Market Roundup
• China says U.S. 'opening fire' on world with tariffs, vows to respond.
• Fed on lookout for recession but still sees strong economy –minutes.
• Merkel says would back cutting EU tariffs on U.S. car imports.
• EU states back measures to limit steel imports after U.S. tariffs.
• Iran to Trump: oil will cost $100 per barrel, and it is your fault.
• US Initial Jobless Claims w/e, 231k, 225k forecast, 227k previous.
• US Jobless Claims 4-Wk Avg w/e, 224.50k, 222.00k previous.
• US Continued Jobless Claims w/e, 1.739 mln, 1.720 mln forecast, 1.705 mln previous.
• US Jun Challenger Layoffs, 37.202k, 31.517k previous.
• US Jun ADP National Employment, 177k, 190k forecast, 178k previous.
• US Jun ISM N-Mfg PMI, 59.1, 58.3 forecast, 58.6 previous.
• US Jun ISM N-Mfg Bus Act, 63.9, 60.9 forecast, 61.3 previous.
• US Jun ISM N-Mfg Employment Index, 53.6, 54.1 previous.
• US Jun ISM N-Mfg New Orders Index, 63.2, 60.5 previous.
• US Jun ISM N-Mfg Price Paid Index, 60.7, 64.3.
• US Jun Markit Comp Final PMI, 56.2, 56.0 previous.
• US Jun Markit Svcs PMI Final, 56.5, 56.5 previous.
• Bank of England's Carney boosts expectations for August rate hike.
Looking Ahead - Economic Data (GMT)
• 5 Jul 22:30 Australia Jun AIG Construction Index, 54.0 previous
• 5 Jul 23:30 Japan May All Household Spending YY, -1.5% forecast, -1.3% previous
• 5 Jul 23:30 Japan May All Household Spending MM, -0.1% forecast, -1.6% previous
• 5 Jul 23:50 Japan Jun Foreign Reserves USD, 1,254.50 bln previous
• 6 Jul 00:00 Japan May Overtime Pay, 1.9% previous
• 6 Jul 05:00 Japan May Coincident Index, 1.7 previous
• 6 Jul 05:00 Japan May Leading Indicator, 1.1 previous
Looking Ahead - Events, Other Releases (GMT)
• 10:00 Keynote lecture by ECB's Daniele Nouy at Session "Banking and Capital Markets Union – Financial Regulation and SME Financing" at conference "Economic and Monetary Union" organised by Oesterreichische Nationalbank and Wirtschaftskammer Österreicht in Linz, Austria
Currency Summaries
EUR/USD is likely to find support at 1.1629 levels and currently trading at 1.1687 levels. The pair has made session high at 1.1720 and hit lows at 1.1670 levels. The euro strengthened against the U.S. dollar on Thursday as strong German industrial orders boosted the euro while U.S. data showed private sector jobs rose less than expected in June, weighing on the greenback along with nagging trade concerns. The dollar briefly extended losses after minutes of the latest Federal Reserve meeting showed policy makers remained upbeat on the U.S. economic outlook but worried about a trade war. The minutes, which described a meeting in which the Fed raised interest rates for the second time this year, also suggested policymakers might soon signal that the Fed's rate hiking cycle was advanced enough that policy was no longer boosting nor constraining the economy. In afternoon trading, the dollar index was down 0.2 percent at 94.467. Earlier, it had dropped to a three-week low. The euro climbed after German industrial orders had a higher-than-expected jump in May following four monthly drops. The euro also benefited as Washington has softened its trade rhetoric toward European Union carmakers. The euro rallied to a three-weak peak and last changed hands at $1.1687, up 0.4 percent. U.S. data showed private payrolls increased last month, but were lower than forecast, while jobless claims rose unexpectedly last week. This data weighed on the dollar, but the currency trimmed losses after a higher-than-expected U.S. services index.
GBP/USD is supported in the range of 1.3169 levels and currently trading at 1.3217levels. It reached session high at 1.3273 and dropped to session low at 1.3203 levels. Britain's pound rose to seven-day high against the dollar on Thursday as traders strengthened bets on an interest rate hike this summer but concerns about a crucial Brexit meeting on Friday kept the currency's gains in check. After a feeble start to 2018, the British economy is showing early signs of a recovery with surveys for the manufacturing, construction and services sectors beating expectations and heightening the prospect of a rate hike by the Bank of England in August. That has brought some respite for sterling after weeks of losses caused by a strong dollar and worries about whether Britain can secure a deal with the European Union before it leaves the bloc next March. In the late US session the pound was up 0.1 percent at $1.3216, away from a 2018 low last week of $1.3050. The government is preparing for a crunch Brexit meeting on Friday and Prime Minister Theresa May has called for unity but her government factions appear to remain intransigent. The pound has traded within tight ranges and volatility has fallen, possibly because markets have already price in the worst-case scenario a "hard Brexit".But it may also indicate investors have stopped second-guessing outcomes, preferring to sit on the sidelines until the prospect of a clean or disorderly Brexit becomes clear.
