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For the 24 hours to 23:00 GMT, the GBP declined 0.27% against the USD and closed at 1.3398 on Friday, following dismal UK GDP growth report.

Data showed that Britain's final gross domestic product (GDP) climbed 1.5% on an annual basis in the three months to June 2017, revised down from an expansion of 1.7% indicated in the preliminary figures, thus stoking concerns over the likelihood of an interest rate hike by the Bank of England (BoE) in the near-term. In the prior quarter, GDP had climbed 2.0%. Further, the nation's mortgage approvals fell to a level of 66.6K in August, more than market expectations for a decline to a level of 67.3K. Mortgage approvals had registered a revised reading of 68.5K in the prior month.

In other economic news, the nation's net consumer credit rose £1.6 billion in August, growing by the most three months, justifying the BoE Governor's worries regarding lending by British lenders. Consumer credit had risen by £1.2 billion in the prior month, while markets had anticipated for an advance of £1.4 billion.

Separately, the BoE Governor, Mark Carney, confirmed that central bank is close to an imminent interest rate hike, stating that it may be appropriate to raise interest rates “in the relatively near-term”, if the British economy continues to show signs of strengthening. Carney also warned against “reckless” household borrowing, outlining that personal lending was becoming a “little frothy and should be addressed”.

In the Asian session, at GMT0300, the pair is trading at 1.3369, with the GBP trading 0.22% lower against the USD from Friday's close.

The pair is expected to find support at 1.3337, and a fall through could take it to the next support level of 1.3306. The pair is expected to find its first resistance at 1.3413, and a rise through could take it to the next resistance level of 1.3458.

Going ahead, market participants will keep a close watch on UK's Markit manufacturing PMI for September, scheduled to release in a few hours.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.17% against the JPY and closed at 112.58 on Friday.

In the Asian session, at GMT0300, the pair is trading at 112.83, with the USD trading 0.22% higher against the JPY from Friday's close.

Overnight data indicated that Japan's final Nikkei manufacturing PMI rose more than initially estimated to a level of 52.9 in September, following a level of 52.2 in the prior month. The preliminary figures had recorded an advance to a level of 52.6.

Additionally, the nation's Tankan large manufacturing index registered a rise to a level of 22.0 in 3Q 2017, topping market expectations of a rise to a level of 18.0 and notching its highest level since September 2007. In the prior quarter, the index had recorded a reading of 17.0. Further, the nation's Tankan non-manufacturing index remained unchanged at a level of 23.0 in 3Q 2017, while markets were expecting the index to climb to a level of 24.0.

The pair is expected to find support at 112.4, and a fall through could take it to the next support level of 111.96. The pair is expected to find its first resistance at 113.09, and a rise through could take it to the next resistance level of 113.34.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.21% against the CHF and closed at 0.9685 on Friday.

In economic news, Switzerland's KOF leading indicator rose to a level of 105.8 in September, exceeding market expectations for a rise to a level of 105.5. The index had registered a revised level of 104.2 in the prior month.

In the Asian session, at GMT0300, the pair is trading at 0.9700, with the USD trading 0.15% higher against the CHF from Friday's close.

The pair is expected to find support at 0.9674, and a fall through could take it to the next support level of 0.9647. The pair is expected to find its first resistance at 0.9724, and a rise through could take it to the next resistance level of 0.9747.

Going forward, Switzerland's retail sales for August and SVME–PMI for September, both due to release in a few hours, will pique a lot of market attention.

The currency pair is trading between its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.35% against the CAD and closed at 1.2478 on Friday.

The Canadian Dollar lost ground against the USD, after data showed that Canada's gross domestic product (GDP) remained flat on a monthly basis in July, dragged by tumbling oil and automobile production and a slowdown in housing market. Market participants had envisaged the nation's GDP to rise 0.1%, after recording an advance of 0.3% in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.2490, with the USD trading 0.1% higher against the CAD from Friday's close.

The pair is expected to find support at 1.2427, and a fall through could take it to the next support level of 1.2365. The pair is expected to find its first resistance at 1.2542, and a rise through could take it to the next resistance level of 1.2595.

