Market Roundup
- Sterling hit by weak PMI data-Cable loses over 100-pts
- GBP/USD -0.85%, USD/JPY +0.4%, EUR/USD -0.07%
- DXY +0.17%, DAX -0.1%, Brent -0.13%, Iron -1.0%
- Germany Flash Jul Mfg PMI 53.7 vs 54.5 previous, 53.5 exp
- Germany Flash Jul Service PMI 54.6 vs 53.7 previous, 53.2 exp
- EZ Flash Jul Mfg PMI 51.9 vs 52.8 previous, 52.0 exp
- EZ Flash Jul Service PMI 52.7 vs 52.8 previous, 52.3 exp
- UK Jul Mfg PMI 49.1 vs 52.1 previous, 50.0 exp
- UK Jul Service PMI 47.4 vs 52.3 previous, 49.2 exp
- BoJ likely to cut 2017/18 CPI forecast to around 1.5% vs 1.7% - Sources
- Japan Abe’s stimulus plan experiencing headline infl. of its own – Nikkei
- Orders drop further at Japan’s electronic parts makers – Nikkei
- Discord between China’s top two leaders spills into the open – WSJ
Economic Data Ahead
- (0830 ET/1230 GMT) Canada's annual inflation rate is expected to have declined to 1.4 percent in June from 1.5 percent in May. The annual core inflation rate, excluding food and energy, likely dropped to 2.0 percent from 2.1 percent.
- (0830 ET/1230 GMT) Statistics Canada is likely to report that retail sales remained flat in the month of May after rising 0.9 percent in April.
- (0945 ET/1345 GMT) Markit Economics releases preliminary U.S. manufacturing PMI for July, which is expected to have increased to 51.6 from a final reading of 51.3 in June.
- (1000 ET/1400 GMT) Mexico's annual inflation rate is expected to have increased to 2.66 percent in early July, while core annual inflation rate is likely to have edged up to 3.01 percent in early July.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae max $1.275 bln.
FX Beat
DXY: The dollar index, against a basket of currencies gained 0.2 percent to 97.13, hovering towards a 4-month high of 97.31 touched earlier in the week.
EUR/USD: The euro consolidates between a narrow range after Markit Economics released a mixed set of preliminary PMI surveys. Eurozone's PMI survey of manufacturing declined to 51.9 in July from 52.8 in June. The service PMI edged up to 52.7 versus consensus 52.5, while the composite index stood at 52.9. The major trades flat at 1.1010, having touched session's high of 1.1040. The break below 1.0970 confirms minor trend reversal, a decline till 1.0910/1.0870 is possible. On the higher side, any break above 1.1061 will take the pair till 1.10900 (200 HAM) and it should close above 1.1090 for further bullishness.
USD/JPY: The greenback regained 106 handle as expectations of a renewed divergence between BoJ and Federal Reserve monetary policy weighed on the safe-haven yen. The major trades 0.3 percent higher at 106.10, pulling away from an early low of 105.56. The short term trend is slightly bullish as long as support 105.40 (7 day EMA) holds. The major resistance is around 106.50 and any break above confirms minor trend reversal, a jump till 107.50/108/109 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 slumped below the 1.3100 handle after PMI surveys showed Britain’s business activity weakened in the wake of the Brexit vote, strengthening expectations of Bank of England policy easing next month to stimulate growth. The PMI survey of services sector purchasing managers dropped to 47.4 in July from 52.3 in June, its lowest reading since March 2009. The manufacturing PMI declined to 49.1 from 52.1 in June, while the composite index fell to 47.7 from 52.4, the weakest since April 2009. Sterling shed 1 percent to 1.3091 from 1.3270 beforehand. Any break below 1.3065 confirms minor weakness, a decline till 1.3000 is possible. Technically any break above 1.3330 will take the pair till 1.3350/1.3480. Against the euro, the pound trades 1 pct lower at 84.11 pence.
USD/CHF: The Swiss franc edged down on the back of slightly risk-on market profile. The greenback rose to 0.9859, pulling away from a low of 0.9840 touched in the previous session. The short term trend is bullish as long as support 0.9840 holds. Above 0.9905 will take the pair till 0.9960/1.000 On the lower side, major support is around 0.9840 and any indicative break below 0.9845 targets 0.980/0.9760 (90 day MA)/0.9680 in the short term.
