Market Roundup
- USD/JPY -1.0%, GBP/USD +0.1%, EUR/USD +0.07%, NZD/USD -0.5%
- DXY -0.25%, DAX -0.15%, Brent +0.15%, Iron +5.65%
- Kuroda-No need, no possibility of helicopter money-BBC Radio
- Kuroda- Don’t think any significant limit on further easing
- Swiss authorities indications laundering safeguards insufficient
- FINMA referring to 1MND probe
- Switzerland Jun Trade Bal. CHF3.546 vs 3.782 bln previous
- UK Jun Retail Sales +4.3% y/y vs 6.0% previous, 5.0% exp
- UK Jun PSNB GBP7.31 bln m/m vs 9.412 bln previous, 9.2 bln exp
- UK Jun PSNCR GBP14.855 bln m/m vs 4.688 bln previous
- Japan govt planning at least Y20 trln to support economy – Kyodo
- BoJ could wipe out bets on July easing – Reuters.
- BoE MPC Forbes – No need to rush on UK rate cuts
- Forbes- Brexit adjustment to take time – Telegraph
- German FinMin – Economy in good shape but risks up post-Brexit
- Australia Q2 biz confidence index +2, conditions +11, Q1 +4, +10.
- RBNZ – NZD decline needed, inflation outlook lower
- RBNZ policy to remain accommodative, further easing likely required
- Moody’s - Emerging market debt triples since ’05, poses threat
Economic Data Preview
- (0830 ET/1230 GMT) New applications for U.S. unemployment benefits is likely to have increased 11,000 to a seasonally adjusted 265,000 for the week ending July 15, while continuing claims for the week ending July 8 is expected to have declined to 2.145m from 2.149m.
- (0830 ET/1230 GMT) Philadelphia Federal Reserve regional manufacturing survey is likely to show that its measure of factory activity in the mid-Atlantic region increased to a reading of 5.0 in July from 4.7 in June.
- (0830 ET/1230 GMT) The Federal Reserve Bank of Chicago will release its National Activity Index for the month of June. The index posted a decline of 0.51 percent in the prior month.
- (0830 ET/1230 GMT) Statistics Canada is expected to reports that wholesale trade rose more than expected in May, gaining 0.2 percent from April.
- (0900 ET/1300 GMT) The Federal Housing Finance Agency releases its housing price index for the month of May. The index stood at 0.2 percent in the previous month.
- (1000 ET/1400 GMT) National Association of Realtors is expected to show that U.S. existing home sales dropped to a 5.48 million-unit rate in June from a 5.53 million-unit pace in May.
- (1000 ET/1400 GMT) The U.S. Conference Board is likely to report that its leading indicator gained 0.2 percent in the month of June, recovering from a decline of 0.2 percent in May.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Natural Gas Storage for the week ending July 15.
Key Events Ahead
- (0830 ET/1230 GMT) ECB President Draghi releases the monetary policy statement and gives a press conference.
- (1145 ET/1545 GMT) FedTrade ops 30-yr F.Mae/Fr.Mac max $2.550 bln
FX Beat
DXY: The dollar index, against a basket of currencies edged down 0.1 percent to 96.83, but within the sight of 97.32, a level seen since March 10.
EUR/USD: The euro trades flat at 1.1020 after the European Central Bank left deposit rate unchanged at -0.4 percent, in line with forecast. The ECB stated that they are likely to keep rates at the present or lower level for extended period, while the monthly asset purchases of 80 bln euros are intended to run until March 2017. Markets now await ECB President Draghi’s presser for further cues. The break below 1.0970 confirms minor trend reversal, a decline till 1.09100/1.0870 is possible. On the higher side, any break above 1.1061 will take the pair till 1.1090 (200 HAM) and it should close above 1.1090 for further bullishness.