Ahead in the day, investors would eye Canada's Markit manufacturing PMI for September.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

Market movers today

In Europe , final PMIs and euro area unemployment rate for August are due out . We estimate the unemployment rate declined from 9.1% to 9.0%. Despite the decline, there is still some slack, which together with low inflation expectations and slow productivity growth is weighing down on wage growth.

In the US, the main release is the ISM manufacturing index for September. Given that regional PMIs have increased, there is also room for ISM manufacturing to increase to around 60 despite PMI manufacturing being stable at a much lower level in September. This big gap between PMI manufacturing and ISM manufacturing is still puzzling and we think the truth is likely somewhere in the middle, but note markets tend to focus more on ISM.

In the UK, the Conservative Party conference began yesterday and ends on Wednesday. The Conservative Party remains hugely divided on Brexit and PM Theresa May's position has been clearly weakened since the general election in June. May is expected to deliver a speech on Brexit and reiterate that the UK will leave the single market and the customs union.

In the Scandies, focus turns to PMI manufacturing releases in Sweden and Norway.

Selected market news

In Spain, a constitutionally declared illegal vote on Catalan independence took place on Sunday. Catalan authorities reported several injuries from clashes with police forces. Given the legal status of the ‘leave' result and lack of external support , the markets seem to expect calmer days going forward even with the EUR weakening slightly. For more details see e.g. Reuters.

On Friday, US PCE core inflation disappointed market expectations by printing a yearly rate of 1.3% (down from 1.4%). Headline PCE also fell short of expectations, which overall leaves the PCE contradicting the strong CPI reading in August . However, given the Fed's focus on a tight labour market , we do not think it will change the Fed's view on monetary policy for now.

Having said this, future Fed monetary policy will depend on who President Trump's nominates as board members (it is said he will pick two nominees). On Friday, several news agencies ran stories that Trump had met with possible candidates for the job as Fed Chair. According to Bloomberg, Trump has so far met with current Fed Chair Janet Yellen, National Economic Council Director Gary Cohn, Fed Governor Jerome Powell and former Fed Governor Kevin Warsh. According to Trump, a decision will be made ‘over the next two or three weeks'.

In Sweden, the Riksbank has extended current governor Stefan Ingves' mandate by five years. Also, First Deputy Governor Kerstinaf Jocknick's mandate was extended by six years. Both decisions were unanimous by the General Council. Much speculation had preceded the announcement , which is why EUR/SEK rose on the announcement .

Over the weekend in China, the Caixin and the official manufacturing PMI painted slightly different out looks for the manufacturing sector. While the former suggested a slightly slower acceleration pace (still above 50) by dropping to 51.0 (from 51.6) the latter rose to 52.4 (from 51.7). Going forward we project a slowdown in the Chinese economy on the back of a tightening in financial conditions, a cooling housing market and infrastructure spending slowing. Importantly, we do not expect a hard landing, as we pencil in solid external demand (exports) and fairly low housing inventories to cushion the slowdown.

Currency pair EUR/USD

The EUR/USD bullish bounce at the 23.6% Fibonacci level could create a larger ABC (green) or a new uptrend (123 purple). These 2 scenarios are invalidated if price breaks below the 23.6% Fib. In that case, price will most likely make a bearish breakout towards the 38.2% Fibonacci level of wave 4 vs 3, which in turn could act as potential support.

The EUR/USD channel, indicated by the red and blue trend lines, could be a corrective pattern as long as price stays above the 100% level of wave B vs A. A break above resistance (red) could start the wave 3 or wave C.

Currency pair GBP/USD

The GBP/USD bounce at the 38.2% Fibonacci level of wave 4 (blue) has so far been unable to break above the resistance trend line (red). A break below the 38.2% Fibonacci level could indicate a bearish breakout towards the 50% Fib of wave 4 vs 3 and the support trend line (blue).

The GBP/USD is testing the support trend line (green) and 78.6% Fibonacci level of wave 2 vs 1. A break below support (green) could indicate a bearish breakout whereas a break above resistance (red) could indicate a bullish breakout.

Currency pair USD/JPY

The USD/JPY bounced at the support trend line (blue), which could indicate the continuation within wave 5 (blue).

