Market Roundup
- Italy's economy may be picking up, surveys suggest
- Eurozone factory malaise impacting services growth: PMI
- Euro zone investor morale hits lowest since Oct 2014, Sentix says
- Global trade likely to remain weak in coming quarters: ECB
Economic Data Ahead
- (0945 ET/1345 GMT) Markit Economics reports final U.S. services PMI for the month of July. The index posted a final reading of 55.2 in July.
- (0945 ET/1345 GMT) Financial firm Markit releases final U.S. composite PMI for the month of July. The index posted a final reading of 51.6 in the previous month.
- (1000 ET/1400 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. non-manufacturing Purchasing Managers' index rose to a final reading of 55.5 in July from 55.1 in June.
- (1400 ET/1800 GMT) The Federal Reserve releases its Loan Officer Survey.
- (1530 ET/1930 GMT) Autodata Corp is expected to report that U.S. auto sales figures dropped to an annualized rate of 16.9 million units in July from 17.3 million units in June.
Economic Data Ahead
- (1330 ET/1730 GMT) Federal Reserve Board Governor Lael Brainard gives a speech
FX Beat
DXY: The dollar index fell to a 1-1/2 week low as recent economic readings from the U.S. cemented expectations that the Fed will cut interest rates again in September. The greenback against a basket of currencies traded 0.5 percent down at 97.66, having touched a high of 98.93 on Thursday, its highest since May 15, 2017.
EUR/USD: The euro rose to a 1-1/2 week peak after two surveys indicated that Italy’s economy may be set for a modest recovery in the next few months, giving the government some breathing space as it prepares a challenging 2020 budget in the autumn.The European currency traded 0.6 percent up at 1.1171, having touched a low of 1.1026 on Thursday, its lowest since May 2017. Immediate resistance is located at 1.1187 (July 25 High), a break above targets 1.1225 (July 22 High). On the downside, support is seen at 1.1060 (July 31 Low), a break below could drag it below 1.026 (August 1 Low).
USD/JPY: The dollar slumped to a 7-month low as the escalating trade war between the United States and China along with global growth worries underpinned the Japanese yen’s safe-haven appeal. On Friday, U.S. President Donald Trump vowed to impose 10 percent tariffs on the remaining $300 billion of Chinese imports from September 1. The major was trading 0.5 percent down at 106.04, having hit a low of 105.78 earlier, its lowest since Jan 3. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. service PMI from both Markit and ISM. Immediate resistance is located at 107.13 (38.2% retracement of 109.31 and 105.78), a break above targets 107.55 (50% retracement). On the downside, support is seen at 105.45, a break below could take it lower at 104.65.
GBP/USD: Sterling consolidated near a 31-month low as fears of a disorderly Brexit increased. Last week's by-election victory for the Liberal Democrats in Brecon and Radnorshire left the Conservative party with a majority of just one seat in parliament, making it difficult for the Tories to pass any Brexit-related decisions. The major traded flat at 1.2158, having hit a low of 1.2079 on Thursday, it’s lowest since Jan. 2017. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2253 (38.2% retracement of 1.2522 and 1.2079), a break above could take it near 1.2305 (61.8% retracement). On the downside, support is seen at 1.2079 (Aug. 1 Low), a break below targets 1.2017 (Jan 17, 2017, Low). Against the euro, the pound was trading 0.7 percent down at 91.88 pence, having hit a low of 91.99 earlier, it’s lowest since Sept 2017.
USD/CHF: The Swiss franc advanced to a 1-1/2 month high as investors’ risk-sentiment weakened after China said it will retaliate against U.S. President Donald Trump’s decision to impose an additional 10 percent tariff on $300 billion worth of Chinese imports. The major trades 0.7 percent down at 0.9752, having touched a low of 0.9737 earlier; it’s lowest since June 25. On the higher side, near-term resistance is around 0.9840 (July 22 High) and any break above will take the pair to next level till 0.9907 (July 17 High). The near-term support is around 0.9710 (June 24 Low), and any close below that level will drag it till 0.9650 (Sept. 6 Low).
Equities Recap
European shares slumped as escalating trade tensions between the United States and China drove investors towards safe-haven assets.
The pan-European STOXX 600 index tumbled 1.9 percent at 370.82 points, while the FTSEurofirst 300 plunged 1.9 percent to 1,460.62 points.
Britain's FTSE 100 trades 2.1 percent down at 7,248.56 points, while mid-cap FTSE 250 fell 1.7 to 18,936.57 points.
Germany's DAX declined 1.5 percent at 11,389.28 points; France's CAC 40 trades 2.1 percent lower at 5,245.88 points.
Commodities Recap
Crude oil prices declined on renewed global economic growth concerns after U.S. President Donald Trump threatened to escalate a trade war with China with more tariffs. International benchmark Brent crude was trading 0.2 percent lower at $61.17 per barrel by 1106 GMT, having hit a low of $60.00 on Thursday, its lowest since June 13. U.S. West Texas Intermediate was trading 0.2 percent down at $55.09 a barrel, after falling as low as $53.58 on Thursday, its lowest since the June 19.
Gold prices rallied by more than 1 percent to their highest in more than 6- years, as the escalating trade war between the United States and China along with global growth worries drove investors towards safe-haven assets. Spot gold was trading 1.4 percent higher at $1,459.84 per ounce by 1114 GMT, having touched a high of $1,461.73 earlier, its highest since May 2013. U.S. gold futures rose 0.8 percent to $1,468.50 an ounce.
Treasuries Recap
The U.S. Treasury yields continued to plunge during the afternoon session, continuing the stress from last week’s tariff imposition on China by President Donald Trump ahead of today’s ISM non-manufacturing PMI for the month of July, scheduled for release at 14:00GMT. Also, FOMC member Brainard is due to deliver a speech at 17:30GMT which shall provide further direction to the debt market. The yield on the benchmark 10-year Treasury yield plunged nearly 9 basis points to 1.767 percent, the super-long 30-year bond yields slumped 8-1/2 basis points to 2.308 percent and the yield on the short-term 2-year plummeted 10 basis points to 1.621 percent.
The United Kingdom’s gilts jumped during European trading hours after the country’s services PMI for the month of July cheered market sentiments beyond initial anticipations, also rising from the previous reading in June. The yield on the benchmark 10-year gilts, slumped nearly 4 basis points to 0.513 percent, the 30-year yield plunged 4-1/2 basis points to 1.196 percent and the yield on the short-term 2-year traded tad lower at 0.427 percent.
The Japanese government bonds jumped at the time of closing on increased appetite for safe-haven assets ahead of the country’s household spending data for the month of June, scheduled to be released today by 23:30GMT and the super-long 30-year auction, due tomorrow by 03:35GMT for further direction in the debt market. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, plunged 19-1/2 basis points to -0.194 percent, the yield on the long-term 30-year suffered 3 basis points at 0.295 percent and the yield on short-term 2-year also traded down at -0.215 percent.
The Australian government bonds rallied during Asian session of the first trading day of the week, in continuation to investors’ risk-off sentiments after the United States late last week announced additional tariffs on Chinese goods, threatening stricter actions if no agreement is reached at the earliest. Also, investors will be eyeing the Reserve Bank of Australia’s (RBA) monetary policy meeting, scheduled to be held on August 6 by 04:30GMT for further direction in the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 7-1/2 basis points to 1.025 percent, the yield on the long-term 30-year bond also slumped 7-1/2 basis points to 1.695 percent and the yield on short-term 2-year suffered 6-1/2 basis points at 0.731 percent.
