Market Roundup
• Fed set to hold rates steady, remain on track for more hikes.
• Atlanta Fed sees U.S. 3rd-qtr GDP growing at 4.7 pct.
• US Jun Consumption, Adjusted, 0.4%, 0.4% forecast, 0.2% previous, 0.5% revised.
• US Jul Consumer Confidence, 127.4, 126.0 forecast, 126.4 previous, 127.1 revised.
• US Jun Personal Income MM, 0.4%, 0.4% forecast, 0.4% previous.
• US Jun Core PCE Price Index YY, 1.9%, 2.0% forecast, 2.0% previous, 1.9% revised.
• US Q2 Employment Costs, 0.6%, 0.7% forecast, 0.8% previous.
• US Jul Chicago PMI, 65.5, 62.3 forecast, 64.1 previous.
• US w/e Redbook YY, 4.2%, 3.8% previous.
• Jury chosen in trial of former Trump campaign chief Manafort.
• China will strive to hit growth target despite trade tensions with U.S.
• Iran rejects Trump offer of talks as "humiliation", without value.
• CA May GDP MM, 0.5%, 0.4% forecast, 0.1% previous.
• CA Jun Producer Prices MM, 0.5%, 1.0% previous, 1.2% revised.
• BOJ seeks to make its ammunition last longer as options dwindle.
• Mexico economy dips in second quarter, peso weakens.
Looking Ahead - Economic Data (GMT)
• 31 Jul 22:30 Australia Jul AIG Mfg Index, 57.40 previous
• 31 Jul 22:45 New Zealand Q2 HLFS Unemployment Rate, 4.4% forecast, 4.4% previous
• 31 Jul 22:45 New Zealand Q2 HLFS Job Growth QQ, 0.4% forecast, 0.6% previous
• 31 Jul 22:45 New Zealand Q2 HLFS Participation Rate, 70.8% forecast, 70.8% previous
• 31 Jul 22:45 New Zealand Q2 Labour Cost Index-YY, 2.1% forecast, 1.9% previous.
• 31 Jul 22:45 New Zealand Q2 Labour Cost Index-MM, 0.6% forecast, 0.3% previous.
• 1 Aug 00:30 JAPAN Jul Nikkei Mfg PMI, 51.6 previous.
• 1 Aug 01:45 China Jul Caixin Mfg PMI Final, 50.8 forecast, 51.0 previous
Looking Ahead - Events, Other Releases (GMT)
• 1 Aug 18:00 Fed's FOMC announces decision on interest rate – Washington
Currency Summaries
EUR/USD is likely to find support at 1.1618 levels and currently trading at 1.1695 levels. The pair has made session high at 1.1727 and hit lows at 1.1687 levels. The euro declined against US dollar on Tuesday as dollar firmed on believes that U.S. Federal Reserve is set to reaffirm the outlook for further gradual rate rises at the end of its two-day monetary policy meeting on Wednesday. On the data front, U.S. consumer spending increased solidly in June as households spent more at restaurants and on accommodation, building a strong base for the economy heading into the third quarter, while inflation rose moderately. Other data showed employers boosting benefits for workers in the second quarter, but wage growth slowed down. With savings at lofty levels and lower taxes increasing take-home pay for some workers, spending is likely to remain strong this year. Accelerating home prices, which are boosting wealth for some households, should also underpin consumption. Strong economic growth and steadily rising inflation are likely to allow the Federal Reserve to continue gradually raising interest rates. The U.S. dollar index, which measures the greenback against a basket of six currencies, was up 0.19 percent at 94.504, as investors await the end of the Federal Open Market Committee meeting. The dollar index, which has risen 2.6 percent for the year, was on pace to finish July down 0.2 percent, its first monthly decline since March.
