Market Roundup
• China presses Europe for anti-U.S. alliance on trade .
• US May Factory Orders MM, 0.4%, 0.0% forecast, -0.8% previous, -0.4% revised.
• US May Durables Ex-Def R MM, May, -1.3%, -1.5% previous.
• US May Durable Goods, R MM, -0.4%, -0.6% previous.
• US 30 Jun w/e Redbook YY, 4.4%, 3.1% previous.
• CA June Markit Mfg PMI SA, 57.1, 56.2 previous.
• ECB's Praet confident of inflation recovery even after bond-buying ends.
• ECB steps up government debt buys to keep stimulus going .
• Days from Brexit crunch meeting, Britain's May calls for unity .
• Trump says nuclear talks with North Korea 'going well' .
• Italy says won't trim 2018 deficit but will keep budget in check.
Looking Ahead - Economic Data (GMT)
• 4 Jul 00:30 Japan Jun Services PMI, 51.0 previous
• 4 Jul 01:30 Australia May Retail Sales MM, 0.3% forecast, 0.4% previous
• 4 Jul 01:30 Australia May Trade Balance G&S (A$), 1,200 mln forecast, 977 mln previous
• 4 Jul 01:45 China Jun Caixin Services PMI, 52.9 previous
Looking Ahead - Events, Other Releases (GMT)
• 01:30 BoJ's Harada speaks at a meeting with business leaders in Ishikawa, Tokyo
• 08:05 BoE's Sam Woods speaks at the Westminster Business Forum Keynote Seminar: Building a resilient UK financial sector – next steps for prudential regulation, structural reform and mitigating risks, London
• 10:55 BoE's Victoria Saporta speaks at the Westminster Business Forum Keynote Seminar: Building a resilient UK financial sector – next steps for prudential regulation, structural reform and mitigating risks, London
Currency Summaries
EUR/USD is likely to find support at 1.1586 levels and currently trading at 1.1660 levels. The pair has made session high at 1.1663 and hit lows at 1.1641 levels. Euro edged higher against the dollar in the US session on Tuesday as dollar fell in thin pre-holiday trading, as investors consolidated recent gains and focused less on trade tensions, raising the market's risk appetite and prompting some flows into other currencies such as the euro and Australian dollar. Ahead of the U.S. Independence Day holiday on Wednesday, market sentiment also improved after the Chinese central bank moved to calm currency markets following a fall in the renminbi below a key psychological level. Protracted weakness in the Chinese currency raises the prospects of capital outflows and a slowdown in the world's second-biggest economy, creating a new source of concern for currency markets grappling with rising threats to global trade. The dollar weakened against a basket of rival currencies after notching up three consecutive months of gains as investors wait for minutes of the U.S. Federal Reserve's June meeting and jobs data that should confirm whether policymakers will raise interest rates twice this year. The Fed will release minutes of its June meeting on Thursday, and investors will parse the data and the statements to gauge whether it is still on track to raise interest rates twice more this year. Monthly payrolls data follow on Friday.
GBP/USD is supported in the range of 1.3100 levels and currently trading at 1.3194 levels. It reached session high at 1.3206 and dropped to session low at 1.3156 levels. Sterling strengthened against the dollar on Tuesday as risk appetite rebounded and a survey showing decent growth in Britain's construction industry gave sterling some respite from recent gloom about the progress of Brexit talks. The British currency rose as much as 0.4 percent versus the dollar to as high as $1.3207, away from 2018 lows hit last week of $1.3050. It later gave up some of those gains to trade at $1.3194 in the late US session. The Construction Purchasing Managers' Index (PMI) picked up to 53.1 in June from May's 52.5, better than forecast and the fastest rate of growth in seven months. It was the third month in a row that the sector grew after contracting in March. Sterling has struggled in recent weeks as worries about whether Britain can secure itself a deal with the European Union before it leaves the bloc next March weigh on the currency. On Monday it fell despite relatively robust manufacturing survey data as investors worried about a looming Brexit cabinet meeting later this week. British Prime Minister Theresa May has called on her Conservative Party to "stand together", but with the clock ticking before a March departure date and divisions rife within her cabinet over what to seek from the EU in negotiations, forging a unified approach is far from easy.
