Market Roundup
• Fed leaves rates unchanged, stays on course for September hike.
• Trump: attorney general should end Russia probe 'right now'.
• US Jul ISM Mfg PMI, 58.1, 59.5 forecast, 60.2 previous.
• US Jul ADP National Employment, 219k, 185k forecast, 177k previous, 181k revised.
• US Jun Construction Spending, -1.1%, 0.3% forecast, 0.4% previous, 1.3% revised.
• US w/e Mortgage Market Index, 353.1, 362.4 previous .
• US w/e Mortgage Refinance Index, 971.3, 988.6 previous.
• US w/e MBA 30-Yr Mortgage Rate, 4.84%, 4.77% previous.
• Massive U.S. defense policy bill passes without strict China measures.
• U.S. Treasury proposes rules on repatriating overseas corporate income.
• Trump officials to give update on China tariffs .
• CA Jul Markit Mfg PMI SA, 56.9, 57.1 previous.
• Deal with U.S. on key NAFTA rule closer, Mexico and Canada say.
Looking Ahead - Economic Data (GMT)
• 1 Aug 23:50 Japan w/e Foreign Bond Investment (JPY), -209.2 bln previous
• 1 Aug 23:50 Japan w/e Foreign Invest JP Stock (JPY), 173.5 bln previous
• 2 Aug 01:30 Australia Jun Trade Balance, G&S (A$), 900 mln forecast, 827 mln previous
• 2 Aug 01:30 Australia Jun Goods/Services Imports, 3.0% previous
• 2 Aug 01:30 Australia Jun Goods/Services Exports, 4.0% previous
Looking Ahead - Events, Other Releases (GMT)
• 2 Aug 01:30 BOJ's Masayoshi Amamiya speaks at meeting with business leaders - Kyoto
• 2 Aug 11:00 BoE announces rate decision, releases inflation report - London
Currency Summaries
EUR/USD is likely to find support at 1.1618 levels and currently trading at 1.1659 levels. The pair has made session high at 1.1691 and hit lows at 1.1655 levels. The euro declined against the dollar on Wednesday as fears of an escalation in the trade dispute between the United States and China boosted the dollar and a survey showing subdued euro zone manufacturing growth in July kept investors cautious. Worries about what an escalation in the months-long dispute would mean for the Chinese and then the global economy led investors to buy the dollar and sell currencies linked to China's economic fortunes.The U.S. administration plans to propose a 25 percent tariff on $200 billion in Chinese imports, up from an original 10 percent, to pressure Beijing into making trade concessions, a source familiar with the matter said. China has vowed to retaliate. Fears about what an escalation in the months-long dispute would mean for the Chinese and then the global economy led to buy into the dollar and sell currencies linked to China's economic fortunes. The euro slipped 0.25 percent to $1.1662, under pressure from the stronger dollar and a Purchasing Managers' Index survey that showed factory output was growing but had nudged up only slightly from June's 18-month low. The dollar index, which measures the greenback against a basket of six currencies, was up 0.14 percent at 94.629.
GBP/USD is supported in the range of 1.3080 levels and currently trading at 1.3123 levels. It reached session high at 1.3138 and dropped to session low at 1.3100 levels. Sterling edged lower against the dollar on Wednesday before a Bank of England policy meeting that is widely expected to see interest rates raised for only the second time since the global financial crisis. Bond markets have priced in a quarter-point increase to 0.75 percent. But any dovish comments from policymakers could cause sterling to drop, and that possibility checked appetite for the pound. On the data front, British factories lost momentum in July and manufacturers were their most downbeat in nearly two years, a survey showed on Wednesday, raising fresh questions about the need for an expected Bank of England interest rate hike on Thursday. The IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) slipped to its second-lowest level since late 2016 at 54.0, down from 54.3 in June and weaker than a median forecast of 54.2 in a poll of economists. The pound was slightly weaker at $1.3117, not far from last Tuesday's $1.3072. Risk appetite in markets was muted amid concerns that trade tensions between the United States and its trading partners were set to escalate after reports that Washington plans to propose higher tariffs on $200 billion in Chinese imports.
