Market Roundup
- USD/JPY -0.12%, EUR/USD flat, GBP/USD -0.5%
- DXY +0.04%, DAX +0.5%, Brent -0.2%, Iron +1.0%
- Switzerland Jul Unemployment 3.3% Adj vs 3.3% previous
- Germany Jun Trade Bal. EUR21.7 bln vs 22.2 previous, 22.2 expected
- UK Jun Ind. Output y/y vs 1.4% previous, 1.6% expected
- UK Jun Mfg Output y/y vs 1.7% previous, 1.3% expected
- UK Jun Trade Bal. –GBP vs -9.9 bln previous, -10.0 bln expected
- UK Jul BRC R.Sales +1.1% vs -0.5% previous
- EU States agreed to cancel budget fines for Spain/Portugal – new deadlines
- China July CPI +0.2% m/m, +1.8% y/y, +0.1% and +1.8% expected
- BoE MPC McCafferty – More rate cuts on way if economy worsens Times
- McCafferty- GBP fall could see CPI “overshoot” relative to target
Economic Data Preview
- (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp is expected to report that housing starts for July slightly decreased at a seasonally adjusted annualized rate of 195,000 units, compared with 218,300 in June.
- (0830 ET/1230 GMT) The U.S. Labor Department is likely to report that non-farm productivity rose 0.4 percent in the second quarter, from a slump of 0.6 percent in the previous quarter.
- (0830 ET/1230 GMT) The U.S. Labor Department will release labor costs report for the second quarter. The indicator is expected to nudge up 1.8 percent after posting a gain of 4.5 percent in the previous quarter.
- (1000 ET/1400 GMT) The U.S. wholesale inventories are likely to have increased 0.4 percent in June, from 0.1 percent in May.
- (1000 ET/1400 GMT) Mexico's annual inflation rate is expected to have increased to 2.74 percent in the 12 months through July, compared with 2.54 percent in June. Core annual inflation rate is likely to have edged up to 0.19 percent in July.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade ops 15-yr Fannie May /Freddie Mac max $650 mln.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent higher at 96.44, having touched intra-day high of 96.52.
EUR/USD: The euro edged down, rebounding from a high of 1.1096. The major continues to struggle to regain the 1.1100 handle, as the greenback gained against most of its peers. The European currency trades between a narrow range of 1.1070 -1.1096, amid lack of relevant data from the Eurozone. Investors now await U.S. non-farm productivity data due later, which may provide fresh impetus on the pair. The pair has made temporary bottom around 1.10457 on Friday and jumped till 1.11052 from that level. It should close below 200 day MA for further weakness. On the lower side, any close below 1.10780 confirms minor trend reversal, a decline till 1.1000/1.0950 likely. Technically it should break above 1.1156 (90 day EMA) for minor bullishness and break above targets 1.1200/1.1.230.
USD/JPY: The Japanese yen gained, retreating from a 1-week high of 102.65, touched in the previous session. The dollar came under fresh selling pressure as it failed to take advantage from a risk-on market environment, supported by rising European equities and a recovery in oil prices. The greenback trades 0.2 percent lower at 102.26, attempting to sustain gains above the 102.00 handle. The short term trend is slightly bullish as long as support 100 holds. The major resistance is around 102.65 and any break above confirms minor trend reversal, a jump till 103/104 is possible. On the lower side, major support is around 100 and any break below 100 will drag the pair till 98.
GBP/USD: The sterling declined to a 1-month low against the dollar, after Bank of England's Ian McCafferty stated that more easing would be needed, apart from the measures unveiled last week by the bank, if the economy slowed as much as sentiment surveys have suggested. The major was also weighed down by downbeat manufacturing and industrial production figures. Britain’s manufacturing production for June came in at 0.9 percent y/y against consensus of 1.3 percent, while industrial production stood at -0.3 percent m/m, versus projections of -0.2 percent. Sterling declined as low as 1.2962, its weakest since July 11. It was trading around 1.2981, 0.4 percent down for the day. From the current levels, 1.3040 level will be acting as immediate resistance and any break above will take the pair to next level till 1.3080. On the lower side 1.2960 seems to be major support and any break below targets 1.2900/1.2850. Minor bullishness can be seen only above 1.3200. Against the euro, the pound trades 0.5 percent lower at 85.40 pence.
USD/CHF: The Swiss franc continues to decline, as the dollar strengthened on rising expectations of Fed interest rate hike this year. The greenback trades 0.1 percent higher at 0.9832, having touched a near 2-week high of 0.9843 earlier in the session. Data released earlier in the day showed that Switzerland's adjusted jobless rate stood at 3.3 percent in July, while unadjusted jobless rate was at 3.1 percent in line with previous. The major should close above 0.9855 (200 day MA) for further bullishness. Any break above 0.9855 will take it to next level till 0.9960/1.000. On the lower side, any break below 0.9770 (90 day EMA) will take the pair to next level till 0.9705 (61.8% retracement of 0.9830 and 0.9633)/0.9630. Minor weakness can be seen below 0.9630 and any violation below 0.9630 targets 0.9575/0.9520. Overall bullish invalidation only below 0.9500.
