Market Roundup
• US consumer spending exits Q2 with strong momentum, +0.4% in Jun; Inflation-adjusted spending +0.3%.
• US June personal income +0.2%, wages/salaries +0.3% vs 0.2% in May.
• US core PCE price Index y/y unchanged at 1.6%, m/m as forecast at 0.1%.
• ISM NY index 721.1 in July vs 715.8 in June.
• USD slides to 6-wk low as US data clouds rate hike outlook, AUD up on day despite RBA interest rate cut.
• Yen hits 3-wk high after Cabinet approves stimulus, GBP hits highest since mid-July after cons PMI beat.
• Fed's Kaplan: urges patience in raising rates, points to global risks.
• Fed’s Kaplan: slowing growth, high debt to GDP levels seen among the risks, jarring traumas may make China adjustment more challenging.
• Fonterra's GDT Price index +6.6%, w/e avg price NZD2,436 per tonne, Volume sold increased & WMP +9.9%.
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand Labour Cost Index - QQ Q2 forecast 0.5%, 0.40%-previous
• 22:45 New Zealand Labour Cost Index - YY Q2 forecast 1.8%, 1.80%- previous
• 23:30 Australia AIG Services Index Jul 51.3-previous
• 01:45 China Caixin Services PMI Jul 52.7-previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1178 levels and currently trading at 1.1222 levels. The pair has made session high at 1.1231 and hit lows at 1.1218 levels. The dollar eased against euro on Tuesday as the pair was pressured by expectations that Federal Reserve would delay raising interest rates after recent soft U.S. economic data. The U.S. currency also slid to a three-week trough against the yen, as the Japanese government approved a largely expected set of stimulus measures. The dollar also fell to its lowest in six weeks against the euro. The greenback extended losses after U.S. data showed little inflation. A key inflation measure - the core personal consumption expenditure index - grew by a modest 0.1 percent in June, which kept the annual inflation rate unchanged at 0.9 percent. In late trading, the dollar index fell 0.7 percent to 95.048, after earlier sliding to 95.0031, the lowest level since June 24. The euro, meanwhile, rose to a six-week high against the dollar and was last up 0.5 percent at $1.1227.
GBP/USD is supported in the range of 1.3268 currently trading at 1.3342 levels. It reached session high at 1.3365 and hit low at 1.3281 levels. The pound rose sharply higher against US dollar in the New York session by punching higher to hit high at 1.3365 as the greenback fell broadly on the view that weak U.S. data would delay an interest rate hike from the Federal Reserve. The greenback had been on its best run of weekly gains for 1-1/2 years until last week, when first a meeting of the Fed's rate-setting FOMC committee did not provide any near-term rate hike signal and then a much-weaker-than-expected set of U.S. growth data sent it tumbling. On the data front, Britain's construction industry suffered its sharpest downturn in seven years last month, according to another business survey on Tuesday which suggests the economy is at risk of recession after June's Brexit vote. The Markit/CIPS UK Construction Purchasing Managers' Index (PMI) inched down to 45.9 in July from 46.0 in June the lowest reading since June 2009.
USD/CAD is supported at 1.3000 levels and is trading at 1.3099 levels. It has made session high at 1.3114 and lows at 1.3000 levels. The Canadian dollar initially rose in the US session against its U.S. counterpart but gave up gains as lower oil prices weighed the loonie. U.S. crude oil declined sharply reaching below $40 a barrel for the first time since April as worries of both a crude and refined fuel glut and a slide in U.S. equities offset an early boost from a weak dollar. Canadian government bond prices were much lower across the maturity curve, with the two-year price down 6.5 Canadian cents to yield 0.573 percent and the benchmark 10-year falling 76 Canadian cents to yield 1.108 percent. On the data front,U.S. consumer spending rose more than expected in June as households bought goods and services, suggesting strength that appeared to be sustained early in the third quarter with auto sales surging to an eight-month high in July. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4 percent in June after a similar gain in May.
AUD/USD is supported around 0.7567 levels and currently trading at 0.7607 levels. It hit session high at 0.7631 and made session lows at 0.7596 levels. The Australian dollar proved remarkably resilient on Tuesday as investors brushed aside a cut in rates to record lows and instead focused on the still fat yields offered by government bonds. The Aussie initially fell to $0.7486 when the Reserve Bank of Australia (RBA) cut its cash rate a quarter point to 1.5 percent. But recovered in the US session to trade at A$0.7547. The policy easing was the second this year as the central bank tries to boost inflation and restrain a rising currency. Attention will now shift to retail sales numbers due on Thursday and the RBA's latest monetary policy statement on Friday for guidance on the possibility of further easing.
Equities Recap
European shares slid to a three-week low on Tuesday as some major companies reported poor results, with Commerzbank dropping to a record to lead banks lower after warning its earnings would fall this year.
UK's benchmark FTSE 100 closed down 0.7 percent, the pan-European FTSEurofirst 300 ended the day down by 1.29 percent, Germany's DAX ended down by 1.8 percent, France’s CAC finished the day down by 1.8 percent.
Wall Street stocks fell on Tuesday, with each of the major indexes notching their worst day in about a month as economic data and weaker-than-expected auto sales spurred concerns about growth.
Dow Jones closed down by 0.49 percent, S&P 500 ended down by 0.64 percent, Nasdaq finished the day down by 0.90 percent.
Treasuries Recap
U.S. Treasury yields rose on Tuesday after Japan unveiled fiscal stimulus measures, dampening demand for U.S. government debt and sending long-dated U.S. yields to their highest levels in more than a week.
U.S. 30-year yields rose the most among U.S. Treasuries and hit 2.332 percent, their highest since July 21, before pulling back. U.S. 30-year yields were last at 2.300 percent, compared to 2.237 percent late Monday.
Benchmark 10-year yields hit a six-day high of 1.573 percent, but were last at 1.544 percent.
Commodities Recap
U.S. crude oil fell on Tuesday to end below $40 a barrel for the first time since April as persistent worries of both a crude and refined fuel glut and a slide in U.S. equities offset an early boost from a weak dollar.
U.S. West Texas Intermediate (WTI) crude settled down 55 cents, or 1.4 percent, at $39.51 a barrel, after earlier rallying to $40.91. On Monday, it slid to an intraday session low below $40 for the first time since April.
Brent crude fell 34 cents, or 0.8 percent, to settle at $41.80, after touching a session high at $43.18.
Gold rose to a four-week high on Tuesday as European and U.S. shares fell and the dollar hit its lowest in over a month after last week's soft U.S. growth data dented expectations for a near-term interest rate hike.
Spot gold was up 0.9 percent at $1,365.09 an ounce by 2:44 p.m. EDT (1844 GMT), after rising to $1,367.33, the highest since July 11.
U.S. gold futures for December delivery settled up 1 percent at $1,372.60.