USD/CAD is supported at 1.2943 levels and is trading at 1.3003 levels. It has made session high at 1.3096 and lows at 1.2970 levels. The Canadian dollar strengthened to a nearly seven-week high against its U.S. counterpart on Wednesday as the U.S. Federal Reserve left interest rates on hold and officials signaled progress in talks to update the NAFTA trade pact. The United States and Mexico are getting close to a deal on the key issue of autos content rules at negotiations to renew the North American Free Trade Agreement, Mexican and Canadian officials said. The modest gain for the loonie came as data showed that the pace of growth in Canada's manufacturing sector eased in July but remained at a robust level. The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) dipped to a seasonally adjusted 56.9 last month from a survey-record high of 57.1 in June. The Fed kept interest rates unchanged but characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September. The price of oil, one of Canada's major exports, was pressured by a surprise increase in U.S. crude stockpiles. U.S. crude oil futures settled 1.6 percent lower at $67.66 a barrel. The Canadian dollar was last trading 0.1 percent higher at C$1.2996 to the greenback, or 76.95 U.S. cents. The currency touched its strongest since June 14 at C$1.2975.
AUD/USD is supported around 0.7357 levels and currently trading at 0.7401 levels. It hit session high at 0.7414 and made session lows at 0.7387 levels. The Australian dollar declined against the US dollar on Wednesday after three straight winning sessions on reports Washington was considering slapping higher import tariffs on Chinese goods. The Australian dollar, a liquid proxy for China plays, was last down 0.2 percent at $0.7414 from Tuesday's high of $0.7441.The Aussie fell to a 1-1/2 year trough of $0.7318 earlier this month and has since been confined to a $0.7318-$0.7464 band amid worries about the impact on global growth and its own economy from a full-blown trade war. The Trump administration plans to propose slapping a 25-percent tariff on $200 billion of imported Chinese goods after initially setting them at 10 percent, in a bid to pressure Beijing into making trade concessions, a source familiar with the plan said on Tuesday. They include food products, chemicals, steel and aluminum and consumer goods ranging from dog food, furniture and carpets to car tires, bicycles, baseball gloves and beauty products. While the tariffs would not be imposed until after a period of public comment, raising the proposed level to 25 percent could escalate the trade dispute between the world's two biggest economies. Investors fear an escalating trade war between Washington and Beijing could hit global growth, and prominent U.S. business groups have condemned Trump's aggressive tariffs.
Equities Recap
European shares retreated on Wednesday as a mixed batch of corporate earnings failed to offset concerns about the U.S.-China trade conflict and subdued euro zone manufacturing growth.
The UK's benchmark FTSE 100 closed down by 1.3 percent, FTSEurofirst 300 ended the day down by 0.46 percent, Germany's Dax ended down by 0.5 percent, and France’s CAC finished the down by 0.3 percent.
The S&P 500 and Dow slipped on Wednesday as gains in Apple shares were offset by a drop in energy and industrial companies, while the U.S. Federal Reserve remained on course for an expected interest rate hike in September.
Dow Jones closed down by 0.34 percent, S&P 500 ended down 0.11 percent, Nasdaq finished the day up by 0.46 percent.
Treasuries Recap
The benchmark 10-year U.S. Treasury note's yield reached its highest in 2-1/2 months on Wednesday, breaking above 3 percent after the government said it intended to boost borrowing in the bond market in the coming quarter to fund spending and debt obligations.
The 30-year bond yield was up as much as 6.6 basis points from late Tuesday to 3.148 percent. The two-year yield was up 1.7 basis points from Tuesday to a session high of 2.686 percent. The 10-year note yield was last at 3.003 percent, slightly below its session high.
Commodities Recap
Gold eased on Wednesday as the dollar strengthened, and stayed weaker after the U.S. Federal Reserve kept interest rates steady as expected.
Spot gold was down 0.3 percent at $1,219.60 an ounce by 2:48 p.m EDT (1848 GMT), close to a one-year low of $1,211.08 reached on July 19.
U.S. gold futures settled down $6, or 0.5 percent, at $1,227.60 per ounce, prior to the Fed statement.
Oil prices fell about 2 percent on Wednesday as a surprise increase in U.S. crude stockpiles fed concerns about global oversupply, while investors worried that trade tensions could hit energy demand.
Brent crude futures fell $1.82 to settle at $72.39 a barrel, a 2.5 percent loss.U.S. West Texas Intermediate (WTI) crude futures fell $1.10 to settle at $67.66 a barrel, a 1.6 percent loss.
