Market Roundup
- G20 will use all policy tools to lift growth as Brexit weighs, global excess capacity issue requires collective response – Reuters.
- China statement – Will continue to improve ccy regime, increase transparency.
- Japan FinMin Aso – Reaffirms importance of FX market stability - Reuters.
- BoJ Gov Kuroda - Will tweak policy as needed – Reuters.
- ECB/Buba Weidmann – No signs yet Brexit having economic impact on Europe.
- German FinMin Schaeuble – Not up to rest of Europe to cushion Brexit.
- PBOC advisor Bai – Downward pressures but China can hit GDP target – Reuters.
- Japan govt leaves economic assessment as it, notes biz sentiment off.
- Japan June trade surplus Y692.8 bln, Y494.8 bln eyed but exports -7.4% y/y, imports -18.8%, exports to US -6.5%, China -10.0%, Asia -10.6%.
- Japan June crude import volume +10.3% y/y, LNG -5.6%, thermal coal -8.9%.
- Japan Mizuho, MUFG reorganizing in Europe over Brexit fears – Nikkei.
- As China lets yuan depreciate, other nations take note – Wall St Journal.
- China’s growth sucks in more debt bucks for lass bang – Reuters.
- Australia on sale: Retail price war raises specter of deflation - Reuters.
Economic Data Ahead
- (0400 ET/0800 GMT) Germany Jul Ifo business climate index, 107.5 eyed; last 108.7.
- (0400 ET/0800 GMT) Germany Jul Ifo current conditions index, 114.0 eyed; last 114.5.
- (0400 ET/0800 GMT) Germany Jul Ifo expectations index,101.2 eyed; last 103.1.
- (1030 ET/1430 GMT) United States Jul Dallas Fed mfg business index; last -18.3.
Key Events Ahead
- N/A UK DMO 0.125% 2065 index-linked Gilt syndication.
- (0630 ET/0930 GMT) Germany E1.5 bln 12-month Bubill auction.
- (0850 ET/1250 GMT) France E3.2-3.6/0.6-1.0/0.8-1.2 bln 3/6/12-month BTF note auctions.
FX Beat
DXY: The dollar index, against a basket of currencies trades at 97.33, having touched fresh 4-month high of 97.57 earlier in the session, boosted by U.S. economic strength and Fed outlook.
EUR/USD: The euro attempted a minor recovery after slumping to a 1-month low of 1.0952 earlier in the session. The major weakened as strong U.S. economic data and easing Brexit worries continued to support the greenback. Better-than-expected U.S. business activity data released on Friday bolstered expectations of an imminent Federal Reserve interest rate hike this year, improving risk sentiment across the financial markets. The European currency trades flat at 1.0971, attempting to regain 1.1000 handle. Traders eye German IFO release, which are anticipated to show business climate, current assessment and expectations index weakened slightly in July. Immediate resistance is located at 1.1000 (5-DMA), break above targets 1.1040. On the lower side support is seen at 1.0952 (Session Low), break below could drag the pair lower 1.0950.
USD/JPY: The Japanese yen edged down against the dollar, on growing expectations that the BoJ would either cut interest rate and/or extend its QE programme at its July 28-29 policy meeting. BoJ has slashed speculation of adopting helicopter money stimulus methods; however, market has maintained its expectation that the central bank would further ease monetary policy in either form. The greenback trades 0.2 percent higher at 106.27 yen, extending recovery from a low of 105.42 touched last week. Markets attention now remains on the Federal Reserve and BoJ meetings due this week, with the Fed widely expected to stand pat on monetary policy. Immediate resistance is located at 107.02 (Jul-20 High), break above targets 107.50/ 108.00. On the downside support is seen at 105.64 (10-DMA), break below could take it till 105.27.
GBP/USD: Sterling steadied against the dollar after declining nearly 1 percent in the previous session, following surveys showing business activity had weakened subsequent the Brexit vote. Traders expect the Bank of England to provide more monetary stimulus as early as next month, after Markit said the PMI levels were in line with the economy shrinking at a quarterly pace of 0.4 percent, a rate of decline last since the 2008-09 recession. Sterling trades 0.2 percent higher at 1.3135, pulling away from a low of 1.3078 touched in the previous session. Markets will eye Britain's CBI industrial trend survey-orders, for further cues on the major. Immediate resistance is located at 1.3290 (Jul-22 High), break above could take it till 1.3400/1.3480. On the lower side support is seen at 1.3000, break below targets 1.2880. Against the euro, the pound trades 0.1 percent up at 83.55 pence.