The USD/JPY could potentially have completed an ABC (orange) correction within wave 4 (purple) and price could be in a wave 5 as long as it stays above support (blue).

Asia Summary

Asian equity markets opened higher after stronger China PMI over the weekend and a RRR cut. China (closed all week), Hong Kong, India and South Korean markets closed for holidays so liquidity remained light. Indonesia stock market reached a fresh record high of 5,929. According to analysts today's Japan Tankan survey could be a leading indicator signaling an improvement in earnings of Japanese companies, which will start reporting later this month. USD remained stronger against the yen and slightly weaker against A$ and NZ$. US 10-yr treasury yield up over 1.0% in the session.

Over the weekend China's PBOC cut reserve requirement ratio (RRR) for some banks that meet certain requirements for lending to small business and agricultural sector (1st cut since Feb 2016); affirms prudent and neutral monetary policy. Should be noted this is different from previous changes to RRR in that it was a delayed cut that will not go into effect until next year. (See headline at 10:12:56ET for full details) Markets seemed to have little reaction. China also released Sept Caixin PMI manufacturing remaining in expansion at 51, tracking in line with the official figure of 52.4 (14th month of expansion and highest level since 2012) released on Friday.

EUR/USD fell to 1.1770 as Spain's Catalonia is now on track towards a declaration of independence. According to regional officials, results showed 90% of voters backed independence (with a turnout of 2.3M vote, 42%). This is notable as the mock referendum also showed 2.3M votes. Catalan President Puigdemont vowed to declare independence in the event of a ‘yes' vote, and later stated that Catalonia had won the right to become an independent state. There were reports of police entering various polling stations to try to seize materials related to the voting and more than 800 injured in clashes with Spanish riot police.

Key economic data

(CN) CHINA SEPT CAIXIN PMI MANUFACTURING: 51.0 V 51.5E

(JP) JAPAN Q3 TANKAN LARGE MANUFACTURING INDEX: 22 V 18E; MANUFACTURERS OUTLOOK: 19 V 16E; ALL-INDUSTRY CAPEX: 7.7% V 8.4%E

(JP) JAPAN SEPT FINAL PMI MANUFACTURING: 52.9 V 52.6 PRELIM

(HK) Macau Sept Gaming Rev MOP21.4B, +16.1% y/y v 14.5%e

(SG) Singapore Q3 URA Private Home Prices Q/Q: +0.5% v -0.1% prior (1st rise in 4-yrs)

(AU) Australia Sept CoreLogic House Price m/m: 0.3% v 0.1% prior; Prices of detached housing in Sydney -0.3% (first decline in 1.5 years)

(TH) Thailand Aug CPI M/M: 0.6% v 0.3%e; Y/Y 0.9% v 0.5%e; Core Y/Y: 0.5% v 0.5%e

Speakers and Press

China/Hong Kong

(CN) PBOC Q3 meeting of monetary policy committee: To cut reserve requirement ratio (RRR) for some banks that meet certain requirements for lending to small business and agricultural sector (1st cut since Feb 2016); affirms prudent and neutral monetary policy

Korea

(KR) Sec State Tillerson has been encouraged to not talk with North Korea by President Trump - Korean press

Japan

(JP) Japan ruling Liberal Democratic Party will pledge to raise the consumption tax as planned to 10% in 2019 in its manifesto for the general election on Oct 22

(JP) Moody's: Even if Japan govt raises the sales tax to 10% (from 8%) in 2019, as scheduled, its overall fiscal balance won't change materially

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.2%, Hang Seng closed; Shanghai Composite closed; ASX200 +1.1%, Kospi +0.9%

Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax +0.2%, FTSE100 +0.1%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.1816-1.1770; JPY 112.91-112.40; AUD 0.7847-0.7816;NZD 0.7226-0.7189

Dec Gold -0.5% at $1,278/oz; Nov Crude Oil -0.3% at $51.53/brl; Dec Copper +0.8% at $2.97/lb

