Market Roundup
- Japan Jul Flash Mfg PMI fell to s/adj 52.2 vs 52.4
- Preliminary index for new export orders fell to 50.0 vs 53.4
- Japan PM Abe denies favours for friend amid falling support
- IMF keeps global growth forecasts; China, eurozone revised higher
- Australia Q2 CPI seen rising 0.4 pct q/q, 2.2 pct y/y
- UK households face sharpest squeeze in three yrs -IHS Markit
- Monthly Household Finance Index dropped to 41.8 from June's 43.7
- China's debt spectre could haunt Fed's policy meetings
- Speculators sour on U.S. dollar, yen shorts press on -CFTC
Economic Data Ahead
- (0300 ET/0700 GMT) France Jul Markit Comp Flash PMI, 56.40 eyed, last 56.60
- (0330 ET/0730 GMT) Germany Jul Markit Comp Flash PMI, 56.30 eyed, last 56.40
- (0400 ET/0800 GMT) Eurozone Jul Markit Comp Flash PMI, 56.20 eyed, last 56.30
Key Events Ahead
- N/A EU economic and financial affairs council meeting in Brussels
- (0600 ET/1000 GMT) Belgium 6Y E1.0/1.0/1.0 bln for 6/10/30 yr auctions
FX Beat
DXY: The dollar slumped across the board as increasing concerns over the Trump administration raised doubts over its ability to deal with reforms. The greenback against a basket of currencies traded 0.1 percent down at 93.90, having touched a low of 93.82 earlier, FxWirePro's Hourly Dollar Strength Index stood at 4.06 (Neutral) by 0500 GMT.
EUR/USD: The euro rallied to a fresh 2-year high as the political uncertainty in the United States continued to weigh over the greenback. The European currency traded 0.1 percent up at 1.1671, having touched a high of 1.1684 earlier, its highest since Aug 20, 2015. FxWirePro's Hourly Euro Strength Index stood at 44.00 (Neutral) by 0400 GMT. Investors’ attention will remain on German & Eurozone PMIs, ahead of U.S. Markit manufacturing and service PMI; and existing home sales. Immediate resistance is located at 1.1700, a break above targets 1.1730. On the downside, support is seen at 1.1619 (78.6% retracement 1.1371 and 1.1686), a break below could drag it near 1.1565 (61.8% retrace).
USD/JPY: The dollar tumbled to a 5-week low after the Bank of Japan trimmed QE purchases, boosting the bid tone around the Japanese yen. Additionally, data showing a fall in the Japanese manufacturing growth to eight-month low triggered a fresh bout of risk-aversion, supported the yen's safe-haven appeal. The major traded 0.1 percent down at 110.99, having hit a low of 110.76 earlier, its lowest since Jun 19. FxWirePro's Hourly Yen Strength Index stood at -1.48 (Neutral) by 0400 GMT. Investors’ will continue to track broad based market sentiment, ahead of U.S. Markit manufacturing and service PMI; and existing home sales. Immediate resistance is located at 111.55 (78.6% retracement of 114.49 and 110.76), a break above targets 112.17 (61.8% retracement of 114.49 and 110.76). On the downside, support is seen at 110.64 (June 16 Low), a break below could take it near 110.32 (June 2 Low).
GBP/USD: Sterling rose, extending gains for the second straight session, despite widespread risk-aversion after latest IMF’s World Economic Outlook report release showed the UK economy's growth forecasts trimmed in 2017, in the wake of the Brexit issue. Moreover, the major was also supported by the latest U.S. political uncertainty over Trump’s Presidency which renewed dollar selling, Sterling traded 0.2 percent down at 1.3015, having hit a low of 1.2932 on Thursday, its lowest since Jul. 14. FxWirePro's Hourly Sterling Strength Index stood at -113.69 (Highly Bearish) by 0400 GMT. Investors’ focus will remain on the developments surrounding the Brexit deal, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3053 (July 19 High), a break above could take it near 1.3100. On the downside, support is seen at 1.2987(10-DMA), a break below targets 1.2932 (July 20 Low). Against the euro, the pound traded 0.1 percent up at 89.65 pence, having hit an 8-month low of 89.94 the session before.
