Market Roundup
- Dollar hits 5-week peak on debt, budget deal
- Oil edges higher as U.S. inventory decline
- Gold gains on Fed rate-cut hopes
- Westpac predicts early RBA rate cut as jobs data disappoints
Economic Data Ahead
- (0315 ET/0715 GMT) France Markit preliminary manufacturing PMI July
- (0315 ET/0715 GMT) France Markit preliminary service PMI July
- (0315 ET/0715 GMT) France Markit preliminary composite PMI July
- (0330 ET/0730 GMT) Germany Markit preliminary manufacturing PMI July
- (0330 ET/0730 GMT) Germany Markit preliminary service PMI July
- (0330 ET/0730 GMT) Germany Markit preliminary composite PMI July
- (0400 ET/0800 GMT) M3 Money Supply June (3M)
- (0400 ET/0800 GMT) M3 Money Supply June (YoY)
- (0400 ET/0800 GMT) EU Markit preliminary manufacturing PMI July
- (0400 ET/0800 GMT) EU Markit preliminary service PMI July
- (0400 ET/0800 GMT) EU Markit preliminary composite PMI July
Key Events Ahead
- No Significant Event Scheduled
FX Beat
DXY: The dollar index rallied to a 5-week high as the yields on 2-year U.S. Treasuries edged up to 1.837 percent overnight, while expectations of a smaller interest rate cut by the U.S. Federal Reserve supported investor sentiment. The greenback against a basket of currencies traded flat at 97.69, having touched a high of 97.76 earlier, its highest since June 18.
EUR/USD: The euro plunged to a near 2-month low as investors wagered on a dovish outcome from the European Central Bank’s upcoming policy meeting. Markets also await the preliminary German purchasing managers' index, which is expected to show the manufacturing activity contracted for the seventh straight month in July. The European currency traded 0.1 percent down at 1.1143, having touched a low of 1.1142 earlier, its lowest since May 31. Investors’ attention will remain on a series of data from the Eurozone economies, and EZ prelim Markit PMI's, ahead of the U.S. Markit flash PMI's and new home sales. Immediate resistance is located at 1.1175 (23.6% retracement of 1.1281 and 1.1142), a break above targets 1.1212 (50.0% retracement). On the downside, support is seen at 1.1125 (May 31 Low), a break below could drag it below 1.1100.
USD/JPY: The dollar eased, halting a 3-day winning streak as investors remained cautious ahead of the U.S. Gross Domestic product, due at the end of the week which looks set to have slowed sharply in the second quarter of this year to 1.8 percent from 3.1 percent in Q1 2019. However, news that a U.S. delegation led by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin would travel to Shanghai next week for meetings with Chinese officials limited the downside. The major was trading 0.1 percent down at 108.13, having hit a high of 108.29 on Tuesday, its highest since July 17. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. Markit flash PMI's and new home sales. Immediate resistance is located at 108.53 (July 1 High), a break above targets 108.96 (July 9 High). On the downside, support is seen at 107.76 (July 5 Low), a break below could take it lower at 107.21 (July 19 Low).
GBP/USD: Sterling consolidated near a 1-week low on news Boris Johnson, who promised to exit the European Union with or without a deal by the end of October, will replace Theresa May as Prime Minister. The major traded flat at 1.2440, having hit a low of 1.2417 on Tuesday, it’s lowest since July 17. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2477 (5-DMA), a break above could take it near 1.2558 (July 18 High). On the downside, support is seen at 1.2396 (July 16 Low), a break below targets 1.2373 (Jan. 3 Low). Against the euro, the pound was trading 0.1 percent down 89.57 pence, having hit a high of 89.52 on Tuesday, it’s highest since July 2.
AUD/USD: The Australian dollar plunged to a near 2-week low, as Westpac expects the Reserve Bank of Australia to deliver a 25 basis point rate cut as early as October, compared to the previous forecast of a rate cut in November. The latest projection is based on the assessment that the unemployment forecast will challenge the central bank. The Aussie trades 0.3 percent down at 0.6982, having hit a low of 0.6978 earlier, it’s lowest since July 12. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6957 (July 5 Low), a break below targets 0.6920 (July 9 Low). On the upside, resistance is located at 0.7044 (July 16 High), a break above could take it near 0.7091 (Mar 12 High).
NZD/USD: The New Zealand dollar slumped to a 1-1/2 week trough after domestic data showed imports lagged behind $5.20 billion expectations to $4.65 billion, while exports also fell short of $5.29 billion expected to $5.01 billion. Moreover, Reserve Bank of New Zealand’s hint towards likely future use of the unconventional monetary policy tools continued to undermine the bid tone around the major. The Kiwi trades 0.1 percent down at 0.6696, having touched a low of 0.6692 earlier, its lowest level July 15. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6738 (July 16 High), a break above could take it near 0.6823 (Mar. 29 High). On the downside, support is seen at 0.6664 (July 1 Low), a break below could drag it below 0.6619 (July 8 Low).
Equities Recap
Asian shares rose as investors’ risk appetite improved on hints of progress in the U.S.-China trade dispute.
MSCI's broadest index of Asia-Pacific shares outside Japan nudged up 0.4 percent.
Tokyo's Nikkei rallied 0.3 percent to 21,689.60 points, Australia's S&P/ASX 200 index surged 0.8 percent to 6,776.70 points and South Korea's KOSPI slumped 0.9 percent to 2,082.19 points.
Shanghai composite index rose 0.7 percent to 2,919.80 points, while CSI 300 index traded 0.2 percent up at 3,817.04 points.
Hong Kong’s Hang Seng traded 0.6 percent higher at 28,637.92 points. Taiwan shares shed 0.1 percent to 10,935.76 points.
Commodities Recap
Crude oil prices declined after rising for three straight sessions on increasing tensions with Iran and as U.S. inventory data showed a much bigger than expected drop in crude stockpiles. International benchmark Brent crude was trading 0.3 percent lower at $63.98 per barrel by 0507 GMT, having hit a low of $61.26 on Thursday, its lowest since June 18. U.S. West Texas Intermediate was trading 0.4 percent down at $56.94 a barrel, after falling as low as $54.71 on Thursday, its lowest since the June 20.
Gold prices surged, recovering from a 1-week low touched in the previous session, amid growing expectations of an interest rate cut by the U.S. Federal Reserve and escalating tensions in the Middle East. Spot gold was trading 0.2 percent up at $1,419.61 per ounce by 0509 GMT, having touched a high of $1,452.80 on Friday, its highest since May, 2013. U.S. gold futures were steady at $1,420.80 an ounce.
Treasuries Recap
The Japanese government bond futures dipped, with the September 10-year JGB futures were down 0.03 point at 153.66. The five-year JGB yield was up half a basis point at minus 0.235 percent, while the 10-year yield was unchanged at minus 0.150 percent.
The Australian government bonds surged during Asian session amid a muted trading session that witnessed data of little economic significance ahead of the Reserve Bank of Australia’s Governor Philip Lowe’s speech, scheduled to be held on July 25 by 03:05GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2 basis points to 1.294 percent, the yield on the long-term 30-year bond suffered 1 basis point to 1.933 percent and the yield on short-term 2-year plunged nearly 3-1/2 basis points to 0.914 percent.