Equities notable movers

Australia/New Zealand

BPT.AU Completes A$201M rights offering, take-up rate over 98%; +15%

A2M.AU Receives CFDA registration to allow exports of a2 Milk Co's China label infant formula to China to continue; +5.5%

Japan

7201.JP Suspended new auto registrations because domestic factories did not follow processes agreed with the Japanese Ministry of Land, Infrastructure and Transport; now fixed and registrations have resumed; -3.4%

7649.JP Reports H1 Net ¥8.7B v ¥7.4B y/y; Op ¥12.6B v ¥11.7B y/y; Rev ¥229.5B v ¥217.8B y/y; -5.2%

Global Markets:

• Asian stock markets: Nikkei up 0.15 %, Shanghai Composite rose 0.28 %, Hang Seng gained 0.48 %, ASX 200 rose 0.1 %
• Commodities: Gold at $1277.85 (-0.54 %), Silver at $16.62 (-0.33 %), WTI Oil at $51.52 (-0.27 %), Brent Oil at $56.56 (-0.41 %)
• Rates: US 10-year yield at 2.35, UK 10-year yield at 1.36, German 10-year yield at 0.46

News & Data:

• (JPY) Tankan Manufacturing Index 22 vs 18 expected
• (JPY) Tankan Non-Manufacturing Index 23 vs 24 expected
• (CNY) Manufacturing PMI 52.4 vs 51.5 expected
• (CNY) Non- Manufacturing PMI 55.5 vs 53.4 previous
• (CNY) Caixin Manufacturing PMI 51.0 vs 51.5 expected
• (EUR) German Retail Sales m/m -0.4 % vs 0.5% expected
• (GBP) Current Account -23.2 B vs -15.8 B expected
• (GBP) Final GDP q/q 0.3 % vs 0.3 % expected
• (EUR) CPI Flash Estimate y/y 1.5 % vs 1.6 % expected
• (EUR) Core CPI Flash Estimate y/y 1.1 % vs 1.2 % expected
• (CAD) GDP m/m 0.0 % vs 0.1 % expected
• (USD) Chicago PMI 65.2 vs 58.6 expected
• (USD) Revised UoM Consumer Sentiment 95.1 vs 95.3 expected
• Oil prices lower after strong third quarter as Sept. OPEC output rises- RTRS

CFTC Positioning Data:

• EUR long 88K vs 62K long last week. Longs increased by 26K
• GBP long 5K vs 10K short last week. Position moves to long from short. Last time it was positve was October 2015
• JPY short 71K vs 51K short last week. Shorts increased by 20K.
• CHF short 1.8K vs 1.5K short last week. Shorts increased by 0.3K
• CAD long 75K vs 59K long. Longs increased by 16K.
• AUD long 77k vs 72k last week. Longs increase by 5K.
• NZD long 8K vs 7K long last week. Longs increased by 1K.

Markets Update:

Asia-Pacific equity markets opened higher on Monday in spite of few major markets in the region being shut for holidays, the optimism was backed by surprisingly strong economic news out of China and Japan in addition to the broadly upbeat sentiment and gains in the U.S. dollar. However, the euro took a knock in Asia on Monday as investors kept an anxious eye on an independence vote in Spain’s Catalonia

USDJPY is currently seen Trading at 112.83 as the Yen was marginally weak against the US Dollar earlier on Monday. Propelled by the weaker Yen, Japan’s Nikkei Stock Average Nikkei 225 was up 0.15%. The gains in Asian Markets were in line with analysts’ bullish expectations for the fourth quarter amid ample market liquidity.

EURUSD had a very active session early on Monday with Euro dropping to lows around 1.1780 against the USD in the NZ session before retracing to around 1.1815 only to drop again over 50 pips in value once Asian liquidity came in, currently the pair is seen trading around 1.1775. The dollar index, which tracks the greenback against a basket of six major currencies, added 0.3 percent and is currently valued at 93.33.

AUDUSD is currently seen Trading at 0.7824 down from its session highs of around 0.7850. Notably, Australia’s main index S&P/ASX 200 was up earlier jumping 1.1% percent helping support export stocks as the Australian Dollar was weak against the US Dollar. Likewise, The New Zealand Dollar dropped from its session highs of 0.7225 and is currently seen trading closer to it’s opening price of around 0.7200 against the US Dollar.

