Market Roundup
- Eurozone second-quarter growth halves, inflation slows despite jobless at 11-year low
- German retail sales jump, labor market shows resilience
- DUP lawmaker calls for time-limit to Irish backstop
- Japan delays budget surplus forecast to FY2027 as fiscal reform struggles
Economic Data Ahead
- (0815 ET/1215 GMT) Payrolls processor ADP releases U.S. employment report for the month of July. The report is expected to show that 150,000 jobs were added as compared with 102,000 jobs in June.
- (0830 ET/1230 GMT) The U.S. Labor Department will release its employment cost index for the second quarter. The index is expected to rise 0.2 percent after increasing 0.7 percent in the first quarter.
- (0830 ET/1230 GMT) Statistics Canada releases its Raw Material Price Index for the month of June. The index posted a decline of 2.3 percent in May.
- (0830 ET/1230 GMT) Statistics Canada will report its industrial producer prices for the month of June. The indicator rose 0.1 percent in the prior month.
- (0830 ET/1230 GMT) Statistics Canada is expected to report that gross domestic product increased 0.1 percent in May after rising 0.3 percent in the previous month.
- (0945 ET/1345 GMT) Chicago Purchasing Managers' Index is likely to show that business conditions rose to 50.5 in July from 49.7 last month.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending July 26.
Key Events Ahead
- (1400 ET/1800 GMT) The Federal Open Market Committee concludes its two-day meeting on interest rate policy and releases its statement.
- (1430 ET/1830 GMT) Federal Reserve Chair Jerome Powell will address news conference
FX Beat
DXY: The dollar index advanced, hovering towards a 2-month peak hit in the previous session as the Federal Reserve is expected to cut interest rates by a quarter-point, but investors will be looking at Chair Jerome Powell's comments for signs of how far the central bank could go with further easing this year. The greenback against a basket of currencies traded 0.05 percent up at 98.13, having touched a high of 98.21 on Tuesday, its highest since May 30.
EUR/USD: The euro declined, reversing most of its previous session losses after data showed Eurozone’s economic growth halved in the April-June period and inflation slowed sharply in July despite the unemployment rate falling to its lowest in 11 years. The European currency traded 0.1 percent down at 1.1145, having touched a low of 1.1101 on Thursday, its lowest since May 2017. Immediate resistance is located at 1.1171 (23.6% retracement of 1.1281 and 1.1101), a break above targets 1.1213 (61.8% retracement). On the downside, support is seen at 1.1101 (July 25 Low), a break below could drag it below 1.1070.
USD/JPY The dollar eased as talks between U.S. and Chinese trade officials seeking ways to end a year-long trade dispute lasted barely half a day before ending. The Federal Reserve is expected to announce its first rate cut since 2008, with the likelihood of a deeper easing diminishing following upbeat second-quarter economic growth and consumer confidence data. The major was trading down at 108.56, having hit a high of 108.94 on Tuesday, its highest since July 10. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. ADP employment change and Fed interest rate decision. Immediate resistance is located at 109.08 (Jan. 8 High), a break above targets 109.54 (Jan. 29 High). On the downside, support is seen at 108.28 (61.8% retracement of 107.21 and 108.94), a break below could take it lower at 108.08 (50% retracement).
GBP/USD: Sterling rebounded from a 28-month low; however, the recovery appears fragile as investors rushed to factor in the possibility of Britain leaving the European Union without transition trade arrangements in place. The major traded 0.2 percent up at 1.2170, having hit a low of 1.2118 on Tuesday, it’s lowest since March 2017. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2274 (38.2% retracement of 1.2522 and 1.2118), a break above could take it near 1.2322 (50% retracement). On the downside, support is seen at 1.2108 (March 14, 2017, Low), a break below targets 1.2037 (Jan 11, 2017, Low). Against the euro, the pound was trading 0.2 percent up at 91.81 pence, having hit a low of 91.90 on Tuesday, it’s lowest since Sept 2017.