GBP/USD is supported in the range of 1.3069 levels and currently trading at 1.3127 levels. It reached session high at 1.3172 and dropped to session low at 1.3088 levels. Sterling dipped against the dollar on Tuesday as the dollar rebounded and investors prepared for a Bank of England policy meeting this week at which markets are now pricing in a near-90 percent chance of a 25 basis points rate rise. Sterling has recuperated somewhat in recent sessions, moving away from the 10-month low it touched earlier in July on growing worries that Britain was headed for a cliff-edge departure from the European Union. Recent economic data in Britain has pointed to an economy that is recovering from a slowdown in the first-quarter but is still struggling, with wage growth weaker than expected given low levels of unemployment and limited domestic inflationary pressures. The BoE appears comfortable with the market pricing in a rate rise on Thursday and investors see that as an indication the second rate hike since the financial crisis is around the corner. But investors will be looking for comments from the central bank's Monetary Policy Committee (MPC) as to whether this is the start of a series of tightening moves or, as most reckon, a one-off hike before Britain leaves the EU next March
USD/CAD is supported at 1.2943 levels and is trading at 1.3006 levels. It has made session high at 1.3054 and lows at 1.2990 levels. The Canadian dollar strengthened against its U.S. counterpart on Tuesday as trade uncertainty and upbeat domestic economic data boosted Canadian dollar across the board. Canada's economy grew by 0.5 percent in May, the biggest rise in a year, as industries recovered from a combination of bad weather and maintenance shutdowns in April, Statistics Canada said on Tuesday. The increase - greater than the 0.4 percent growth forecast by analysts was the largest since the 0.5 percent advance seen in May 2017. May marked the eighth time in the last nine months that the economy has expanded. Chances of a Bank of Canada interest rate hike by October rose to 68 percent from 62 percent before the data, the overnight index swaps market indicated. Canada has been negotiating with the United States and Mexico to revamp the North American Free Trade Agreement. The United States and Mexico plan to hold ministerial-level NAFTA trade talks on Thursday in Washington, the second such meeting within a week. The Canadian dollar was last trading 0.1 percent lower at C$1.2999 to the greenback.
USD/JPY is supported around 110.55 levels and currently trading at 111.80 levels. It peaked to hit session high at 111.95 and made session lows at 111.38 levels. The dollar strengthened against the Japanese yen on Tuesday as greenback firmed against a basket of peers ahead of the conclusion of the U.S. Federal Reserve's two-day monetary policy meeting on Wednesday. The Bank of Japan pledged to keep its massive stimulus in place but made tweaks to reduce adverse effects of its policies on markets and commercial banks, reflecting the central bank's view that its inflation target remains stubbornly out of reach. At a two-day rate review that ended on Tuesday, the Bank of Japan kept its interest rate targets steady but for the first time adopted a forward guidance on future policy, saying it will keep rates "very low" for an extended period of time. The dollar firmed 0.75 percent against the yen, putting it on pace for its best day in nearly three weeks, after the BOJ said it would keep rates "very low" in comments that brought some relief to a market that had braced for bigger changes. Investors await meetings of the U.S. Federal Reserve on Tuesday and Wednesday and the Bank of England on Thursday. On the data front, U.S. consumer spending increased solidly in June, while inflation rose moderately. Other data showed employers boosting benefits for workers in the second quarter, but wage growth slowed
Equities Recap
European shares climbed on Tuesday to a new six-week high on signs of a détente in the U.S.-China trade dispute, while strong earnings updates drove gains for stocks including Germany's Lufthansa and France's Vivendi.
UK's benchmark FTSE 100 closed up 0.8 percent, the pan-European FTSEurofirst 300 ended the day up by 0.38 percent, Germany's Dax ended up by 0.2 percent, France’s CAC finished the day up by 0.5 percent.
U.S. stocks bounced back on Tuesday as industrial and technology stocks pulled the market higher on news of a possible easing of tariff tensions between the United States and China.
Dow Jones closed up by 0.42 percent, S&P 500 ended up by 0.49 percent, Nasdaq finished the day up by 0.55 percent.
Treasuries Recap
U.S. Treasury yields eased on Tuesday after the Bank of Japan said it would maintain its ultra-loose monetary policy, though they pared losses thanks to a modest increase in U.S. inflation.
The 10-year U.S. government note last yielded 2.96 percent, down a basis point from Monday. The 30-year yield was down 2 basis points, at 3.08 percent. The drop in yields on longer-dated Treasuries drove the yield curve modestly flatter, with the spread between two- and 10-year bonds at 28.9 basis points, down from 30.8 on Monday.
Commodities Recap
Gold prices rose on Tuesday, reversing early losses as the Chinese yuan strengthened against the dollar after a report said the United States and China were trying to restart negotiations to defuse a trade war.
Spot gold rose 0.3 percent to $1,224.48 per ounce by 1:43 p.m. EDT (1743 GMT), rebounding after touching its lowest since July 19. The precious metal is heading for a 2 percent monthly decline.
U.S. gold futures for August delivery settled up $2.40, or 0.2 percent, at $1,223.70 per ounce.
Oil prices fell on Tuesday, closing out the largest monthly decline in two years on supply worries after OPEC output reached a 2018 high in July, overshadowing reports that the United States and China might reopen trade talks that could boost demand.
October Brent crude futures fell $1.34 to settle at $74.21 a barrel. The September contract, which expires later on Tuesday, settled at $74.25. U.S. crude futures fell $1.37, or nearly 2 percent, to settle at $68.76.
