Market Roundup
- China devaluation hits stocks, boosts USD on currency war fears.
- U.S. bonds jump on China FX move, speculation Fed may delay first rate hike.
- U.S. warns China against backsliding on currency commitments.
- OPEC: crude oil demand in coming months should continue to improve & gradually lower supply imbalance.
- Spain's Rajoy: Eurogroup to meet Friday for Greece deal talks.
- Greek bailout package expected to be EUR 82-86 billion (EU source).
- Germany's Spahn: it is important that the IMF agrees w/the evaluation of the ECB & EC on Greek debt sustainability & reforms.
- US Labor Costs Prelim Q2 0.5%, f/c 0.1%, 2.3%-previous.
- US Productivity Prelim Q2 1.3%, f/c 1.6%, -1.1%-previous.
- US Wholesale Inventories MM Jun 0.9%, f/c 0.4%, 0.6%-previous
Looking Ahead - Economic Data (GMT)
- 23:50 Japan Corp Goods Price MM* Jul f/c -0.1%, -0.2%-previous
- 23:50 Japan Corp Goods Price YY* Jul f/c -2.9%, -2.4%-previous
- 00:30 Australia Consumer Sentiment Aug -3.2%-previous
- 01:30 Australia Wage Price Index QQ* Q2 f/c 0.6%, 0.5%-previous
- 01:30 Australia Wage Price Index YY* Q2 f/c 2.3%, 2.3%-previous
- 04:30 Japan Industrial Output Rev* Jun 0.8%-previous
- 04:30 Japan Capacity Utilization Index Change MM* Jun -3%-previous
- 05:30 China Urban investment (ytd)yy* Jul f/c 11.5%, 11.4%-previous
- 05:30 China Industrial Output YY* Jul f/c 6.6%, 6.8%-previous
- 05:30 China Retail Sales YY* Jul f/c 10.6%, 10.6%-previous
Looking Ahead - Events, Other Releases (GMT)
- 23:50 Japan Bank of Japan will publish the minutes of July policy meeting
Currency Summaries
EUR/USD is supported above 1.0970 levels and currently trading at 1.1035levels. The pair has made session high at 1.1088 and hit lows at 1.1010 levels. Euro edged higher against greenback on Tuesday in the New York session as, Greece and its international lenders reached a multi-billion euro bailout agreement on Tuesday after various official negotiated throughout the night, potentially saving the country from financial ruin. The pair surged from 1.1031 to hit daily highs at 1.085 levels, in the mid New York session the pair retreated from high to hit lows at 1.1008. The agreement, reached after a 23-hour session of talks, must still be adopted by Greece's parliament and euro zone countries. The single currency bloc's finance ministers are due to meet on Friday, giving time to finalize the deal before a major debt repayment next week. To the upside, immediate resistance can be seen at 1.1050. To the downside, immediate support level is located at 1. 1020 levels.
GBP/USD is supported in the range of 1.5520 levels and currently trading at 1.5572 levels. It reached session high at 1.5607 and dropped to session low at 1.5549 levels. Sterling bullish momentum was paused on Tuesday after China's unexpected devaluation of its currency which raised the prospect of weaker global commodities prices which could increase inflation in Europe. Sterling weakened as investors preferred US dollar as safe heaven as the Asian currencies were volatile due to China devaluating its currency unexpectedly on Tuesday. The pair traded most of the day in a very choppy range between 1.5550 to 1.5601 levels. Ahead in the coming European session Average earnings index and Claimant count change data is set to be released from UK which determine further trend for this pair. Meanwhile, The Bank of England said on Tuesday that, it will study the cumulative economic costs of financial regulations introduced since the global financial crisis, it said on after the government told it to help promote competition and investment. To the upside, immediate resistance can be seen at 1.5600. To the downside, immediate support level is located at 1.5550 levels.