Upcoming Events:

• 07:15 GMT – (EUR) Retail Sales y/y
• 07:15 GMT – (EUR) Spanish Manufacturing PMI
• 08:30 GMT – (GBP) Manufacturing PMI
• 09:00 GMT – (EUR) Unemployment Rate
• 14:00 GMT – (USD) ISM Manufacturing PMI
• 18:00 GMT – (USD) FOMC Member Kaplan Speaks

The Week Ahead:

Tuesday, October 3rd

• All Day – (EUR) German Bank Holiday
• Tentative – (NZD) GDT Price Index
• 00:30 GMT – (AUD) Building Approvals m/m
• 03:30 GMT – (AUD) Cash Rate
• 03:30 GMT – (AUD) RBA Rate Statement
• 07:00 GMT – (EUR) Spanish Unemployment Change
• 08:30 GMT – (GBP) Construction PMI
• 12:30 GMT – (USD) FOMC Member Powell Speaks

Wednesday, October 4th

• All Day – (CNY) Chinese Bank Holiday
• 08:30 GMT – (GBP) Services PMI
• 12:15 GMT – (USD) ADP Non-Farm Employment Change
• 14:00 GMT – (USD) ISM Non-Manufacturing PMI
• 14:30 GMT – (USD) Crude Oil Inventories
• 17:15 GMT – (EUR) ECB President Draghi Speaks
• 19:15 GMT – (USD) Fed Chair Yellen Speaks

Thursday, October 5th

• All Day – (CNY) Chinese Bank Holiday
• 00:30 GMT – (AUD) Retail Sales m/m
• 00:30 GMT – (AUD) Trade Balance
• 11:30 GMT – (EUR) ECB Monetary Policy Meeting Accounts
• 12:30 GMT – (CAD) Trade Balance
• 12:30 GMT – (USD) Unemployment Claims
• 12:30 GMT – (USD) Trade Balance
• 13:10 GMT – (USD) FOMC Member Powell Speaks
• 14:00 GMT – (USD) FOMC Member Harker Speaks
• 14:00 GMT – (USD) Factory Orders m/m
• 16:00 GMT – (GBP) MPC Member McCafferty Speaks
• 17:30 GMT – (GBP) MPC Member Haldane Speaks

Friday, October 6th

• All Day – (CNY) Chinese Bank Holiday
• 07:30 GMT – (GBP) Halifax HPI m/m
• 12:00 GMT – (GBP) MPC Member Haldane Speaks
• 12:30 GMT – (CAD) Employment Change
• 12:30 GMT – (CAD) Unemployment Rate
• 12:30 GMT – (USD) Average Hourly Earnings m/m
• 12:30 GMT – (USD) Non-Farm Employment Change
• 12:30 GMT – (USD) Unemployment Rate
• 14:00 GMT – (CAD) Ivey PMI
• 16:15 GMT – (USD) FOMC Member Dudley Speaks
• 16:45 GMT – (USD) FOMC Member Kaplan Speaks

Dollar Closes September Strong but Possible Correction Ahead. September was a strong month for the U.S. dollar, but as we look ahead to October, the greenback's momentum is fading and the odds of a correction outweigh the chance of continuation. October is when we will begin to see the negative impact of hurricanes Harvey and Irma on the U.S. economy, for example US payrolls on Friday were expected to have been weak.

Outlook for Eurozone is Positive On Fundamental Basis. The euro has finally stabilized as investors realize that at the end of the day Angela Merkel will still be leading the country and it won't be long before a coalition government is formed. EUR/USD traders could celebrate the announcement by driving the currency higher on the elimination of election uncertainty. No major Eurozone economic reports are scheduled for release in the coming week.

The Euro Fell on Monday After the Violence-Marred Vote. The euro edged down 0.1 percent to $1.1796, as investors nervously watched the situation in Spain, where police used batons and rubber bullets to thwart the Catalan vote on Sunday in a show of force that left hundreds injured. The euro fell around a third of a U.S. cent to as low as $1.1776 in early Asian trade but soon steadied at $1.1800.