AUD/USD: The Australian dollar steadied after easing from a 26-month high following dovish comments from Reserve Bank of Australia deputy governor Guy Debelle on Friday. Investors now await the domestic second quarter inflation data due on Wednesday, followed by a speech by RBA Governor Philip Lowe for further insight on the strength of the economy and central bank's interest rate outlook. The Aussie trades 0.1 percent higher at 0.7919, having hit a high of 0.7987 on Thursday, it’s highest since May 19, 2015. FxWirePro's Hourly Aussie Strength Index stood at -40.34 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7829 (61.8% retracement of 0.7571 and 0.7987), a break below targets 0.7780 (50.0% retrace). On the upside, resistance is located at 0.7959, a break above could take it near 0.8000.
NZD/USD: The New Zealand dollar declined from an almost 11-month peak amid persisting risk-off trades on the back of negative Asian equities and subdued oil prices. However, the downside appears limited as the recent upbeat remarks from the New Zealand Finance Minister Joyce continued to cheer NZD bulls. The Kiwi trades 0.4 percent down at 0.7425, having touched a high of 0.7458 the prior session, its highest level since Sept. 8. FxWirePro's Hourly Kiwi Strength Index was at 124.23 (Highly Bullish) by 0500 GMT. Investors’ will continue to track broad based market sentiment, ahead of New Zealand's trade balance report due in the week. Immediate resistance is located at 0.7485 (Sept 7 High), a break above could take it near 0.7500. On the downside, support is seen at 0.7405 (78.6% retracement of 0.7201 and 0.7458), a break below could drag it till 0.7394 (5-DMA).
Equities Recap
Asian shares declined amid renewed risk-off market sentiment triggered by downbeat Japanese manufacturing growth figures, while the greenback tumbled to 13-month lows on lingering uncertainty surrounding the U.S. political scenario.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent.
Tokyo's Nikkei declined 0.6 percent to 19,986.85 points, Australia's S&P/ASX 200 index lost 0.7 percent to 5,681.70 points and South Korea's KOSPI fell 0.1 percent to 2,447.53 points.
Shanghai composite index rose 0.4 percent to 3,251.64 points, while CSI300 index was trading 0.4 percent up at 3,743.19 points.
Hong Kong’s Hang Seng was trading 0.5 percent higher at 26,829.94 points. Taiwan shares added 0.2 percent to 10,461.28 points.
Commodities Recap
Crude oil prices gained after declining for two consecutive sessions, supported by expectations that a joint OPEC and non-OPEC meeting later in the day may address rising output in Nigeria and Libya. International benchmark Brent crude was trading 0.7 percent up at $48.15 per barrel by 0413 GMT, having hit a high of $50.16 on Thursday, its strongest since Jun. 7. U.S. West Texas Intermediate traded 0.5 percent up at $45.81 a barrel, after rising as high as $47.71 on Thursday, its strongest since Jun 7.
Gold prices steadied after hitting a four-week high earlier in the session, supported by weaker equities and a fall in the dollar to fresh 13-month lows due to political uncertainty in the United States. Spot gold trading flat at $1,254.57 per ounce at 0424 GMT, having hit a high of $1,257.09 an ounce in early trade, its highest since Jun 26. U.S. gold futures for August delivery rose 0.1 percent to $1,256.00 per ounce.
Treasuries Recap
The 10-year U.S Treasury yield stood at 2.241 percent higher by 0.009 bps, while 5-year yield was 0.008 up at 1.808 percent.
The Japanese government bonds traded nearly flat as investors wait to watch the Bank of Japan’s (BoJ) July monetary policy meeting minutes, scheduled to be released on July 25. The benchmark 10-year bond yield, which moves inversely to its price, hovered around 0.06 percent, the long-term 30-year bond yields traded flat at 0.86 percent and the yield on the short-term 2-year note remained tad lower at -0.11 percent.
The Australian bonds jumped at the start of the trading week as investors are hoping for a tad lower reading of the country’s consumer price-led inflation index (CPI) for the second-quarter of this year, scheduled to be released on July 26. The yield on the benchmark 10-year Treasury note slumped nearly 3-1/2 basis points to 2.68 percent, the yield on 15-year note also plunged 3-1/2 basis points to 2.98 percent and the yield on short-term 2-year traded 1-1/2 basis points lower at 1.84 percent.
The New Zealand bonds ended on the upside as investors remain sidelined in any major trading activity due to lack of any economically significant data and tracking some strength in the U.S. Treasuries. At the time of closing, the yield on the benchmark 10-year bond fell 1/2 basis point to 2.94 percent, the yield on 7-year note also slipped 1/2 basis point to 2.81 percent while the yield on short-term 2-year note ended 1 basis point lower at 1.95 percent.