AUD/USD: The Australian dollar came under immense selling pressure as traders speculate that upcoming inflation data next week could trigger a RBA rate cut, which put the major on course for its biggest weekly fall in 2-1/2 months. The Aussie trades 0.2 pct lower at 0.7479, having touched a near 2-week low of 0.7460 earlier, and on track for 1.4 percent drop in the week. On the higher side, resistance is around 0.7520 and any break above targets 0.7580/0.7625. 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 declined for the eighth consecutive session, on expectations that Reserve Bank of New Zealand sees room for two rate cuts in this year. The recovery in the major stalled and now extends losses below 0.7000 handle. The Kiwi trades lower at 0.6994, consolidating above previous session lows of 0.6951 and on track for second consecutive weekly decline. Immediate support is seen at 0.6951 (Previous Session Low), break below targets 0.6900 handle. On the higher side, resistance is located at 0.7036 (5-DMA), break above could take it over 0.7050.
Equities Recap
European shares declined after weak U.S. corporate results dragged Wall Street back from record highs and on course for their first consecutive daily losses in 2-weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, having touched a 9-month high on Thursday.
The pan-European FTSEuroFirst 300 and STOXX 600 both declined 0.1 pct, Germany's DAX trades flat and France's CAC 40 gained 0.2 pct.
Britain's FTSE 100 rose 0.4 pct, while mid-cap FTSE 250 index dropped 0.4 pct.
Tokyo's Nikkei declined 1.09 pct at 16,627.25 and Australia's S&P/ASX 200 index slumped 0.50 pct at 5,485.00 points.
South Korea's KOSPI nudged down 0.02 pct, Hong Kong’s Hang Seng index fell 0.2 pct at 21,964.27 points and was 1.4 pct up for the week.
Shanghai composite index shed 0.9 pct at 3,012.82 points and was 1.4 pct down for the week. CSI300 index lost 0.8 pct at 3,225.16 points and posted a 1.6 pct drop on the week.
Commodities Recap
Brent crude oil rebounded from a 2-month low, however, was on track for weekly losses as investors reassessed U.S. report on oil stockpiles and excesses in oil products in Europe and Asia. Brent crude oil rose 0.7 percent to $46.38 by 1031 GMT after declining to a more than 2-month low of $45.81 per barrel and was on track for a drop of more than 2.5 percent for the week. U.S. West Texas Intermediate traded bounced back to $44.82, pulling away from a low of $44.23, a level last seen on May 11, however, was set to close the week more than 2.5 percent lower.
Gold declined on profit taking following a 1.2 percent gain in the previous session on signs U.S. and European central banks will continue loose monetary policies in the medium term. Spot gold shed 0.4 percent at $1,324.98 an ounce at 1046 GMT and is set for 1 percent decline for the week. U.S. gold slipped 0.4 percent at $1,326.30 an ounce.
Treasuries Recap
The US Treasuries saw modest gains across much of the curve alongside a pullback in equities on Friday.. The yield on the benchmark 10-year Treasury note rose nearly 2 basis points to 1.583 percent and the yield on short-term 2-year note also bounced 1-1/2 basis points to 0.707 percent.
The UK gilts gained after the Markit PMI survey showed that the economy was shrinking at the fastest rate since 2009. The yield on the benchmark 10-year gilts fell 2 basis points to 0.816 percent, the yield on super-long 30-year bond dipped more than 1 basis point to 1.714 percent and the yield on short-term 2-year bonds slid 1-1/2 basis points to 0.152 percent.
The German bunds traded nearly flat on Friday, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. The yield on the benchmark 10-year bond hovered around zero percent mark, the yield on long-term 30-year note remained steady at 0.52 percent and the yield on short-term 2-year note rose 1 basis point to -0.604 percent.
The Japanese government bonds slumped as investors cashed in profit on the last day of the week. Also, investors await the Bank of Japan policy decision, which is scheduled to take place on July 29. The yield on the benchmark 10-year bonds rose 1 basis point to -0.219 percent, the yield on long-term 30-year note rose nearly 1 basis point to 0.277 percent, the yield on 20-year note also jumped 1 basis point to 0.192 percent and the short-term 2-year JGB yield remained steady at -0.322 percent by 07:20 GMT.
The New Zealand government bonds closed the week on a firm note as investors poured into safe-haven assets after reading the Reserve Bank of New Zealand’s much anticipated dovish economic assessment that clearly signaled a rate cut in the upcoming policy meeting. The yield on benchmark 10-year bond slid 2 basis points to 2.220 percent, the yield on 7-year note also dipped 2 basis points to 1.965 percent and the yield on short-term 2-year note ended 1 basis point lower at 1.860 percent.
The Australian government bonds rallied as investors speculate that the Reserve Bank of Australia will lower its official cash rate from prevailing record low in August’s monetary policy meeting. The yield on the benchmark 10-year Treasury note fell 4-1/2 basis points to 1.885 percent and the yield on short-term 2-year note also dipped 3 basis points to 1.511 percent.