Important Week for Sterling as All 3 of The U.K.'s PMI Reports Are Due for Release. PMI reports due this week will be exceptionally important. If manufacturing, service and construction sector activity accelerate, it would validate the BoE's calls for tightening and reinvigorate the rise in pound sterling.

However, if manufacturing and/or service sector activity slows, it would cast doubt on the central bank's plans and cause the currency to give up some of the gains that it enjoyed in September against the dollar and the euro.

Dollar Rose 0.2 Percent to 112.71 Against The Yen. Data released earlier on Monday showed Japan's big manufacturers were the most confident about the business outlook in a decade in the last quarter, a sign the country's economic recovery may be gathering steam thanks to robust global demand. The figures could also help premier Shinzo Abe as he tries to convince voters in an Oct. 22 election that his “Abenomics” stimulus policies have improved their livelihoods, analys. There are two main directional scenarios for the yen following the election, though, dollar/yen is still dominated by U.S. factors.

Kiwi Little Changed After Mixed US Data. The New Zealand dollar, which has shed about 1.5 percent since the Sept. 23 election, was little changed after mixed US data gave few clues to the pace of Federal Reserve monetary policy changes. Also, NZ First leader Winston Peters says he won't begin talks on forming a coalition government until Oct. 7, after special votes are counted, leaving the media to speculate on which way he will turn.

Gold Heads for Worst Month in 2017. Gold prices have edged lower as slightly weaker US inflation and consumer spending data did little to dampen expectations of an interest rate hike in December. Spot gold dipped 0.3 per cent at $US1,274.61 per ounce.

Oil Prices Edge Lower After Strong Third-Quarter. Oil prices edged lower on Monday in early Asian trading, pausing for breath after posting gains of as much as 20 percent in the third quarter, after a survey pointed to a slight increase in OPEC production in September. U.S. crude was down 2 cents at $51.65 a barrel, Brent crude for December delivery, was down 6 cents at $56.73 a barrel.

Watch Out Today for:

08:30 am GMT: GBP Manufacturing PMI

14:00 pm GMT: USD ISM Manufacturing PMI

Oil and Gold both continued to fade into the week's end with a China holiday seeing a quiet start for Asia.

WTI finished unchanged at 51.35 on Friday as the selling pressure continued to be seen in the Brent contract, which closed one percent lower at 56.90 as traders lightened longs further into the weekend. With Brent being the month's outperformer and the technically more overbought of the two, it was no real surprise as news that Iraq and Libya have increased production, that the weight of the selling would fall there.

Both contracts continue to trade consolidative, slowly unwinding the extreme overbought technical picture caused by the pace of the rally in September. We would expect quiet start to Asia trading today with little news of note to move markets over the weekend and China on holiday. That said, a deeper correction cannot be ruled out as both Brent and WTI are resting on support zones as the week gets underway.

Brent spot looks set to test its long-term breakout zone between 56.50 and 57.00 to start the week. A move through this level could see the contract drop back to the 55.00 area initially. Resistance sits above at 57.50 to start followed by the September highs of 59.10.

WTI spot is trading at 51.35 this morning, just above its ascending support line at 51.10. It has held all pullbacks throughout the September rally, and a break now could signal a deeper correction to 50.30 and then 49.00. Resistance appears above at 52.50 before its long-term resistance region between 53.50 and 54.50.

GOLD

Gold gets off to a quiet start to the week, with the bearish bias continuing from Friday's session where it fell seven dollars to close at 1280.50. Gold has sagged another four dollars this morning to 1276.50, showing no reaction to the Catalan elections in Spain in what was otherwise a quiet weekend on the news front. With China on holiday this week, physical buying will be muted in early Asia.

U.S. yields and the dollar are clearly the primary drivers of the gold prices at the moment and with both rising gold has wilted closing below its 50% retracement zone at 1281.00 on Friday. Bullish traders will now be nervously eyeing the 100-day moving average just below at 1272.45 for some relief. A break here opening a move lower to the August lows and the 200-day moving average at 1250.00. Resistance now rests at 1281.00 and 1285.00 to start, followed by the 1286.00 area.