Morning market report

September 10, 2015 09:53 AM

The Dow Jones Industrial Average fell eight points in its opening hour as uncertainty over the Federal Reserve’s key meeting next week is weighing on trader sentiment.

Forex news for 9/10/15 is headlined by a key rate decision by the Bank of England, new capitals controls in China, a sovereign-debt downgrade in Brazil, and a key report on Australian jobs data.

Capital Controls: This morning, China announced plans to tighten capital controls in order to deter capital flight from the emerging market. The decision is a significant reversal from past rhetoric and the easing of limits that would enable citizens to invest overseas. The State Administration of Foreign Exchange (SAFE) – which manages China’s currency – has ordered financial companies to increase controls on all Forex transactions. Specifically, Chinese authorities are targeting “over-invoicing exports,” a practice that has been used by some to disguise capital outflows.

USD/CAD: The Canadian Dollar advanced marginally after the Bank of Canada announced plans to hold interest rates in line. Though BoC Governor Stephen Poloz noted the impact of China’s economic struggles and subdued energy prices, the central bank appears in no hurry to further loosen monetary policy. The dollar was down 0.04% against this loonie at 10:30 EST.

GBP/USD: The British pound gained 0.46% this morning on news that members of the Bank of England voted 8-1 to keep its benchmark interest rate at 0.5%. The hawkish opinion of BOE Governor Mark Carney has been on display as he dismissed any impact of recent volatility on the central bank’s decision to maintain the current rate levels.

BRL/USD: The Brazilian cratered to an all-time low against the U.S. dollar today (0.26) after Standard & Poor's Ratings Services downgraded the nation’s sovereign debt to junk status last night. Falling oil prices have helped accelerate a steep decline in the currency over the last year, in addition to a highly publicized corruption probe at state-owned energy giant Petrobas. As the odds of a rate hike becomes more likely, the currencies of the BRICs – once darlings of global investment – are under greater pressure.

USD/JPY: The dollar gained 0.31% this morning against the yen, but pared some gains after surpassing the 121 level.  Two events triggered today’s gain. First, the completion of a five-year bond sale saw yields decline to 0.067%. Second, the nation’s Liberal Democratic Party leader Kozo Yamamoto said that the Bank of Japan’s policy meeting, set for October 30, would be a “good opportunity” for the central bank to explore further monetary easing. Japan’s economy is currently in a recession.

AUD/USD: The Australian dollar gained 0.75% after a strong jobs report erased concerns over the currency’s ongoing weakness. The nation’s August employment report indicated a net gain of 17,400 jobs for the month, exceeding consensus expectations of a gain of 5,000.

NZD/USD: The New Zealand dollar fell more than 2% this morning after the Reserve Bank of New Zealand announced that it will cut interest rates by another 25 basis points. However, losses continued after the bank said that “some further easing seems likely” in the event that China’s economy fails to stabilize, with some experts predicting a record-low target rate of 2%. China is New Zealand’s largest trading partner.

Oil Prices Rise: Crude oil prices ticked higher this morning, despite expectations that the Energy Information Administration (EIA) will report an increase in inventories. WTI October prices added 0.63% this morning, while Brent crude futures dipped 0.21% to $47.48.

Editor’s Note: Check back tomorrow with FXHQ as the South Korea reports its central bank’s rate decision, a flurry of European data hits the markets, and the U.S. reports PPI, consumer sentiment, and inflation expectations ahead of the critical Fed Open Market Committee next week.

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