Market Roundup
• Consumer spending rises 0.3% in July boosted by auto sales.
• US July personal income rises 0.4% vs forecast 0.4%; Jun 0.3%.
• US Core PCE price Index y/y 1.6% vs 1.6% previous.
• US PCE price Index y/y 0.8% vs 0.8% previous.
• US Dallas Fed manufacturing business Index -6.20 vs -1.30 previous.
• Atlanta Fed’s GDPNow model forecast Q3 GDP is 3.5% on Aug 29, up from 3.4% on Aug 25.
• White House says it sees a path to approval of Pacific trade deal (TPP).
• German trade group (BGA) slashes exports forecast as Brexit hit looms; cuts 2016 growth view to 1.8-2.0% from 4.5%.
• US assets gain, European shares dip on rising Fed rate hike bets; USD rallies, weighs on oil & gold.
• Oil down nearly 1.2% on surging OPEC output, strong USD; Iraq still set on expanding output, market share.
• Mexico hedges ‘17 oil export income at USD 42 per barrel, Mexico Finance Ministry bought puts at avg USD 38/bbl.
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand Building Consents Jul 16.3%-previous
• 23:30 Japan All House Hold Spending YY Jul forecast -0.9%, -2.2%- previous
• 23:30 Japan All House Hold Spending MM Jul forecast 1.1%, -1.1%- previous
• 23:30 Japan Jobs/Applicants Ratio Jul forecast 1.38%, 1.37- previous
• 23:30 Japan Unemployment Rate Jul forecast 3.1%, 3.1%- previous
• 23:50 Japan Retail Sales YY Jul forecast -0.9%, -1.4%- previous
• 01:30 Australia Building Approvals* Jul forecast 0%, -2.9%- previous
• 01:30 Australia Private House Approvals Jul -2.3%- previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1130 levels and currently trading at 1.1187 levels. The pair has made session high at 1.1193 and hit lows at 1.1157 levels. Euro traded flat against the greenback on Monday as the pair rebounded to erase earlier losses as investors looked ahead to jobs data this week that Federal Reserve Vice Chair Stanley Fischer has said will be important to whether the U.S. central bank raises interest rates soon. Fed Chair Janet Yellen said on Friday the case for a rate increase was strengthening, but provided little detail on when the Fed would next move. A report from the U.S. Commerce Department showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose for a fourth month in July reinforcing bets of a rate rise soon. Against a basket of major currencies, the dollar hit its highest in two weeks at 95.834, before falling back to 95.607. The euro was little changed at $1.1189 after earlier falling to $1.1159.
GBP/USD is supported in the range of 1.3018 currently trading at 1.3107 levels. It reached session high at 1.3120 and hit low at 1.3058 levels. Sterling initially declined against the dollar on Monday as expectations that U.S. interest rates would be raised soon added selling pressure on the currency pair, but the pair recovered most of the ground as investors continued to digest comments from U.S. Federal Reserve officials on Friday. Fed Chair Janet Yellen said the case for a rate hike before the end of the year was strengthening, Vice Chair Stanley Fischer seemed to indicate not only the possibility of a tightening move in September but a second one in December. Monday's market remained light with fewer volumes as many UK investors were out for a bank holiday and many in the U.S. out ahead of next week's Labor Day holiday. Others meanwhile remained caution ahead of Friday's U.S. non-farm payrolls report. Sterling hit low at $1.3057 after the consumer spending data was released. But recovered to trade at 1.3104 in the late US session.
USD/CAD is supported at 1.2970 levels and is trading at 1.3019 levels. It has made session high at 1.3047 and lows at 1.3000 levels. The Canadian dollar declined against its U.S. counterpart on Monday as positive U.S. economic data and increased expectations of a U.S. interest rate hike as soon as September weighted on the loonie. Speaking in Jackson Hole, Wyoming, on Friday, Fed Chair Janet Yellen said the case for raising U.S. interest rates has strengthened in recent months. Fed Vice Chair Stanley Fischer later reinforced that message. Oil prices fell, pressured by high output from Middle East OPEC members and as a stronger U.S. dollar weighed on commodities. U.S. crude oil futures were down 74 cents at $47.64 a barrel. On the data front, Canada's gross domestic product data for the second quarter is due for release on Wednesday. The economy is forecast to have contracted at a 1.5 percent annualized pace as growth was shaken by wildfires in northern Alberta that disrupted oil production.
AUD/USD is supported around 0.7500 levels and currently trading at 0.7573 levels. It hit session high at 0.7581 and made session lows at 0.7523 levels. The Australian dollar initially fell to its lowest level in nearly a month after speculation on U.S. rate hike following Federal Reserve Chair Janet Yellen's upbeat assessment of the economy. However, the Aussie recovered most of the losses later in the US session and was slightly trading higher at $0.7575. Earlier, it touched $0.7525, its lowest level since Aug. 2. The Australian dollar has been resilient in the face of domestic interest rate cuts this year due to carry trades, where investors borrow at low rates in yen, pounds or euros to buy higher-yielding Australian dollar. Meanwhile, now the focus will shift to a speech by assistant Reserve Bank governor Guy Debelle on Wednesday. Capital expenditure and retail sales numbers both market sensitive releases are due on Thursday.
Equities Recap
European shares fell on Monday as top Federal Reserve official’s bolstered expectations for a U.S. rate hike this year, while Alstom bucked the weaker trend after a contract win.
The pan-European FTSEurofirst 300 ended the day down by 0.19 percent, Germany's Dax ended down by 0.4 percent, France’s CAC finished the day down by 0.3 percent.
Financial and commodity-sector stocks led the S&P 500 higher in a low-volume session on Monday after consumer spending rose for a fourth straight month, pointing to a pick-up in U.S. economic growth.
Dow Jones closed up by 0.59 percent, S&P 500 ended down by 0.53 percent, Nasdaq finished the day up by 0.23 percent.
Treasuries Recap
U.S. Treasury prices rose on Monday as foreign investors swooped in and bought Treasuries following a market selloff Friday that took yields on benchmark 10-year notes to their highest since Britain's surprise vote to exit the European Union in late June.
Benchmark 10-year U.S. Treasury prices rose 20/32 in price to yield 1.566 percent. The 30-year Treasury bond rose 1-23/32 to yield 2.216 percent.
Commodities Recap
Gold rebounded from a near five-week low as the dollar dropped on Monday, shrugging off earlier pressure by top Federal Reserve officials' comments fuelling speculation that U.S. interest rates would rise sooner rather than later.
Spot gold touched its lowest since July 26 at $1,314.70, and was up 0.3 percent at $1,324.41 an ounce by 2:49 p.m. EDT (1849 GMT), after falling for the past six sessions straight. U.S. gold futures for December delivery settled up 0.09 percent at $1,327.10.
Oil prices settled down more than 1 percent on Monday, snapping two consecutive days of gains, on caution over galloping Middle East crude output and a firmer dollar boosted by speculation of a U.S. rate hike by year-end.
Brent crude settled down 66 cents, or 1.3 percent, at $49.26 a barrel. U.S. West Texas Intermediate (WTI) crude also finished down 66 cents, or 1.4 percent, at $46.98.
