Market Roundup
• Fed Minutes: Policymakers generally agreed it was prudent to wait for additional data on labor market conditions & impact of Brexit vote on financial conditions.
• Fed Minutes: most participants noted Brexit vote could generate financial market turbulence that could hamper US economy.
• US trade deficit widens in May, -41.1bn vs -40bn forecast, as oil prices lift imports.
• US ISM Non-Mfg PMI 56.5 beats forecast 56.5, Non-Mfg Bus act beats as well 59.5 v 55.5 forecast.
• Atlanta Fed lowers US Q2 GDP view to 2.4% from 2.6% on July 1.
• Fed's Tarullo: no rate hikes needed until inflation is more solid.
• Fed's Dudley: anxious about 10-Yr Treasury note level.
• Canada Life suspends dealing in UK property funds, makes 6 UK fund suspensions in 48 hrs.
• US Treasury benchmark and long-dated yields set record lows on growth fears
Looking Ahead - Economic Data (GMT)
• No Significant Data
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1000 levels and currently trading at 1.1097 levels. The pair has made session high at 1.1106 and hit lows at 1.1026 levels. Euro clawed backs some of its earlier losses against the dollar after the minutes of the Fed's June policy meeting release showed, Federal Reserve policymakers decided in June that interest rate hikes should stay on hold until they have a handle on the consequences of Britain's vote on EU membership. At the June policy meeting, policymakers also cited a severe slowdown in hiring by U.S. employers as a reason for leaving interest rates steady last month, the minutes showed. The Brexit vote, which shocked investors and politicians, has raised anxiety in financial markets around the world, in part because it could take years before Britain and the EU agree to new rules on finance, trade and immigration. Meanwhile, a recovery in oil prices and strong U.S. services data helped alleviate some concerns about a potential global economic slowdown.
GBP/USD is supported in the range of 1.2860 currently trading at 1.2929 levels. It reached session high at 1.2975 and hit low at 1.2860 levels. Sterling edged lower against the U.S. dollar to hit fresh 31 year low on Wednesday as the currency pair was weighted down on fears over the effect of last month's Brexit vote on Britain's property market and the prospect of cuts in Bank of England interest rates. The pound, one of the main vehicles through which financial markets can express concern about Britain's decision to leave the European Union, fell as low as $1.2798 in Asian trading, its lowest since June 1985. but recovered slightly towards $1.2929 in the late US session. Worries have grown in the past two days about financial stress. The Bank of England warned on Tuesday of threats to financial stability, pointing out the effects on property markets. Trading has now been suspended in six of Britain's biggest property funds as investor redemptions rose.
USD/CAD is supported at 1.2920 levels and is trading at 1.2957 levels. It has made session high at 1.3057 and lows at 1.2949 levels. The Canadian dollar firmed slightly against its U.S. counterpart on Wednesday, as Canada dollar was supported by rising oil prices and better than expected US economic data. Strong ISM non-manufacturing data lifted crude oil prices from two days low, although a gasoline glut and woes from Britain's European Union exit suggested more pressure ahead. Several currencies of key commodity exporters recovered after oil prices rose almost 2 percent, reacting to data showing strong growth in the U.S. services sector. Oil prices also rose in anticipation that the U.S. government will report on Thursday a seventh straight weekly drop in crude stockpiles. On the data front, Canada posted its second largest trade deficit on record in May, a large negative surprise, as widespread export weakness canceled out higher shipments from the battered energy sector, government data indicated. Meanwhile, the yield on Canadian government 10-year bonds touched their lowest level since February.
USD/JPY is supported around 100.00 levels and currently trading at 101.33 levels. It peaked to hit session high at 101.44 and made session lows at 100.73 levels. The safe-haven yen rose against US dollar on Wednesday, on mounting worries about the broader impact that Britain's vote to leave the European Union would have on the global economy. The yen soared to a 3-1/2-year high against the British pound and climbed to two-week peaks versus the dollar and the euro. Fears of contagion intensified after several U.K. property funds stopped redemptions and suspended operations, drove investors to the safe heaven assets like Japanese yen. The dollar fell 0.9 percent to 100.46 yen , after earlier falling to a two-week low of 100.22 yen. The euro, meanwhile, dropped nearly 1 percent to 111.56 yen.
Equities Recap
European stocks fell on Wednesday, led lower by major banks and other financial stocks as worries persist about the impact of Britain's vote to leave the European Union.
UK's benchmark FTSE 100 closed down by 1.2 percent, the pan-European FTSEurofirst 300 ended the day down by 1.63 percent, Germany's Dax ended down by 1.7 percent, France’s CAC finished the day down by 1.8 percent.
U.S. stocks rose on Wednesday as the Federal Reserve was seen refraining from raising U.S. interest rates soon, even as economic data showed the world's largest economy regained speed in the second quarter.
Dow Jones closed up by 0.42 percent, S&P 500 ended up by 0.52 percent, Nasdaq finished the day up by 0.74 percent.
Treasuries Recap
U.S. benchmark and long-dated Treasury yields finished slightly higher on Wednesday on profit taking after hitting record lows during the session on global growth concerns stemming from Britain's recent vote to exit from the European Union.
Benchmark 10-year U.S. Treasury yields hit 1.321 percent at 5:08 a.m. EDT, while 30-year Treasury yields hit 2.098 percent at 7:59 a.m. EDT. Those were unprecedented lows for both, while seven-year Treasury yields hit 1.146 percent, their lowest level in more than three years.
Yields on Treasuries maturing between two, three, and five-years hit their lowest levels since June 24 of 0.538 percent, 0.623 percent, and 0.900 percent.
Commodities Recap
Gold pared gains after rising to the highest in more than two years on Wednesday, as U.S. equities reversed early losses, Treasury yields turned higher after hitting record lows and investors bought bullion as a haven from risk.
Spot gold was up 0.6 pct at $1,363.36 an ounce by 2:59 p.m. EDT (1859 GMT) after reaching a peak of $1,374.91, its highest since March 2014.
U.S. gold futures for August delivery settled up $8.4, or 0.6 percent, at $1,367.10 per ounce.
Oil prices rose almost 2 percent on Wednesday as robust U.S. economic data lifted crude futures from two days of declines, although a gasoline glut and woes from Britain's European Union exit suggested more pressure ahead.
Brent crude settled up 84 cents, or 1.8 percent, at $48.80 a barrel. U.S. crude futures gained 83 cents, or 1.8 percent, to settle at $47.43.
