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Asia Roundup: Aussie surges as RBA stands pat, dollar index at 1-week peak amid lingering trade worries, Asian shares plunge - Tuesday, September 4th, 2018

Market Roundup

  • Japan finmin seeks record 2019 budget to boost welfare, defence spending
     
  • Japan PM Abe says will raise sales tax "by all means" – Nikkei
     
  • BOJ operation points to small cut in 3-5yr JGB purchase, market steady
     
  • Australia central bank holds rates at 1.5 pct
     
  • Australia Q2 current account deficit 13.5 bln vs 11.5 bln expectation
     
  • Trump accuses Sessions of hurting U.S. Republican congressional races
     
  • ECB's stimulus purchases dwindle to all-time low in August
     
  • UK government in talks to keep Carney longer at BoE – BBC
     
  • Critics "chuck rocks from both sides" at May's Brexit plans
     
  • UK retailers report lacklustre sales as shoppers head to the pub
     
  • Argentina unveils 'emergency' austerity measures, grain export taxes
     

Economic Data Ahead

  • (0430 ET/0830 GMT) Great Britain Aug Markit/CIPS Cons PMI, 55.0 f'cast, 55.8 prev
     
  • (0500 ET/0900 GMT) EZ Jul Producer Prices MM, 0.3% f'cast, 0.4% prev
     
  • (0500 ET/0900 GMT) EZ Jul Producer Prices YY, 3.9% f'cast, 3.6% prev

Key Events Ahead

  • (0800 ET/1200 GMT) BoE's Mark Carney speaks about BoE's decision to raise interest rates in August and its latest inflation report along with fellow policymakers Andy Haldane, Silvana Tenreyro and Michael Saunders in London
     
  • (1200 ET/1600 GMT) National Bank of Austria Governor Ewald Nowotny speaks at an exhibition opening in Vienna

FX Beat

DXY: The dollar index surged to a 1-week peak amid rising U.S. interest rates, tensions around global trade and strains in emerging market currencies. The greenback against a basket of currencies trades 0.2 percent up at 95.31, having touched a high of 95.31 earlier, its highest since August 24. FxWirePro's Hourly Dollar Strength Index stood at 23.70 (Neural) by 0500 GMT.

EUR/USD: The euro declined, reversing some of its previous session losses after data released yesterday showed eurozone manufacturing growth slowing to a near 2-year low in August as optimism faded due to the lingering threat of a global trade war. The European currency traded 0.1 percent down at 1.1609, having touched a low of 1.1584 on Friday, its lowest since Aug 24. FxWirePro's Hourly Euro Strength Index stood at -19.59 (Neutral) by 0500 GMT. Investors’ attention will remain on Eurozone producer price index, ahead of the U.S. construction spending, manufacturing PMI from both Markit and ISM; and Fed Evan's speech. Immediate resistance is located at 1.1658 (5-DMA), a break above targets 1.1747 (July 31 High). On the downside, support is seen at 1.1542 (21-DMA), a break below could drag it till 1.1500.

USD/JPY: The dollar surged above the 111.00 handle on news that the Bank of Japan lifted purchases of bonds in 1-5 maturity and will be buying fewer bonds at the short end of the Japanese government bond yield curve. The major was trading 0.1 percent up at 111.13, having hit a low of 110.68 on Friday, its lowest since August 23. FxWirePro's Hourly Yen Strength Index stood at 45.59 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. construction spending, manufacturing PMI from both Markit and ISM; and Fed Evan's speech. Immediate resistance is located at 111.31 (August 23 High), a break above targets 111.82 (August 29 High). On the downside, support is seen at 110.70 (August 9 Low), a break below could take it lower 110.43 (August 15 Low).

