USD -0.1% to 1.3258 (range 1.3230-1.3280)
  • USD/CAD +0.2% to 1.2527 (range 1.2507-1.2537)
  • USD/CHF +0.2% to 0.9768 (range 0.9740-0.9784)

TECHNICAL OUTLOOK by Bloomberg strategist David Finnerty

  • USD/JPY – Consolidating under 113.26, last weeks high
    • Resistance: 113.26, Sept. 272 high; 114.49, July 11 high; 114.96, Feb. 15 high
    • Support: 111.99, 200-DMA; 111.48, Sept. 25 low; 111.05, Aug. 4 high
  • EUR/USD — Eyeing test of support at Aug. low
    • Resistance: 1.1846, 50-DMA; 1.2004, Sept. 22 high; 1.2092, Sept. 8 high
    • Support: 1.1679, 23.6% Fibo retracement of Jan. 3 to Sept. 8 rally; 1.1662, Aug. 17 low; 1.1578, 100-DMA
  • EUR/JPY — Consolidating under last week’s high
    • Resistance: 133.12, Sept. 29 high; 134.24, Sept. 25 high; 134.41, Sept. 22 high
    • Support: 131.71, Aug. 30 high; 130.83, 50-DMA; 129.38, Sept. 5 low

–With assistance from Stephen Spratt and David Finnerty. To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Shikhar Balwani

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