Market Roundup
- USD/JPY +0.45%, EUR/USD -0.09%, GBP/USD -0.05%
- DXY +0.15%, DAX -0.7%, Brent -0.75%, Iron -1.04%
- Spanish gross debt rose to record high E1.1 trln in Jun-BoS data
- SA biggest opposition parties fail to form a coalition
- UK Jul Claimant Count -8.6k vs 0.4K previous, 9.5K expected
- UK Jun ILO Unemployment rate 4.9% vs 4.9% previous, 4.9% expected
- UK Jun Avg Earnings 2.4% y/y vs 2.3% previous, 2.4% expected
- Switzerland Aug ZEW Inv. Sentiment -2.8 vs 5.9 previous
- Japan MoF Asakawa – Will respond to excessive FX moves
- Japan Nissan seeks to boost SouthKorea output on post-Brexit JPY surge
- China FX regulator – QDII for outbound investment operating normally
- China issuers return to dollar bond market amid refinancing pressure
- Moody’s affirms Australia AAA rating, maintains stable outlook
- New Zealand Fonterra GDT price index +12.7%, last auction +6.6%
Economic Data Ahead
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending Aug 12.
- (1400 ET/1800 GMT) Federal Open Market Committee issues minutes from its July 26-27 meeting.
- (1950 ET/2350 GMT) Japan's Ministry of Finance is expected to report that merchandise trade balance decreased to Y 283.7 billion in the month of July from Y 692.8 billion in June. Imports and exports of goods and services for July are likely to decline 20.6 percent and 14.0 percent, respectively.
- (1950 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending Aug 12.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae (max $1.325 bn).
- (1300 ET/1700 GMT) Federal Reserve Bank of St. Louis President James Bullard speaks on the economy and monetary policy before the Wealth and Asset Management Research conference hosted by the WFA Center for Finance and Accounting Research, in St. Louis, Missouri.
FX Beat
DXY: The dollar index, against a basket of currencies rose 0.2 percent at 94.94, pulling away from a low of 94.43 hit in the previous session, its lowest since June 24.
EUR/USD: The euro trimmed gains, as the dollar rebounded against its major peers after yesterday's comments from Fed officials. New York Fed president William Dudley stated that the Fed was moving closer to raise interest rates further, as soon as in September, forcing markets to readjust their positions. The euro trades 0.1 percent lower at 1.1268, within the reach of a 7-week high of 1.1322 touched in the previous session. The short term trend is slightly weak as long as resistance 1.1350 holds. On the higher side any break above 1.1350 will take the pair to next level till 1.1400/1.14300. It should close above 1.14300 for further bullishness. Technically major support is at 1.12250 and break below targets 1.1150/1.1085 (200 DMA).
USD/JPY: The Japanese yen eased, retreating from 7-weeks peak touched in the previous session. The major rose as high as 101.16, strengthened by the renewed buying interest surrounding the greenback. However, it eased back below the 101.00 handle to trade at 100.67, still 0.4 percent up for the day. The dollar attempted a recovery across the broad largely on the back of hawkish comments from Federal Reserve officials in the previous session, which revived September interest rate hike prospects. Investors now await FOMC meeting minutes, due later in the day, which would determine the near-term course for the greenback. The short term trend is slightly bearish as long as resistance101.50 (9 day EMA) holds. The major resistance is around 101.50 and any break above confirms minor trend reversal, a jump till 102.65/103.80 is possible. On the lower side major support is around 99.50 and any break below 99.50 will drag the pair till 98.
GBP/USD: Sterling erased most of early session losses after data showed claims for unemployment benefits surprisingly declined in July. However, gains in the major will remain capped as expectations of easier monetary policy weakened the bid tone around the pound. Data from the Office for National Statistics showed that unemployment claimants declined by 8,600 in the month of July, compared with an increase of 900 in June and projections of 9,500 rise. Britain's unemployment rate held steady at 4.9 percent in the three months to June, while wage growth picked up slightly in the April-June period. Sterling trades flat at 1.3040, having touched a low of 1.2996 earlier in the session. The short term trend is still weak as long as resistance 1.3175 (Kijun-Sen) holds. On the higher side, any break above will take the pair to next level till 1.3250/1.3300. Immediate support is around 1.3000 and any break below will drag the pair to next level till 1.2950/1.2860.Further weakness can be seen below 1.2850. Against the euro, the pound trades flat at 86.44 pence, well away from a 3-year low of 87.24 pence struck on Tuesday.
USD/CHF: The Swiss franc edged down, pulling away from an 8-week high touched in the previous session. The greenback trades 0.1 percent higher at 0.9628, having touched an early high of 0.9640. Survey released by ZEW earlier in the day showed that Switzerland's investor expectations declined by 2.8 percent in August after gaining 5.9 percent in the previous month. On the lower side, major support is around 0.9580 and any violation below 0.9580 will drag the pair down till 0.9530/0.9500. The minor resistance is around 0.9680 and any break above targets 0.9730/0.9770/0.9800.
AUD/USD: The Australian dollar slumped to a 1-week low, as the greenback recovered across the broad amid declining crude oil prices. The Aussie trades 0.9 percent lower at 0.7622, pulling further away from a peak of 0.7759 touched last week. The major came under fresh selling pressure after comments from the Federal Reserve officials strengthened the bid tone around the U.S. dollar. On the higher side any break above 0.7760 will take the pair till 0.7800/0.7840 is possible. The major support is around 0.7630 and break below will drag the pair till 0.7630/0.7575/0.7535.