AUD/USD: The Australian dollar rebounded from early low as oil prices recovered from early lows amid risk-on market sentiment. The major largely gained on the pack of decelerating Chinese CPI figures, which spurred speculation of further easing by PBoC. The Aussie trades 0.3 percent higher at 0.7667, having touched fresh 3-week high at 0.7673. On the higher side, any break above 0.7670 will take the pair to next level till 0.7725/0.7750. The major support is around 0.7580 and break below will drag the pair till 0.7535/0.7500.
NZD/USD: The New Zealand dollar erased its session’s losses, but it continues to trade below the 0.7150 level as markets remain cautious ahead of Reserve Bank of New Zealand monetary policy decision on Thursday. The central bank is widely expected to lower its benchmark interest rates by 25bps points in the wake of rising deflationary pressure. The Kiwi trades 0.1 percent higher at 0.7144, having retreated from session low of 0.7110. Immediate resistance is located at 0.7197 (Jul-1 High), break above could take it till 0.7240. On the lower side, support is seen at 0.7087, break below targets 0.7050.
Equities Recap
European shares steadied as gains in companies such as Altice and financials offset losses by weaker commodities-related stocks
The pan-European STOXX 600 index added 0.2 percent, led higher by banks and autos stocks, while the FTSEurofirst 300 index gained 0.2 percent to 1,348.35 points.
Germany's DAX rose 0.5 pct at 10,485.19 points; France's CAC 40 gained 0.5 pct at 4,437.38 points.
Britain's FTSE 100 trades 0.3 pct higher at 6,833.38 points, while mid-cap FTSE 250 index added 0.2 pct. FTSE 350 banks index was up 0.6 pct, recouping all of its post-Brexit losses.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.2 percent, having already risen for three sessions in a row.
Tokyo's Nikkei gained 0.69 pct at 16,764.97, Australia's S&P/ASX 200 index rose 0.27 pct at 5,552.80 points and South Korea's KOSPI climbed 0.71 pct at 2,043.78 points.
Shanghai composite index and CSI300 index both added 0.7 pct at 3,025.68 points and 3,256.98 points, respectively. Hong Kong’s Hang Seng index declined 0.1 pct at 22,465.61 points.
Commodities Recap
Crude oil prices recovered after declining below $45 a barrel, as concern about a supply glut weighed on markets. The global benchmark Brent crude was 0.2 percent up at $45.26 a barrel by 0955 GMT, after dropping to an early low of $44.78. U.S. West Texas Intermediate crude was at $42.96 per barrel, up 0.3 percent.
Gold continued to trade near 1-week lows touched on Monday as the dollar strengthened amid rising expectations of a rate hike by the Federal Reserve this year. Spot gold eased 0.1 percent to $1,333.78 an ounce by 1001 GMT, having touched its lowest since July 29 at $1,329.79 on Monday. U.S. gold edged down 0.3 percent to $1,337.60 an ounce.
Treasuries Recap
The US Treasuries saw modest upward pressure across much of the curve amidst a relatively quiet Monday session light on significant economic data. The yield on the benchmark 10-year Treasury note fell nearly 1 basis point 1.578 percent, the yield on 5-year note dipped 1/2 basis point to 1.135 percent and the yield on short-term 2-year note hovered around 0.72 percent mark.
The UK gilts traded narrowly mixed after data showed that the country’s industrial output remained strong in June, while manufacturing production took a downturn. The yield on the benchmark 10-year gilts fell 1 basis point to 0.605 percent, the yield on super-long 40-year bond also dipped 1 basis point to 1.290 percent and the yield on short-long 2-year bond bounced 1-1/2 basis points to 0.121 percent.
The German bunds traded nearly flat on Tuesday, succumbing to thin trading activity during a relatively quiet session that saw data of little significance. The yield on the benchmark 10-year bond hovered around -0.065 percent mark, the yield on short-term 30-year note dipped 1/2 basis point to 0.443 percent and the yield on short-term 2-year bond remained steady at 0.615 percent.
The Japanese government bonds strengthened as stronger-than-expected 30-year JGB auction boosted investors’ demand for safe-haven buying. The benchmark 10-year bond yield fell 3 basis points to -0.076 percent and the short-term 2-year JGB yield dipped 1-1/2 basis points to -0.180 percent.
The New Zealand government bonds traded modestly higher as investors sought refuge in the safe-haven instruments ahead of the Reserve Bank of New Zealand (RBNZ) monetary policy decision. The yield on the benchmark 10-year bond fell 1/2 basis point to 2.230 percent, the yield on 7-year note also dipped 1/2 basis point to 1.930 percent and the yield on short-term 2-year note ended 1-1/2 basis points lower at 1.780 percent.
The Australian government bonds traded nearly flat Tuesday, succumbing to thin trading activity during a relatively quiet session that saw data of little significance. The yield on the benchmark 10-year Treasury note hovered around 1.95 percent mark and the yield on short-term 2-year note remained steady at 1.49 percent.