USD/CAD is supported at 1.3100 levels and is trading at 1.3136 levels. It has made session high at 1.3151 and lows at 1.3113 levels. The Canadian dollar was little changed against its U.S. counterpart on Thursday as the greenback fell and investors' hopes rose that European carmakers could be spared from U.S. tariffs. On Wednesday, the loonie touched its strongest since June 15 at C$1.3113 as investors braced for a potential Bank of Canada interest rate hike next week. Stocks rose on signs that Washington may ease back on plans for tariffs on European cars, with automaker shares higher across the board, offsetting further signs of trade tension with China. Canada runs a current account deficit so its economy could be hurt if the flow of trade or capital slows. The country has its own trade dispute with the United States and is contending with slow-moving talks to revamp the North American Free Trade Agreement, while U.S. President Donald Trump has threatened to impose tariffs on Canada's autos. The U.S. dollar fell against a basket of major currencies as strong German industrial orders and hopes over a softening in U.S. trade rhetoric. The price of oil, one of Canada's major exports declined a day after U.S. President Donald Trump sent a tweet demanding that OPEC reduce prices for crude.
AUD/USD is supported around 0.7334 levels and currently trading at 0.7384 levels. It hit session high at 0.7407 and made session lows at 0.7372 levels. The Australian dollar edged slightly lower against its U.S. counterpart on Thursday as concerns of a global trade war hurt demand for Australian dollar. Markets counted down to the threatened launch of U.S tariffs on China, and the risks that might hold to trade and growth worldwide. The Aussie dollar was looking shaky at $0.7384, after failing to sustain a bounce to $0.7424 overnight. The pace of the pullback suggested speculators were keen to test the recent 18-month trough around $0.7311. Investors are on tenterhooks ahead of the July 6 deadline when the U.S. administration is due to slap tariffs on $34 billion worth of Chinese goods. China is Australia's single biggest export market and the world's largest buyer of commodities, making the Australian economy particularly sensitive to developments there. Reserve Bank of Australia (RBA) Governor Philip Lowe recently singled out President Donald Trump's protectionism as the single greatest threat to the global outlook. Domestically, policymakers are also concerned about weakness in home prices and the impact it might have on household wealth, the RBA's head of economics said on Thursday. Alex Heath noted recent economic data had been positive and the bank was more confident about the outlook for investment outside the mining sector. But she noted housing construction was no longer adding to growth and the downturn in house price bore close watching.
Equities Recap
European shares gained a boost on Thursday as hopes of a softening in U.S. trade rhetoric lifted the car sector, though trading remained cautious ahead of a U.S. deadline to impose tariffs on Chinese goods.
UK's benchmark FTSE 100 closed up 0.4 percent, the pan-European FTSEurofirst 300 ended the day up by 0.45 percent, Germany's Dax ended up by 1.2 percent, France’s CAC finished the day up by 0.9 percent.
U.S. stocks slightly pared gains on Thursday after the release of minutes from the Federal Open Market Committee's June meeting, though they remained in positive territory.
Dow Jones closed up by 0.76 percent, S&P 500 ended up by 0.86 percent, Nasdaq finished the day up by 1.11 percent.
Treasuries Recap
U.S. shorter-dated Treasury yields increased slightly on Thursday following the Federal Reserve's release of the minutes from its latest policy meeting, where it hinted at the probability of raising short-term interest rates twice more in 2018.
The spread between five-year and 30-year Treasury yields hit 20.80 basis points, the tightest since July 2007, while the gap between two-year and 10-year yields touched 27.30 basis points, the narrowest since August 2007.
The yield on benchmark 10-year Treasury notes was 2.838 percent, flat on the day.
Commodities Recap
Gold was little changed on Thursday, as the U.S. dollar stayed weak for the day and minutes of the Federal Reserve's June policy meeting were within market expectations for the pace of further interest rate hikes this year.
Spot gold was flat at $1,255.90 per ounce by 2:27 p.m. EDT (1827 GMT).U.S. gold futures for August delivery settled up $5.30, or 0.4 percent, at $1,258.80 per ounce.
Oil fell on Thursday after U.S. government data showed an unexpected build in crude oil stockpiles.
U.S. crude futures fell $1.20 to settle at $72.94 a barrel, retreating from Tuesday's 3-1/2-year high of over $75.
Brent crude futures lost 85 cents to settle at $77.39 a barrel.
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