USD/JPY: The greenback slumped from a 6-week high and now attempts to sustain gains above 106 handle. The major rose to a high of 107.49 on news that the Japanese government is considering to expand its stimulus package as early as August. However, it tumbled to 105.42 after reports quoted BoJ's Kuroda ruling out helicopter money. The Japanese yen trades 0.6 percent higher at 106.27, pulling further way from a 6-week high. Investors now await U.S. economic release of Philly Fed manufacturing index, weekly jobless claims and existing home sale data. Strong numbers could strengthen the case of imminent Fed rate hike this year. The short term trend is slightly bullish as long as support 105.40 (7 day EMA) holds. The major resistance is around 107.50 and any break above confirms minor trend reversal, a jump till 108/109 is possible. On the lower side minor support is around 105.40 and any break below 105.40 will drag the pair till 104.85/104.45.
GBP/USD: Sterling reversed most of its gains against the dollar and the euro after British June retail sales posted its sharpest monthly fall in six months. Sales volumes declined 0.9 percent, missing forecast 0.6 percent drop, and prior 0.9 percent gain. On yearly basis, sales growth slowed to 4.3 percent against forecasts of 5.0 percent and previous 5.7 percent. Sterling slumped from a high of 1.3274, falling back again below the 1.3200 handle. It recovered some ground to trade at 1.3183, still down 0.1 percent on the day. Any break below trend line support confirms minor weakness, a decline till 1.3100/1.3065 is possible. Technically any break above 1.3275 will take the pair till 1.3340. Against the euro, the pound trades 0.2 percent lower at 83.48 pence.
USD/CHF: The Swiss franc retreated from a 2-1/2 month low as risk sentiment weakened in the market. The greenback trades at 0.9870, having touched an early low of 0.9842 and away from a high of 0.9904 touched in the previous session. Data released earlier in the day showed that Swiss trade balance in June contracted to 3546 mln sfr from revised 3782 mln sfr in the previous month. The short term trend is bullish as long as support 0.9845 holds. Above 0.9905 will take the pair till 0.9960/1.000. On the lower side, major support is around 0.9845 and any indicative break below 0.9845 targets 0.980/0.9760 (90 DMA)/0.9680 in the short term.
AUD/USD: The Australian dollar recovered after declining to a 2-week low of 0.7452 on the back of growing expectations of further RBA monetary easing. The major halted its 4-day losing streak as it benefited from the ongoing weakness in the greenback, combined with recovering oil prices. Markets now await Energy Information Administration's Natural Gas Storage report and series of economic data from the U.S for further momentum. On the higher side, resistance is around 0.7550 and any break above targets 0.7600/0.7680. The major support is around 0.7450 and break below will drag the pair till 0.7380/0.7350.
NZD/USD: The New Zealand dollar tumbled for the seventh consecutive session, largely due to growing speculation of a Reserve Bank of New Zealand rate cut at its August policy meeting and an easing bias later in the year. The major has shed more than four percent since last week on interest rate cut talks. The Kiwi trades 0.6 percent lower at 0.6924, hovering towards a low of 0.6951, its lowest level since June 8. Immediate support is located at 0.6944, break below could take it lower 0.6900 handle. On the higher side, resistance is seen at 0.7058 (5-DMA).
Equities Recap
European shares tumbled, as major airlines shares declined after Lufthansa issued a profit warning, triggering risk-aversion sentiment across the market.
MSCI's 46-country All-World share index was at its highest level since early November, while MSCI's broadest index of Asia-Pacific shares outside Japan had risen to its highest level since October 2015.
The pan-European STOXX 600 and FTSEurofirst 300 index both declined 0.3 percent, while European travel and leisure index declined 2.0 percent.
Britain's FTSE 100 index dropped 0.4 pct, while mid-cap FTSE 250 index lost 0.3 pct. Germany's DAX shed 0.2 pct and France's CAC slumped 0.5 pct.
