Market Roundup
• Trump's trade 'extortion' won't work, China state media says.
• Renewed U.S. sanctions target Iran's economy, Tehran cool on talks.
• Star U.S. witness Gates to begin testimony Monday at ex-Trump aide's trial.
• ECB focused on longer-dated papers in QE last month.
• Saudi Arabia freezes new trade with Canada for urging activists' release.
• Debt costs seen rising as Italy casts doubt on fiscal rules.
• Support for UK PM May's handling of Brexit falls to record low: ORB poll.
Looking Ahead - Economic Data (GMT)
• 6 Aug 23:30 Japan Jun All Household Spending y/y, -1.6% forecast, -3.9% previous
• 6 Aug 23:30 Japan Jun All Household Spending m/m, 1.7% forecast, -0.2% previous
• 7 Aug 04:30 Australia Aug RBA Cash Rate, 1.5% forecast, 1.5% previous
Looking Ahead - Events, Other Releases (GMT)
• No major events are scheduled.
Currency Summaries
EUR/USD is likely to find support at 1.1500 levels and currently trading at 1.1553 levels. The pair has made session high at 1.1570 and hit lows at 1.1529 levels. The euro dipped against dollar on Monday as investors bet that trade war rhetoric and a strong U.S. economy would continue to boost the greenback. China proposed retaliatory tariffs on $60 billion worth of U.S. goods ranging from liquefied natural gas (LNG) to some aircraft on Friday, as a senior Chinese diplomat cast doubt on prospects of talks with Washington to solve their bitter trade conflict. Against a broad basket of currencies, the dollar was last up 0.24 percent to 95.369 and is within striking distance of more-than-one-year peak of 95.652 reached on July 19.The dollar's gains have been more pronounced against emerging-market currencies as investors bet that an escalation in trade war concerns would hit these export-oriented economies harder. The greenback was also boosted on Monday by disappointing German data and concerns about the U.K.’s plan to leave the Eurozone. The euro fell to a five-week low of $1.1527 as German industrial orders fell more than expected in June, posting their steepest monthly drop in nearly a year and a half. The single currency was last down 0.1 percent at $1.1555.
GBP/USD is supported in the range of 1.2919 levels and currently trading at 1.2941 levels. It reached session high at 1.2952 and dropped to session low at 1.2919 levels. Britain's pound declined against the dollar on Monday as concerns about Britain's plan to leave the euro zone sent the pound lower against the greenback, while U.S.-China trade tensions helped boost the U.S. currency. Comments by officials about a no-deal Brexit stoked fears Britain would crash out of the European Union without securing a trade agreement. With less than eight months until Britain quits the EU, the government has yet to agree a divorce deal with Brussels. The saga over Brexit has come to dictate the pound's fortunes as fears mount about the impact it would have on Britain's trade. Investors are growing edgy about the currency's outlook despite signs the economy is improving and the Bank of England raising of interest rates last week for only the second time in over a decade. British trade minister Liam Fox, a prominent Brexit supporter in Prime Minister Theresa May's cabinet, said over the weekend the odds of Britain leaving the EU without agreeing on a deal stood at 60-40. Sterling fell to $1.2920, its lowest since July 19, before settling down half a percent on the day. It slumped 0.4 percent against the euro to 89.33 pence and was the biggest loser among major currencies against a broadly strong greenback.
USD/CAD is supported at 1.2965 levels and is trading at 1.3004 levels. It has made session high at 1.3040 and lows at 1.2992 levels. The Canadian dollar strengthened against its U.S. counterpart on Monday as renewed concerns about the risk of a global trade war and higher oil prices supported Canadian dollar. China proposed retaliatory tariffs on $60 billion worth of U.S. goods ranging from liquefied natural gas (LNG) to some aircraft on Friday, as a senior Chinese diplomat cast doubt on prospects of talks with Washington to solve their bitter trade conflict. The Trump administration tightened pressure for trade concessions from Beijing this week by proposing a higher 25 percent tariff on $200 billion worth of Chinese imports. China vowed to retaliate while also urging Washington to act rationally and return to talks to resolve the dispute. The United States and China implemented tariffs on $34 billion worth of each other’s' goods in July. Washington is expected to soon implement tariffs on an additional $16 billion of Chinese goods, which China has already announced it will match immediately. The Canadian dollar was trading at C$1.3006 to the greenback, up 0.3 percent. The currency traded in a range of C$1.2897 to C$ C$1.3039.
USD/JPY is supported around 110.17 levels and currently trading at 111.06 levels. It peaked to hit session high at 111.20 and made session lows at 110.67 levels. The dollar was little changed against the Japanese yen on Monday as tariff dispute between the United States and China kept investor cautious. The prolonged trade dispute between Washington and Beijing has rattled financial markets across the globe. Chinese state media attacked President Donald Trump's trade policies on Monday, calling the U.S. plan ineffective "extortion," in a bid to reassure investors as growth concerns battered China's financial markets. The media campaign comes days after China proposed tariffs on $60 billion worth of U.S. imports in retaliation to the Trump administration's plans to impose 25-percent tariffs on $200 billion of Chinese imports. Investors have largely been buying the dollar as a safe haven asset rather than Japanese yen as the U.S.-China trade dispute escalates.The dollar was last up 0.24 percent to 95.367 against a broad basket of currencies. It is within striking distance of a more-than-one-year peak of 95.652 reached on July 19, which is also seen as having technical resistance. The main U.S. economic focus this week will be Friday’s consumer price inflation report for July, which is expected to show a 0.2 percent increase in core inflation in the month.
Equities Recap
European shares dipped on Monday in choppy trading as HSBC, Europe's biggest bank, disappointed investors, while doubts over a planned $87 billion tie-up with Praxair sank shares in German industrial gases group Linde.
The UK's benchmark FTSE 100 closed flat, FTSEurofirst 300 ended the day down by 0.20 percent, Germany's Dax ended down by 0.3 percent, and France’s CAC finished the down by 0.1 percent.
The S&P 500 rose on Monday as results from Berkshire Hathaway boosted optimism about a strong earnings season, and Facebook lifted the tech-heavy Nasdaq index after a report it was planning new services.
Dow Jones closed up by 0.15 percent, S&P 500 ended up 0.35 percent, Nasdaq finished the day up by 0.60 percent.
Treasuries Recap
U.S. Treasury yields dipped on Monday, with the 10-year yield hitting a two-week low on safe-haven demand stemming from the trade conflict between United States and China, the world's two largest economies.
The U.S. Treasury Department will sell $34 billion in three-year notes on Tuesday; $26 billion in 10-year debt on Wednesday and $18 billion in 30-year bonds on Thursday.
Commodities Recap
Gold prices fell on Monday under pressure as a firmer dollar and expectations for further interest rate hikes by the U.S. Federal Reserve offset U.S. 'snapback' sanctions targeting the purchase of precious metals.
Spot gold was down 0.32 percent at $1,209.18 an ounce by 12:44 p.m. CDT (1744 GMT).U.S. gold futures for December delivery settled down $5.50, or 0.5 percent, at $1,217.70 per ounce.
Oil futures gained on Monday after OPEC sources said Saudi crude production unexpectedly fell in July, raising concerns about global oil supplies as the United States prepares to reinstate sanctions against major exporter Iran.
Brent crude futures rose 54 cents to settle at $73.75 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 52 cents to settle at $69.01 a barrel.