USD/CHF: The Swiss franc rose, extending gains for the third straight session, as rising fears of no-deal Brexit and warnings from President Donald Trump before the U.S.-China trade talks dented investors risk sentiment. The major trades down at 0.9898, having touched a high of 0.9946 on Friday; it’s highest since July 9. On the higher side, near-term resistance is around 0.9951 (July 9 High) and any break above will take the pair to next level till 0.9999 (June 17 High). The near-term support is around 0.9875 (21-DMA), and any close below that level will drag it till 0.9817 (July 23 Low).
Equities Recap
European shares slumped as investors turned cautious ahead of a keenly-awaited U.S. Federal Reserve decision on interest rates.
The pan-European STOXX 600 index slumped 0.1 percent at 384.74 points, while the FTSEurofirst 300 declined 0.1 percent to 1,515.23 points.
Britain's FTSE 100 trades 0.6 percent down at 7,599.52 points, while mid-cap FTSE 250 fell 0.2 to 19,737.89 points.
Germany's DAX rose 0.2 percent at 12,174.29 points; France's CAC 40 trades 0.05 percent higher at 5,512.97 point.
Commodities Recap
Crude oil prices surged, extending gains for the fourth consecutive session, supported by a drop in U.S. inventories and investor expectations that the U.S. Federal Reserve will lower borrowing costs. International benchmark Brent crude was trading 0.2 percent higher at $65.05 per barrel by 1035 GMT, having hit a high of $65.26 earlier, its highest since July 17. U.S. West Texas Intermediate was trading 0.1 percent up at $58.38 a barrel, after rising as high as $58.55 earlier, its highest since the July 16.
Gold prices steadied as investors awaited the outcome of the Federal Reserve’s meeting later in the day, where policymakers are expected to cut interest rates. Spot gold was trading flay at $1,431.29 per ounce by 1037 GMT, having touched a low of $1,410.77 on Thursday, its lowest since July 17. U.S. gold futures edged 0.1 percent higher to $1,443.60 an ounce.
Treasuries Recap
The U.S. Treasuries gained during the afternoon session, ahead of the Federal Reserve’s monetary policy meeting, scheduled to be concluded today by 23:30GMT, and the country’s ADP non-farm employment change for the month of July, also due today by 12:15GMT. The yield on the benchmark 10-year Treasury yield slipped nearly 1-1/2 basis points to 2.049 percent, the super-long 30-year bond yields also fell 1-1/2 basis points to 2.570 percent and the yield on the short-term 2-year traded nearly 2 basis points lower at 1.830 percent.
The United Kingdom’s gilts remained mixed during European trading hours ahead of the Bank of England’s (BoE) monetary policy meeting, scheduled to be released on August 1 by 11:00GMT and Governor Mark Carney’s speech, due by 11:30GMT for further direction in the debt market. The yield on the benchmark 10-year gilts, traded tad higher 0.637 percent, the 30-year yield jumped 2 basis points to 1.375 percent and the yield on the short-term 2-year remained flat at 0.441 percent.
The German bunds rose higher during European session following disappointment in Eurozone’s consumer price inflation (CPI) for the month of July, while a better-than-expected reading in the country’s jobless change restricted any further upside in debt prices. The German 10-year bond yields, which move inversely to its price, slipped 1 basis point to -0.410 percent, the yield on 30-year note edged 1-1/2 basis points lower to 0.161 percent and the yield on short-term 2-year also traded 1 basis point down at -0.765 percent
The Australian government bonds remained nearly flat during Asian trading session after the country’s consumer price inflation (CPI) for the second quarter of this year edged tad higher, compared to market expectations as well as the previous quarter. Investors will now look forward to the release of Australia’s retail sales data for the month of June, scheduled for end of this week, for further direction in the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, hovered around 1.202 percent, the yield on the long-term 30-year bond plunged remained nearly flat at 1.864 percent and the yield on short-term 2-year also remained steady at 0.859 percent.
