Americas Roundup: Dollar falls after Fed's Brainard dampens bets on Sept rate hike, US stocks rallies, oil rises on soft

Market Roundup

•    Fed’s Brainard: warns against removing support for U.S. economy, wants stronger spending, inflation data before tightening.

•    US rate hike odds for Sept dip after dovish Brainard comments to 15% from 21%, Dec rises near 59%.

•    Feds Lockhart: "Serious discussion" over rate rise warranted no urgency for Fed to raise rates at a particular time, wage pressures appear to be broadening despite weak inflation.

•    Fed’s Kashkari: overall outlook is for moderate econ growth, wants to see more movement in core inflation, politics does not come up in Fed deliberations on policy, highly unlikely Fed would use negative rates.

•    BoE will start to buy corporate bonds on Sept 27 for initial period of 18 months.

•    Wall St rallies, oil up as markets reassess Fed action; European stocks halve earlier losses.

•    European credit pares losses as dip buyers emerge.

Looking Ahead - Economic Data (GMT)

•    22:45 New Zealand Food Price Index* Aug -0.2%-previous

•    23:50 Japan Business Survey Index Q3 -11.1%- previous

•    01:30 Australia NAB Business Conditions Aug 8- previous

•    01:30 Australia NAB Business Confidence Aug 4- previous

•    02:00 China Urban investment (ytd)yy Aug forecast 8%, 8.1%- previous

•    02:00 China Industrial Output YY Aug forecast 6.1%, 6%- previous

•    02:00 China Retail Sales YY Aug forecast 10.3%, 10.2%- previous

Looking Ahead - Events, Other Releases (GMT)

•    22:30 Australia RBA Assistant Governor Christopher Kent speaks at the Bloomberg Breakfast

Currency Summaries

EUR/USD is likely to find support at 1.1164 levels and currently trading at 1.1229 levels. The pair has made session high at 1.1270 and hit lows at 1.1214 levels. The dollar declined against euro on Monday after comments from a top Federal Reserve official reduced bets that the central bank would raise rates this month by striking a dovish stance. Fed board governor Lael Brainard told the Chicago Council on Global Affairs, that Federal Reserve should avoid removing support for the U.S. economy too quickly because of potential weakness in the labor market and risks of foreign economic downturns. The dollar index, which measures the greenback against a basket of six major rivals, was last down 0.22 percent at 95.126. The index fell to a session low of 94.935 following the release of Brainards remarks. The euro was last up slightly against the dollar at $1.1235.

GBP/USD is supported in the range of 1.3230 currently trading at 1.3333 levels. It reached session high at 1.3347 and hit low at 1.3270 levels. Sterling steadied against dollar on Monday after dovish comments from U.S. Federal Reserve policymakers lowered expectations for an interest rate hike this month. Sterling was up roughly 0.3 percent against dollar at $1.3335 after Fed Governor Lael Brainard comments. The pound had been on a winning streak up until last Tuesday, hitting a seven-week high of $1.3445 that left it more than 5 percent up from a three-decade low plumbed in July following Britains vote to leave the EU. The BoE meets on Thursday and is not expected to announce new policy measures, having cut interest rates to record lows and reintroduced an asset-purchase programme last month. Inflation, wage, unemployment and retail sales data are all due before then.

USD/CAD is supported at 1.3000 levels and is trading at 1.3053 levels. It has made session high at 1.3122 and lows at 1.3030 levels. The Canadian dollar strengthened against its U.S. counterpart on Monday as oil rallied and reduced bets that Federal Reserve would raise rates this month weighted on dollar. European stocks and bonds fell in a volatile market, hit by growing concerns that global central banks commitment to the post-crisis orthodoxy of super-low interest rates and asset purchase programs may be waning. Oil prices rose as softer dollar and stronger U.S. equity markets helped crude futures recover from earlier losses. Retail sales data on Thursday and consumer inflation data on Friday will next be watched for signs of whether U.S. economic strength can support a rate increase. The Canadian dollar was last trading at C$1.3042 to the greenback, weaker than Fridays close of C$1.3037.

USD/JPY is supported around 101.00 levels and currently trading at 101.87 levels. It peaked to hit session high at 102.07 and made session lows at 101.56 levels. The dollar declined against Japanese yen on Monday after Federal Reserve policymakers sounded cautious notes on near-term interest rate increases. Japanese yen hit session highs after Fed Governor Lael Brainard, who some had expected to abandon her stance and open the door to higher rates, said the U.S. central bank must be careful not to remove stimulus too quickly. Comments from Fed officials in the past few weeks had raised speculation of a U.S. rate increase this year and the European Central Bank and Bank of Japan recently refrained from further monetary policy easing, fueling Fridays broad stocks selloff and rise in bond yields. The dollar, which hit a session low of 101.58 yen was last down 0.83 percent at 101.83 yen.

Equities Recap

European shares ended at their lowest point in two weeks on Monday, adding to losses seen last week as investors fretted over a possible near-term rate hike in the United States.

UKs benchmark FTSE 100 closed down by 1.1 percent, the pan-European FTSEurofirst 300 ended the day down by 1.00 percent, Germanys Dax ended down by 1.4 percent, France’s CAC finished the day up by 1.2 percent.

U.S. stocks racked up their strongest gain in two months on Monday after Federal Reserve Board Governor Lael Brainard stuck to her dovish stance on interest rates and urged caution about removing monetary stimulus too quickly.

Dow Jones closed up by 1.32 percent, S&P 500 ended up by 1.47 percent, Nasdaq finished the day up by 1.69 percent.

Treasuries Recap 

The U.S. Treasury yield curve was the steepest in over a month on Monday after Federal Reserve Governor Lael Brainard said the U.S. central bank should avoid removing support for the economy too quickly.

The gap between five-year note yields and 30-year bond yields  widened to 119 basis points, resulting in the steepest yield curve since Aug. 5. It has risen from 102 basis points on Aug. 30.

Benchmark 10-year notes gained 1/32 in price to yield 1.670 percent, after rising earlier on Monday to 1.697 percent, the highest since June 24.

Commodities Recap

Oil prices ended nearly 1 percent higher on Monday as a softer dollar and stronger U.S. equity markets helped crude futures rebound from an early drop pressured by worries about increased drilling activity for oil in the United States.

Brent crude settled up 31 cents, or 0.7 percent, at $48.32 per barrel.
U.S. West Texas Intermediate crude rose 41 cents, or nearly 1 percent, to settle at $46.29.

Gold steadied on Monday, recovering from earlier weakness after dovish comments from U.S. Federal Reserve policymakers lowered expectations for an interest rate hike this month, and the dollar fell.

Spot gold was up 0.05 percent at $1,328.32 an ounce by 3:12 p.m EDT (1912 GMT), with U.S. gold futures settling down 0.7 percent at $1,325.60 per ounce.