Market Roundup
- Yuan sinks past 7/dollar to over decade low
- Oil prices ease as U.S.-China trade war fuels growth concerns
- Gold gains on weaker dollar
Economic Data Ahead
- (0315 ET/0715 GMT) Spain Markit service PMI July
- (0345 ET/0745 GMT) Italy Markit service PMI July
- (0350 ET/0750 GMT) France Markit service PMI July
- (0350 ET/0750 GMT) France Markit composite PMI July
- (0355 ET/0755 GMT) Germany Markit service PMI July
- (0350 ET/0755 GMT) Germany Markit composite PMI July
- (0400 ET/0800 GMT) EZ Markit service PMI July
- (0400 ET/0800 GMT) EZ Markit composite PMI July
- (0430 ET/0830 GMT) UK Markit service PMI July
- (0430 ET/0830 GMT) UK Markit composite PMI July
- (0430 ET/0830 GMT) EZ Sentix investor confidence August
Key Events Ahead
- No significant events scheduled
FX Beat
DXY: The dollar index slumped after data released on Friday showed U.S. non-farm payrolls increased by 164,000 jobs in July, fewer than the prior month, and wages increased modestly, cementing expectations that the Federal Reserve will cut interest rates again in September after it delivered its first rate reduction in more than a decade last month. The greenback against a basket of currencies traded 0.2 percent down at 98.87, having touched a high of 98.93 on Thursday, its highest since May 15, 2017.
EUR/USD: The euro rose, extending gains for the third straight session, as the greenback plunged on expectations that the Federal Reserve will cut interest rates again in September. The European currency traded 0.2 percent up at 1.1125, having touched a low of 1.1026 on Thursday, its lowest since May 2017. Investors’ attention will remain on Markit service PMI's from the Eurozone economies and EZ sentix investor confidence, ahead of the U.S. service PMI from both Markit and ISM. Immediate resistance is located at 1.1162 (31 July High), a break above targets 1.1225 (July 22 High). On the downside, support is seen at 1.1060 (July 31 Low), a break below could drag it below 1.026 (August 1 Low).
USD/JPY: The dollar plunged to a 7-month low against the Japanese yen amid mounting fears over a sharp escalation in the U.S.-China trade war. On Friday, Beijing vowed to retaliate against U.S. President Donald Trump’s abrupt decision to impose 10 percent tariffs on the remaining $300 billion in Chinese imports, a move that ended a month-long trade truce. The major was trading 0.6 percent down at 105.97, having hit a low of 105.78 earlier, its lowest since Jan 3. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. service PMI from both Markit and ISM. Immediate resistance is located at 107.13 (38.2% retracement of 109.31 and 105.78), a break above targets 107.55 (50% retracement). On the downside, support is seen at 105.45, a break below could take it lower at 104.65.
GBP/USD: Sterling eased after rising to a 5-day peak earlier in the session after Prime Minister Boris Johnson declared that the UK would leave the European Union on October 31, with or without a transitional trade agreement. The major traded 0.2 percent down at 1.2135, having hit a low of 1.2079 on Thursday, it’s lowest since Jan. 2017. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2253 (38.2% retracement of 1.2522 and 1.2079), a break above could take it near 1.2305 (61.8% retracement). On the downside, support is seen at 1.2079 (Aug. 1 Low), a break below targets 1.2017 (Jan 17, 2017, Low). Against the euro, the pound was trading 0.5 percent down at 91.69 pence, having hit a low of 91.90 on Tuesday, it’s lowest since Sept 2017.
AUD/USD: The Australian dollar tumbled, extending losses for the twelfth straight session, as broadening fallout of the U.S.-China trade dispute saw investors rushing into perceived safe-haven assets. The Aussie trades 0.5 percent down at 0.6767, having hit a low of 0.6748 earlier, it’s lowest since Jan. 3. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6744 (Jan 3 Low), a break below targets 0.6700. On the upside, resistance is located at 0.6827 (23.6% retracement of 0.7082 and 0.6748), a break above could take it near 0.6876 (38.2% retracement).
NZD/USD: The New Zealand dollar slumped to a near 2-month low, after China vowed to fight back against Trump’s decision, a move that ended a month-long trade truce. The Kiwi trades 0.3 percent down at 0.6515, having touched a low of 0.6488 earlier, its lowest level June 14. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6559 (23.6% retracement of 0.6790 and 0.6488), a break above could take it near 0.6603 (38.2% retracement). On the downside, support is seen at 0.6474 (Oct. 4 Low), a break below could drag it below 0.6442 (Oct. 10 Low).
Equities Recap
Asian shares tumbled to 6-1/2-month lows as a rapid escalation in the U.S.-China trade war sent investors stampeding into safe-haven assets.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 2.1 percent.
Tokyo's Nikkei plunged 1.9 percent to 20,670.07 points, Australia's S&P/ASX 200 index fell 1.9 percent to 6,640.30 points and South Korea's KOSPI slumped 2.5 percent to 1,948.44 points.
Shanghai composite index eased 1.2 percent to 2,834.07 points, while CSI 300 index traded 1.5 percent down at 3,691.64 points.
Hong Kong’s Hang Seng traded 2.8 percent lower at 26,150.72 points. Taiwan shares shed 1.2 percent to 10,423.41 points.
Commodities Recap
Crude oil prices declined amid concerns about weaker crude demand after U.S. President Donald Trump said he would impose tariffs on more Chinese imports, potentially ramping up a trade war between both the economies. International benchmark Brent crude was trading 0.2 percent higher at $61.12 per barrel by 0427 GMT, having hit a low of $60.00 on Thursday, its lowest since June 13. U.S. West Texas Intermediate was trading 0.4 percent down at $54.97 a barrel, after falling as low as $53.58 on Thursday, its lowest since the June 19.
Gold prices surged to an over 6-week peak, boosted by a weaker greenback and escalating trade tension between the United States and China. Spot gold rose 0.9 percent to $1,452.65 per ounce by 0433 GMT, having touched a high of $1,455.98 earlier, its highest since May 2013. U.S. gold futures inched down 0.1 percent to $1,455.40 an ounce.
Treasuries Recap
The Japanese government bond yields eased as a sharp decline in the Chinese yuan heightened worries about the fallout from the China-U.S. trade war. The benchmark 10-year JGB yield fell to as low as minus 0.200 percent, while the benchmark 10-year JGB futures rose as much as 0.36 point to a record high of 154.26. The 20-year JGB yield fell 3 basis points to 0.150 percent, while the 30-year JGB yield declined 4 bps to 0.285 percent.
Australian government bonds rallied during Asian session of the first trading day of the week, in continuation to investors’ risk-off sentiments after the United States late last week announced additional tariffs on Chinese goods, threatening stricter actions if no agreement is reached at the earliest. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 7-1/2 basis points to 1.025 percent, the yield on the long-term 30-year bond also slumped 7-1/2 basis points to 1.695 percent and the yield on short-term 2-year suffered 6-1/2 basis points at 0.731 percent by 05:10GMT.