USD/CAD is supported at 1.3128 levels and is trading at 1.3139 levels. It has made session high at 1.3174 and lows at 1.3130 levels. The Canadian dollar strengthened against its U.S. counterpart on Tuesday as oil prices rose to 3-1/2-year highs and the greenback weakened across the board. The U.S. dollar fell against a basket of major currencies after the Chinese central bank moved to calm nervous foreign exchange markets following a fall in the renminbi below a key psychological level. Canada runs a current account deficit so its economy could be hurt if the flow of capital slows. The price of oil, one of Canada's major exports, rose after Libya declared a force majeure on some of its crude exports. U.S. crude prices were up 1.5 percent to $75.07 a barrel. The loss of Canadian supplies has helped lift the price of oil but could restrain domestic economic growth in the third quarter. Canada is also contending with slow-moving talks to revamp the North American Free Trade Agreement and a trade dispute with the United States. On Friday, the loonie notched a two-week high at C$1.3131 after a surprise expansion of the domestic economy in April and business optimism raised expectations for a Bank of Canada interest rate hike next week. The Canadian dollar was last trading 0.3 percent higher at C$1.3140 to the greenback, or 76.05 U.S. cents. The currency traded in a range of C$1.3133 to C$1.3207.
USD/JPY is supported around 110.17 levels and currently trading at 110.57 levels. It peaked to hit session high at 110.74 and made session lows at 110.49 levels. The Japanese yen strengthened against the dollar on Tuesday as greenback fell as investors awaited minutes of the U.S. Federal Reserve's June meeting and jobs data that should confirm whether policymakers will raise interest rates twice this year. U.S. financial markets were little moved by the data in quiet trading ahead of Wednesday's Independence Day holiday. On the data front, new orders for U.S.-made goods unexpectedly rose in May, pointing to a strengthening manufacturing sector, but business spending on equipment appeared to have slowed further in the second quarter. Factory goods orders increased 0.4 percent amid strong demand for machinery, the Commerce Department said on Tuesday. Data for April was revised up to show orders falling 0.4 percent instead of the previously reported 0.8 percent decrease. Economists polled had forecast that factory orders would be unchanged in May. Orders increased 8.7 percent on a year-on-year basis in May. In afternoon trading, the dollar was down 0.4 percent against a basket of at 94.604, after notching up three consecutive months of gains. Investors are awaiting the release of the Federal Reserve's June meeting minutes on Thursday and Friday's U.S. jobs data for validation of policymakers' forecasts for two more rate hikes this year.
Equities Recap
European shares gained on Tuesday after German Chancellor Angela Merkel's conservatives settled a row over migration and eased some anxieties of investors, though worries about trade wars remained.
UK's benchmark FTSE 100 closed up by 0.5 percent, the pan-European FTSEurofirst 300 ended the day up by 0.79 percent, Germany's Dax ended up by 0.9 percent, France’s CAC finished the day up by 0.8 percent.
Wall Street dipped on Tuesday, weighed down by Apple, Facebook and other technology stocks, in a trading session ending early ahead of the U.S. July 4 holiday.
Dow Jones closed down by 0.54 percent, S&P 500 ended down by 0.49 percent, Nasdaq finished the day down by 0.86 percent.
Treasuries Recap
U.S. Treasury yields declined on Tuesday, pinning the yield curve at its flattest level in nearly 11 years as U.S. stocks slipped in a shortened session, stoking a safe-haven bid for U.S. government debt.
The spread between two-year and 10-year yields contracted to 29.90 basis points after touching 29.59 basis points, which was the tightest since August 2007.The five-to-30-yield yield gap hit 22.60 basis points, the slimmest since July 2007.
The yield on benchmark 10-year Treasury notes was down 3 basis points at 2.833 percent, while the 30-year yield was 3 basis points lower at 2.959 percent.
Commodities Recap
Crude prices ended slightly higher on Tuesday after a volatile session in which the U.S. benchmark passed $75 a barrel for the first time in more than three years before turning negative and later recouping its losses.
U.S. light crude settled up 20 cents at $74.14 a barrel, rebounding from a session low of $72.73 a barrel. In early trade, the contract rose to $75.27, a 3-1/2-year high.
Brent crude was up 46 cents at $77.76 a barrel, after trading as low as $76.67 and as high as $78.85.
Gold prices recovered from a near seven-month low and platinum bounced from close to a 10-year low on Tuesday as the dollar eased.
Spot gold gained 0.9 percent to $1,252.96 an ounce at 1:42 p.m. EDT (1742 GMT). Earlier, bullion prices dropped to $1,237.32, their lowest since Dec. 12, 2017.
U.S. gold futures for August delivery settled up $11.80, or 1 percent, at $1,253.50 per ounce.