GBP/USD: Sterling slumped, extending losses for the fourth straight session, amid growing concerns about the progress of Brexit negotiations. Moreover, expectations that May's government could fail to reach an agreement and that Britain could potentially leave the EU in March with no deal in place weighed on investor sentiment. The major traded 0.1 percent down at 1.2862, having hit a low of 1.2854 earlier; it’s lowest since August 29. FxWirePro's Hourly Sterling Strength Index stood at -84.14 (Slightly Bearish) 0500 GMT. Immediate resistance is located at 1.2944 (5-DMA), a break above could take it near 1.3083 (July 19 High). On the downside, support is seen at 1.2828 (August 27 Low), a break below targets 1.2799 (August 24 Low). Against the euro, the pound was trading 0.05 percent up at 90.23 pence, having hit a high of 89.38 on Friday, it’s highest since August 17.

AUD/USD: The Australian dollar rose, extending gains from the previous session, after the Reserve Bank of Australia left its cash rate at 1.5 percent, a widely expected decision, and sounded resolutely upbeat on the economy. The central bank maintained a forecast of 3 percent-plus economic growth this year and next, while estimating growth had been above trend for the first half of this year. The Aussie trades 0.2 percent up at 0.7224, having hit a low of 0.7166 on Monday; it’s lowest since Dec. 29. FxWirePro's Hourly Aussie Strength Index stood at 71.75 (Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7150, a break below targets 0.7100. On the upside, resistance is located at 0.7241 (38.2% retracement of 0.7362 and 0.7166), a break above could take it near 0.7264 (50.0% retracement).

NZD/USD: The New Zealand dollar plunged to an over 2-week low below the 0.6600 handle, amid turmoil in emerging markets and doubts about the outlook for global growth. The Kiwi trades 0.1 percent down at 0.6596, having touched a low of 0.6586 earlier, its lowest level since August 17. FxWirePro's Hourly Kiwi Strength Index was at -20.50 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6651 (21-DMA), a break above could take it near 0.6696 (August 24 High). On the downside, support is seen at 0.6579 (August 17 Low), a break below could drag it below 0.6553.

Equities Recap

Asian shares tumbled as the trade dispute between the United States and China threatened to escalate.

MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.3 percent.

Tokyo's Nikkei declined 0.05 percent to 22,696.90 points, Australia's S&P/ASX 200 index plunged 0.3 percent to 6,293.10 points, and South Korea's KOSPI gained 0.4 percent to 2,316.86 points.

Shanghai composite index rose 1.2 percent to 2,753.73 points, while CSI300 index traded 1.4 percent up at 3,366.13 points.

Hong Kong’s Hang Seng traded 0.8 percent higher at 27,941.10 points. Taiwan shares added 0.5 percent to 11,021.38 points.

Commodities Recap

Crude oil prices surged, hovering towards multi-week peak touched in the previous session after two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane. International benchmark Brent crude was trading 0.2 percent up at $78.11 per barrel by 0513 GMT, having hit a high of $78.42 on Monday, its highest since July 11. U.S. West Texas Intermediate was trading 0.1 percent higher at $70.11 a barrel, after rising as high as $70.47 on Thursday, its highest since August 8.

Gold prices nudged down as the greenback touched a 1-week high on the back of intensifying global trade tensions, economic worries in emerging markets and expectations of U.S. interest rates hikes. Spot gold was down 0.1 percent at $1,199.94 an ounce at 0520 GMT, having touched a low of $1,195.60 on Monday, its lowest since August 24. U.S. gold futures had dropped 0.1 percent to $1,205 an ounce.

Treasuries Recap

The Japanese government bonds traded range-bound ahead of the 10-year auction scheduled for September 5. However, investors would focus on any new developments in ongoing global trade conflicts. The yield on the benchmark 10-year JGB note, which moves inversely to its price, traded nearly flat at 0.114 percent, the yield on the long-term 30-year note remained steady at 0.860 percent and the yield on short-term 2-year stood flat at -0.108 percent.

The Australian bonds traded nearly flat during late Asian session after the Reserve Bank of Australia (RBA) remained on hold at its monetary policy meeting held today, citing sustained expansion in global economic growth. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, remained tad lower at 2.520 percent, the yield on the long-term 30-year bond hovered around 3.039 percent and the yield on short-term 1-year traded flat at 1.977 percent.

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