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Asia Roundup: Kiwi eases as global dairy prices slump, dollar hits 6-month peak against yen as Fed's Powell reiterates gradual rate hike view, Asian shares rebound - Wednesday, July 18th, 2018

Market Roundup

  • UK PM May narrowly avoids defeat in parliament on EU trade laws
     
  • Fed's Powell: Years of strong jobs, low inflation still ahead
     
  • Fed's George sees 'excellent' economy, wants more rate hikes
     
  • Fed's George says uncertainty over trade policy could hurt
     
  • Trump, seeking to calm political storm over Putin summit, says he misspoke
     
  • Foreigners buy $26.69 billion U.S. Treasuries in May; Russia drops out of list-data

Economic Data Ahead

  • (0430 ET/0830 GMT) Great Britain Jun CPI YY, 2.6% f'cast, 2.4% last
     
  • (0430 ET/0830 GMT) Great Britain Jun RPI YY, 3.5% f'cast, 3.3% last
     
  • (0430 ET/0830 GMT) Great Britain Jun PPI Output Prices YY NSA, 3.2% f'cast, 2.9% last
     
  • (0500 ET/0900 GMT) EZ Jun HICP Final YY, 2% f'cast, 2% last

Key Events Ahead

  • (0630 ET/1030 GMT) European Commission Jean-Claude Juncker speaks in Brussels
     
  • (1000 ET/1400 GMT) Federal Reserve Chairman Jerome Powell gives semiannual testimony in Washington D.C.
     
  • (1400 ET/1800 GMT) Federal Reserve releases Beige Book

FX Beat

DXY: The dollar index surged after Fed Chairman Jerome Powell reiterated that the central bank would continue to gradually hike interest rate in compliance with their mandate to reach 2 percent inflation and maximum employment. The greenback against a basket of currencies trades 0.2 percent up at 95.19, having touched a high of 95.24 on Friday, its highest since June 29. FxWirePro's Hourly Dollar Strength Index stood at 154.86 (Highly Bullish) by 0500 GMT.

EUR/USD: The euro eased to a 5-day low as the greenback gained after Federal Reserve Chairman Jerome Powell's U.S. economic outlook reinforced views the central bank is on track to hike interest rates gradually. The European currency traded 0.2 percent up at 1.1635, having touched a high of 1.1744 on Tuesday, its highest since July 11. FxWirePro's Hourly Euro Strength Index stood at -25.76 (Neutral) by 0500 GMT. Investors’ attention will remain on the Eurozone consumer price index, ahead of U.S. housing starts, building permits and Fed Powell testimony. Immediate resistance is located at 1.1744 (June 4 High), a break above targets 1.1801 (June 13 High). On the downside, support is seen at 1.1613 (July 13- Low), a break below could drag it till 1.1600.

USD/JPY: The dollar rallied to a 6-month high against the yen after Federal Reserve Chairman Jerome Powell provided an upbeat outlook for the U.S. economy and reinforced views that the Fed was on track to steadily hike interest rates. The major was trading 0.2 percent up at 113.02, having hit a high of 113.07 earlier, its highest since Jan 9. FxWirePro's Hourly Yen Strength Index stood at -58.71 (Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. housing starts, building permits, and Fed Powell testimony. Immediate resistance is located at 113.38 (Dec 8 High), a break above targets 113.62 (Dec 21 High). On the downside, support is seen at 112.40 (5-DMA), a break below could take it lower 111.91 (July 12 Low),

GBP/USD: Sterling declined, extending previous session losses, as investors expected more Brexit challenges after PM Theresa May's government narrowly won a vote on a trade bill before the British parliament. The major traded 0.2 percent down at 1.3095, having hit a low of 1.3068 on Tuesday; it’s lowest since June  29. FxWirePro's Hourly Sterling Strength Index stood at -88.84 (Slightly Bearish) 0500 GMT. Investors’ attention will remain on the UK retail price index, producer price index and consumer price index, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3198 (5-DMA), a break above could take it near 1.3274 (July 5 High). On the downside, support is seen at 1.3065 (June 26 Low), a break below targets 1.3027 (Oct 6 2017 Low). Against the euro, the pound was trading 0.05 percent up at 88.86 pence, having hit a low of 89.00 pence last week, it’s lowest since March 9.

