Market Roundup
• Fed seen holding rates steady as inflation watch continues.
• U.S. consumer confidence steady; new home sales near 8-1/2-year high.
• U.S. Markit flash July services PMI 50.9 vs expectation 52.0, previous 51.4
• Increase in U.S. home prices falls short of expectations-Case-Shiller.
• Citi's U.S. economic surprise index hits highest since 2014
• China leaders vow to keep growth steady, push reforms.
• Brazil central bank sees no rate cut, worried with high inflation.
• Oil dips on oversupply worries; U.S. crude hits April lows.
• Indonesia president expected to announce cabinet reshuffle on Wednesday – sources.
• Mexico economic activity up 2.2% y/y as expected vs previous 3.0%.
• Mexico's trade deficit narrows in June as factory exports jump.
• Fitch: Growth, Politics Key to US Post-Election Debt Trajectory.
• Turkish troops hunt remaining coup plotters as crackdown widens.
• Turkey's central bank slams S&P over "hasty" ratings downgrade.
Looking Ahead - Economic Data (GMT)
• 1:30:00 Australia CPI QQ Q2 forecast 0.40%, -0.20% -previous
• 1:30:00 Australia CPI YY Q2 forecast 1.10%, 1.30% - previous
• 1:30:00 Australia RBA Weighted Median CPI QQ Q2 forecast 0.40%, 0.10% - previous
• 1:30:00 Australia RBA Weighted Median CPI YY Q2 forecast 1.30%, 1.40% - previous
• 1:30:00 Australia RBA Trimmed Mean CPI QQ Q2 forecast 0.40%, 0.20% - previous
• 1:30:00 Australia RBA Trimmed Mean CPI YY Q2 forecast 1.50%, 1.70% - previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.0950 levels and currently trading at 1.0985 levels. The pair has made session high at 1.1006 and hit lows at 1.0980 levels. The dollar rose against the euro on Tuesday as a better than expected U.S. economic data buoyed the view that the Federal Reserve may raise interest rates this year. The Commerce Department said new home sales increased 3.5 percent to a seasonally adjusted annual rate of 592,000 units last month, the highest level since February 2008. The Fed is expected to leave interest rates unchanged on Wednesday, though investors will be looking for signs on when the U.S. central bank is next likely to raise rates. Positive economic data has increased expectations that the Fed will raise rates in December, though some traders and analysts think the Fed could indicate that a September hike is possible. The dollar index, which tracks the currency against a basket of six major rivals, fell 0.13 percent to 97.164.
GBP/USD is supported in the range of 1.3074 currently trading at 1.3129 levels. It reached session high at 1.3177 and hit low at 1.3090 levels. Sterling initially rose against the dollar but declined after a Bank of England policymaker said a batch of weak UK data would be "very material" for the bank's next policy meeting, having last week said he needed more evidence of economic weakness before backing an interest rate cut. While stopping short of openly backing a cut in interest rates or quantitative easing (QE), Martin Weale said in a Financial Times interview that last week's purchasing managers' data for the services and manufacturing sectors which pointed to the sharpest contraction since the 2008-09 financial crisis were a lot worse than he had thought. Sterling slipped as low as $1.3057 in the earlier session, before recovering to about $1.3134, leaving it down 0.3 percent on the day but over 3 cents higher than a 31-year low hit last month before it was clear who Britain's prime minister would be.
USD/CAD is supported at 1.3105 levels and is trading at 1.3187 levels. It has made session high at 1.3222 and lows at 1.3173 levels. The Canadian dollar continued to decline against US dollar on Tuesday, as the slump in crude oil prices raised the prospects that Canada’s central bank may have to take precautionary measures. The domestic economic calendar was light, but investors were looking ahead to data at the end of the week that is expected to show Canadian economic growth pulled back in May, likely due to the disruption caused by wildfires in Alberta. U.S. crude prices fell on Tuesday, hitting three-month lows, on renewed worries of a glut while Brent settled higher due to its better fundamentals versus U.S. crude. The loonie has lost more than 2 percent in July so far, hurt as the price of oil have fallen back toward $40 a barrel after hitting $50 in June. Meanwhile, U.S. data released on Tuesday was strong, with consumer confidence steady in July and new single-family home sales at the highest in nearly 8-1/2 years in June.
AUD/USD is supported around 0.7461 levels and currently trading at 0.7502 levels. It hit session high at 0.7520 and made session lows at 0.7500 levels. The Australian dollar declined against US dollar on Tuesday as the oil prices continued to fall and the dollar strengthened against all major commodity exporting currencies after better expected US economic data. Australian inflation data on Wednesday was most likely to decide the near-term fate of the Australian dollar. Economists forecast a dip to a fresh trough of 1.4 percent, likely cementing the case for another rate cut as early as next week. Meanwhile, the U.S. central bank is widely expected to stand pat on policy this week, but investors were bracing for any possible signals about a tightening later this year. The Aussie dollar rose towards 0.7509 in the early US session but slightly declined after better than expected US economic data. Meanwhile, the U.S. central bank is widely expected to stand pat on policy this week, but investors were bracing for any possible signals about a tightening later this year.
Equities Recap
Gains in major healthcare and consumer goods stocks propped up European equities on Tuesday, partly offsetting persistent concerns over the region's banking system.
UK's benchmark FTSE 100 closed up by 0.4 percent, the pan-European FTSEurofirst 300 ended the day up by 0.23 percent, Germany's Dax ended up by 0.6 percent, France’s CAC finished the day up by 0.3 percent.
U.S. stocks were mixed on Tuesday as Federal Reserve policymakers kicked off a two-day interest rate meeting and investors braced for quarterly scorecards from Apple and Twitter.
Dow Jones closed down by 0.11percent, S&P 500 ended up by 0.03 percent, Nasdaq finished the day up by 0.24 percent.
Treasuries Recap
U.S. Treasury short-dated yields held firm on Tuesday with the two-year note yield hovering at its highest in more than four weeks as the Federal Reserve began a two-day meeting that may produce clues on the timing of a possible interest rate hike.
The benchmark 10-year Treasury yield was down 1 basis point at 1.565 percent, while the 30-year yield slipped about half basis point to 2.283 percent.
The two-year yield, which is sensitive to traders' view on Fed policy, was little changed at 0.762 percent after reaching 0.7780 percent, its highest since the Brexit referendum.
Commodities Recap
U.S. crude prices fell on Tuesday, hitting three-month lows, on renewed worries of a glut while Brent settled higher due to its better fundamentals versus U.S. crude.
U.S. crude's West Texas Intermediate (WTI) futures settled down 21 cents, or 0.5 percent, at $42.92 a barrel. It extended losses after the release of the API data, sliding more than 1 percent. During the session, WTI fell to as low as $42.36 earlier, its lowest since April 20.
Brent rose 15 cents, or 0.3 percent, to settle at $44.87 a barrel, and turned negative after the API data. During the session, Brent fell to $44.14, its lowest since May 10.
Gold rose on Tuesday as the dollar fell, but remained hemmed into a range at the start of a two-day U.S. Federal Reserve policy meeting which is being closely watched for clues on the outlook for U.S. interest rates.
Spot gold was up 0.4 percent at $1,319.96 an ounce by 2:35 p.m. EDT (1835 GMT), while U.S. gold futures for August delivery settled up $1.30, or 0.1 percent, at $1,320.80.