AUD/USD: The Australian dollar attempted a minor recovery to pull away from a 2-week of 0.7442, supported by persisting risk on market profile. However, the upside lacks momentum as investors expect the economy's underlying inflation to decline to a fresh trough of 1.4 percent, which could strengthen the case for another rate cut as early as next month. The Aussie trades 0.3 percent higher 0.7477, after shedding 1.4 percent last week, halting a run of seven straight weeks of gains. With the Australian and U.S. data- calendar absolutely data empty for the day, markets attention will remain on major risk events ahead in the week, including Aus CPI, US durable goods and Fed decision. Immediate resistance is located at 0.7515 (20-DMA), break above could take it till 0.7543. On the downside support is seen at 0.7442 (Previous Session Low).
NZD/USD: The New Zealand dollar edged up, but failed to sustain gains above the 0.7000 handle. The major declined to an early low of 0.6957, nearing a 6-week low touched week, however, it regained some ground to trade at 0.6992. The Kiwi is down 2.2 percent in July so far, but is still up more than 8 percent over the last six months. The pair has largely declined on the back of RBNZ monetary policy easing in August talks, combined with dovish economic outlook report. Markets now eye New Zealand trade balance figures due later in the day for further cues on the major. Immediate support is seen at 0.6950, break below take it near 0.6900. On the higher side, resistance is located at 0.7201, break above targets 0.7050.
Equities Recap
Asian shares hovered near 9-month highs as investors speculate the Federal Reserve and the BoJ to provide stimulus in their meeting this week, amid easing worries over the impact of Britain's Brexit vote.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat, sitting 0.5 percent below its 9-month peak hit on Thursday.
Tokyo's Nikkei ended down 0.04 pct at 16,620.29, Australia's S&P/ASX 200 index gained 0.62 pct at 5,532.30 points and Seoul shares edged up 0.08 pct.
Shanghai composite index trades 0.1 percent down at 3,008.40 points, while CSI300 index trades flat at 3,233.39 points.
Hong Kong’s Hang Seng was trading 0.2 percent lower at 21,924.52 points. Taiwan shares dropped 0.2 pct at 8,991.67 points.
Commodities Recap
Crude oil prices edged down, hovering near a 2-1/2 -month low touched in the previous session, amid worries over a global oil glut. Global benchmark Brent crude oil nudged down at $45.50 a barrel by 0624 GMT, after declining to $45.15 on Friday, the lowest since May 11. U.S West Texas Intermediate crude trades flat at $44.12 a barrel, after closing down to $43.73 on Friday, a level last seen since May 10.
Gold extended losses as investors remain cautious ahead of central bank meetings in the United States and Japan this week, amid strong appetite for riskier assets. Spot gold dropped 0.3 percent at $1,317.28 an ounce by 0625 GMT, having declined 0.7 percent on Friday, its second successive week of losses. U.S. gold was down 0.5 percent at $1,317.50 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5662 percent down by 0.002 bps, while 5-year was 0.003 bps lower at 1.1233 percent.
The Australian government bonds slumped as investors anticipate higher second quarter consumer inflation amid rising possibilities that the Reserve Bank of Australia will hold its key interest rate at its upcoming policy meeting. The yield on the benchmark 10-year Treasury note rose more than 3 basis points to 1.923 percent and the yield on short-term 2-year note also jumped more than 3 basis points to 1.544 percent.
The New Zealand government bonds closed narrowly mixed as investors await the Reserve Bank of New Zealand Governor Graeme Wheeler’s speech, in an attempt to predict the central bank's likely step to ease interest rates in the upcoming monetary policy meeting. The yield on benchmark 10-year bond fell half basis point to 2.245 percent, the yield on 7-year note also dipped half basis points to 1.990 percent and the yield on short-term 2-year note ended 1 basis point higher at 1.880 percent.