AUD/USD: The Australian dollar extended losses as the prospect of more rate hikes from the Federal Reserve boosted the bid tone around the U.S. dollar. The Aussie trades 0.3 percent down at 0.7367, having hit a high of 0.7483 last week; it’s highest since June 14. FxWirePro's Hourly Aussie Strength Index stood at -84.93 (Slightly Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7345, a break below targets 0.7300. On the upside, resistance is located at 0.7444 (July 6 High), a break above could take it near 0.7490.

NZD/USD; The New Zealand dollar edged down as global dairy prices dropped for the fourth time in a row at an auction. The GDT Price Index dipped 1.7 percent, with an average selling price of $3,222 per tonne, after slumping 5 percent at the previous sale. The Kiwi trades 0.3 percent down at 0.6763, having touched a high of 0.6840 the day before, its highest level since July 10. FxWirePro's Hourly Kiwi Strength Index was at 13.77 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6860, a break above could take it near 0.6900. On the downside, support is seen at 0.6736 (June 29 Low), a break below could drag it below 0.6700.

Equities Recap

Asian shares surged, boosted by gains on Wall Street as a bullish outlook from the Fed Chair Jerome Powell underpinned the greenback.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.5 percent.

Tokyo's Nikkei rallied 0.6 percent to 22,823.90 points, Australia's S&P/ASX 200 index surged 0.7 percent to 6,245.10 points, and South Korea's KOSPI slumped 0.3 percent to 2,291.68 points.

Shanghai composite index fell 0.1 percent to 2,796.58 points, while CSI300 index was trading 0.2 percent down at 3,442.90 points.

Hong Kong’s Hang Seng was trading 0.3 percent lower at 28,095.77 points. Taiwan shares added 0.6 percent to 10,842.46 points.

Commodities Recap

Crude oil prices steadied after declining to multi-week lows on an industry reported that showed U.S. crude inventories rose last week, offsetting market expectations for a significant reduction. International benchmark Brent crude was trading 0.3 percent up at $71.60 per barrel by 0448 GMT, having hit a low of $71.35 on Tuesday, its lowest since April 17. U.S. West Texas Intermediate was trading 0.2 percent higher at $67.69 a barrel, after falling as low as $67.08 on Tuesday, its lowest since June 22.

Gold prices eased, hovering toward a 1-year low hit in the previous session, as the dollar firmed after Federal Reserve Chairman Jerome Powell's U.S. economic outlook reinforced views the central bank is on track to hike interest rates gradually. Spot gold was down at $1,226.96 an ounce at 0511 GMT,  after marking the lowest since July 14 at $1,225.97 on Tuesday. U.S. gold futures for August delivery were little changed at $1,227 an ounce.

Treasuries Recap

The Japanese government bonds remained tad lower as investors hope to see an improvement in the country’s trade balance data for the month of June and national consumer price inflation data for the same period, scheduled to be released today and 19 by 23:50GMT and 23:30GMT respectively. The yield on Japan’s benchmark 10-year bond, which moves inversely to its price, remained tad higher at 0.04 percent, the yield on the long-term 30-year hovered around 0.68 percent and the yield on short-term 2-year traded 1/2 basis point up at -0.12 percent.

The Australian government bonds traded narrowly mixed ahead of the June employment report. But, following the weakness in the U.S. Treasuries after Federal Reserve Chair Jerome Powell upbeat testimony to Congress, the short-term Australia 2-year bond yield to highest in one month. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 1 basis points to 2.652 percent, the yield on the long-term 30-year Note dipped nearly 2 basis points to 3.128 percent and the yield on short-term 2-year up 1/2 basis point to 2.034 percent.

The Canadian government bond prices were higher across much of the yield curve. The two-year yield was down slightly at 1.921 percent, from 1.929 percent late on Monday, while the 10-year slipped to 2.126 percent from Monday's 2.138 percent.

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