NZD/USD: The New Zealand dollar declined, reversing most of its previous session gains, as markets readjust their positions following Fed official’s comments on near term interest rate hike. The major rose above the 0.7300 earlier in the day after unemployment rate declined to 5.1 percent, while producer price index-input rose 0.9 percent and output increased to 0.2 percent in the second quarter. However, the major failed to extend gains as the rise in employment was primarily led by change in methodology. The Kiwi fell 0.7 percent to 0.7225, having touched an early high of 0.7321. Immediate support is seen at 0.7200, break below could take it near 0.7185. On the upside, resistance is located at 0.7338, break above targets 0.7400.
Equities Recap
European shares declined, reversing its early session gains, while the U.S. dollar rose across the broad on revived bets on Fed interest rate rises this year, with investors waiting for minutes from the last Fed policy meeting for more clues.
MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.3 percent
The pan-European STOXX 600 index declined 0.4 percent at 341.84 points, while the FTSEurofirst 300 index slipped 0.5 percent at 1,347.25 points.
Britain's FTSE 100 trades 0.1 percent down at 6,885.64 points, while mid-cap FTSE 250 index edged down 0.1 pct at 17,790.68 points.
Germany's DAX slumped 0.8 percent at 10,587.35 points; France's CAC 40 trades 0.7 percent up lower 4,426.83 points.
Tokyo's Nikkei gained 0.90 pct at 16,745.64, Australia's S&P/ASX 200 index edged up 0.09 pct at 5,537.20 points and South Korea's KOSPI shed 0.2 percent down at 2,043.75 points.
Shanghai composite index ended flat at 3,109.55 points, while CSI300 index declined 0.2 pct at 3,373.05 points. Hong Kong’s Hang Seng index fell 0.5 pct at 22,799.78 points.
Commodities Recap
Crude oil prices declined, pulling away from 5-week highs touched in the previous session as investors doubted whether upcoming producer talks would result in firm measures to control the increasing oversupply. Brent crude oil was trading 0.5 percent lower at $48.75 per barrel at 0934 GMT, but not far off a 5-week high of $49.33 a barrel reached the previous day. U.S. West Texas Intermediate crude was at $46.14 per barrel, down 0.6 percent, but still up 18 percent from early August.
Gold edged lower as hawkish comments from the Federal Reserve officials increased speculation on a rate hike this year, with investors waiting FOMC meeting minutes for more clues. Spot gold was 0.2 percent down at $1,342.99 an ounce at 0939 GMT. U.S. gold shed 0.7 percent to $1,346.80 an ounce.
Treasuries Recap
The US Treasuries saw further selling as investors shrugged off weaker than expected consumer prices data. The yield on the benchmark 10-year Treasury note rose 1 basis point to 1.587 percent, the yield on 5-year note jumped 2 basis points at 1.172 percent and the yield on short-term 2-year note bounced 2 basis points at 0.762 percent.
The UK gilts plunged after data showed that the number of people claiming unemployment benefit in Britain unexpectedly fell in July. The yield on the benchmark 10-year gilts increased 2 basis points to 0.608 percent, the super-long 40-year bond yield jumped 3 basis points to 1.235 percent and the yield on short-long 2-year bond climbed 2 basis points to 0.190 percent.
The German bunds traded nearly flat as investors awaited the July Federal Reserve meeting minutes in an attempt to predict the central bank's likely step to hike interest rates in the upcoming monetary policy meeting, particularly in the wake of the UK’s Brexit vote. The yield on the benchmark 10-year bond hovered around -0.029 percent mark, the yield on short-term 30-year note remained steady at 0.48 percent and the yield on short-term 2-year bond fell ½ basis points to -0.612 percent.
The Eurozone periphery bonds plunged as investors remained cautious and sought refuge in the safe-haven German bunds ahead of July FOMC meeting minutes, which trigged a worldwide selloff in lower-rated debt and a flight to haven investments such as German bunds. The Irish 10-year bonds yield rose nearly 2 basis points to 0.422 percent, Italian sovereign bond inched higher 1 basis point to 1.133 percent, Portuguese 10-year bonds yield bounced more than 9 basis points to 2.942 percent, Spanish 10-year bonds yield climbed 1 basis point to 0.988 percent, the benchmark German 10-year bonds yield, which moves inversely to its price, fell 1 basis point to -0.048 percent.
The Japanese government bonds plunged as US Treasuries slipped after two Federal Reserve officials revived hopes the US central bank may raise its policy rates by year-end. The benchmark 10-year bond yield rose nearly 2 basis points to -0.075 percent, the super-long 30-year JGB yield jumped 1 basis point to 0.363 percent, the 5-year JGB yield bounced more than 1 basis point to -0.153 percent and the short-term 2-year JGB yield climbed 1 basis point to -0.179 percent.
The New Zealand bond yields snapped previous gain at the close of trading despite market witnessing better than expected employment figures. The yield on the benchmark 10-year bond fell 1 basis point to 2.200 percent and the yield on 7-year note ended 1 basis point lower at 1.895 percent and the yield on short-term 2-year note slid 1 basis point to 1.785 percent.
The Australian government bonds traded nearly flat, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 1.90 percent mark and the yield on short-term 3-year note remained steady at 1.41 percent.