USD/JPY is supported at 124.70 levels and currently trading at 125.15 levels. It peaked to hit session high at 125.15 and made session lows at 125.00 levels.US dollar edged higher against Japanese Yen on Tuesday as the Asian currencies weakened due to china's unexpected devaluation of its currency. The Japanese Yen traditionally has been viewed as safe heaven by the investors when there is volatility in the market. The pair hit 125.15 levels in the late New York session, highest since June 2nd. The U.S. Federal Reserve has gradually primed markets to prepare for an end to its 7-year ultra-loose monetary policy this year by revising the interest rate in the coming months. Meanwhile the yen, on the other hand, has remained weak on expectations that the Bank of Japan will keep its policies ultra-loose for some time to push Japan out of deflation. To the upside, immediate resistance can be seen at 125.50. To the downside, immediate support level is located at 124.97 levels.
USD/CAD is likely to find support at 1.2997 evels and is trading at 1.3114 levels. It has made intraday high at 1.3150and lows at 1.3100 levels. The Canadian dollar dropped against its U.S. counterpart on Tuesday, reversing the previous American session's hefty gains, as oil prices took a beating following China's surprise move to devalue its currency and downbeat Canadian housing starts data which printed 193.0k against forecast of 195.0k. China is one of the world's largest natural resource consumers, and the move triggered a selloff in dollar-priced commodities, such as crude, which is a key Canadian export. The pair surged from 1.3040 levels to hit session high at 1.3147 by almost gaining 100pips in a single session. The loonie remained the weakest currency against almost most of the major currencies. It traded between C$1.2996 and C$1.3147 on Tuesday, but was well off the 2004 lows above C$1.32 hit last week. To the upside, immediate resistance can be seen at 1.3140. To the downside, immediate support level is located at 1.3100 levels.
Equities Recap
European stock markets slipped lower on Tuesday as China unexpectedly devaluated its currency to slip to its biggest fall in over two decades. UK's benchmark FTSE 100 closed, down by 1.1 percent, the pan-European FTSEurofirst 300 closed, down by 1.7 percent, Germany's Dax closed, down by 2.7 percent, France's CAC closed, down by 1.9 percent, Italy's FTSE MIB closed, down by 1.1 percent. Meanwhile, Spain's IBEX 35 was down by 1.4 percent at close.
US stocks slipped sharply on Tuesday, fueled by China's surprise devaluation of its currency. Dow Jones closed, down by 1.18 percent, S&P 500 closed, down by 0.93 percent, Nasdaq closed, down by 1.24 percent.
Treasuries Recap
U.S. Treasury yields tumbled to multi month lows on Tuesday as a surprise currency devaluation by China touched off safety buying and speculation that Federal Reserve policymakers will delay raising U.S. interest rates.
The MSCI world equity index, which tracks shares in 45 nations, fell 1.25 percent and Wall Street was down around 1.5 percent in late activity.
German Bunds, British gilts and other high-quality bonds drew investors worried about a possible currency war and fallout for the global economy. The 10-year Bund's yield fell 5 basis points to 0.64 percent.
The 30-year bond climbed well over 2 full basis points in price and was last up 1-30/32 to yield 2.8062, a level last touched on May 4.
The benchmark Treasury 10-year note was last up 27/32 and last yielded 2.1391 percent after closing on Monday at 2.238 percent. It had traded up over 1 full point and yielded as little as 2.1140 percent, its lowest since June 1.
The 7-year was up 20/32 in price, carrying a yield of 1.8894 percent that was last seen in late June.
Commodities Recap
U.S. crude settled at a more than six-year low on Tuesday after China's currency devaluation raised questions about oil demand in the No. 2 consumer and a new OPEC estimate showed non-member producers are likely to keep output high despite low prices.
U.S. crude fell $1.88 or more than 4 percent, to $43.08 a barrel, its lowest settlement since March 2009, and about $1 above the 2015 contract low on March 18.
Brent fell $1.23, or 2.4 percent, to $49.18 a barrel, paring more than half of its gains in a rally on Monday.
Gold rose to a three-week high on Tuesday as global stocks fell, and investors assessed the impact of China's nearly 2 percent devaluation of its currency and move to prop up its economy.
China's rate decision triggered a sharp but short-lived retreat in gold to a session low of $1,093.25 an ounce.
Spot prices rebounded to a three-week high of $1,119 before trading up 0.4 percent at $1,108.66 an ounce by 3:14 p.m. EDT (1914 GMT). U.S. gold for December delivery settled up 0.3 percent at $1,107.70 an ounce.