Tokyo's Nikkei gained 0.77 pct at 16,810.22, Australia's S&P/ASX 200 index rose 0.44 pct at 5,513.10 points and South Korea's KOSPI 200 lost 0.22 pct.
Shanghai composite index advanced 0.4 pct at 3,039.01 points, while CSI300 index soared 0.5 pct at 3,252.52 points. Hong Kong's Hang Seng index added 0.5 pct at 22,000.49 points.
Commodities Recap
Oil prices edged up after the U.S. Energy Department reported that U.S. crude inventories fell 2.3 million barrels in the week ending July 15, however, gains were capped by overall build in oil inventories. Brent crude oil rose 0.2 percent to $47.18 a barrel, having touched an early high of $47.54. U.S. West Texas Intermediate crude gained 0.3 percent to $45.78 a barrel.
Gold edged up after touching a 3-week low, as the dollar declined and European shares slipped on the back of renewed risk-aversion sentiment across the market. Spot gold rose 0.5 percent to $1,322.07 an ounce by 1021 GMT, after touching $1,310.75, its lowest since June 28. U.S. gold was down 0.1 percent at $1,317.50 an ounce.
Treasuries Recap
The U.S. Treasuries witnessed selling across the curve during a relatively quiet session on Thursday ahead of lighter flow of economic data, highlighted by jobless claims, Philadelphia Fed manufacturing, existing home sales and leading indicators releases, followed later by a 10-year TIPS auction. The yield on the benchmark 10-year Treasury note rose more than 1 basis point to 1.592 percent and the yield on short-term 2-year note also bounced 1/2 basis points to 0.718 percent.
The UK gilts continued to trade lower after reading stronger than expected labour market data, which raised the possibility that the country's Brexit decision may not be as detrimental to the economy as expected. The yield on the benchmark 10-year gilts rose more than 1 basis point to 0.846 percent, the yield on super-long 30-year bond jumped more than 1 basis point to 1.729 percent and the yield on short-term 2-year bonds bounced 1-1/2 basis points to 0.200 percent.
The German 10-year bund yield bounced above zero for the first time since the UK left the European Union last month. The yield on the benchmark 10-year bond rose more than 2 basis points to 0.011 percent, the yield on long-term 30-year note also jumped more than 2 basis points to 0.557 percent and the yield on short-term 2-year note rose nearly 2 basis points to -0.603 percent.
The Japanese government bonds dipped in the wake of speculation about further stimulus package from the government. The yield on the benchmark 10-year bonds rose ½ basis points to -0.240 percent, the yield on long-term 30-year note rose 5-1/2 basis points to 0.269 percent, the yield on 20-year note jumped 3 basis points to 0.832 percent and the short-term 2-year JGB yield remained steady at -0.325 percent.
The New Zealand government bonds closed higher after the Reserve Bank of New Zealand much anticipated economic assessment clearly signaled a likely rate cut in the upcoming policy meeting due to strengthening NZ dollar. The yield on benchmark 10-year bond, which moves inversely to its price, slid 1-1/2 basis points to 2.270 percent, the yield on 7-year note dipped 1 basis point to 2.005 percent and the yield on short-term 2-year note also ended 1 basis point lower at 1.885 percent.
The Chinese sovereign bonds gained after latest poll from Reuters, which showed that the world’s second-largest economy is expected to witness a shrink in gross domestic product (GDP) growth in 2016 owing to weak exports. The yield on the benchmark 10-year note dipped more than 2-1/2 basis points to 2.812 percent, the yield on long-term 30-year bond fell 6-1/2 basis points to 3.430 percent and the yield on short-term 2-year note slid more than 2 basis points to 2.450 percent.
The Australian government bonds traded narrowly mixed on Thursday, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. The yield on the benchmark 10-year Treasury note rose 1/2 basis point to 1.929 percent, the yield on short-term 15-year note climbed more than ½ basis points to 2.118 percent and the yield on short-term 2-year note also dipped 2 basis points to 1.540 percent.
