Market Roundup
- Trump to propose 25-percent tariff on $200 bln of Chinese imports -source
- Asian factories slow as China-U.S. trade conflict intensifies
- Apple's pricey iPhone X, subscriptions deliver earnings beat
- Facebook says it identifies campaign to meddle in 2018 U.S. elections
- China Jul Caixin PMI Final, 50.8, 50.8 f'cast, 51.0 prev
- Japan Jul Nikkei Mfg PMI, 52.3, 51.6 prev
- New Zealand Q2 HLFS Unemployment Rate, 4.5%, 4.4% f'cast, 4.4% prev
Economic Data Ahead
- (0350 ET/0750 GMT) France Jul Markit Mfg PMI, 53.1 f'cast, 53.1 prev
- (0355 ET/0755 GMT) Germany Jul Markit/BME Mfg PMI, 57.3 f'cast, 57.3 prev
- (0400 ET/0800 GMT) EZ Jul Markit Mfg Final PMI, 55.1 f'cast, 55.1 prev
- (0430 ET/0830 GMT) Great Britain Jul Markit/CIPS Mfg PMI, 54.2 f'cast, 54.4 prev
Key Events Ahead
- (1400 ET/1800 GMT) Fed's FOMC announces decision on interest rate, followed by statement in Washington D.C.
FX Beat
DXY: The dollar index rose on news that the White House was about to propose a 25 percent tariff on $200 billion of imported Chinese goods after initially setting them at 10 percent. The greenback against a basket of currencies trades 0.05 percent up at 94.60, having touched a low of 94.08 last week, its lowest since July 10. FxWirePro's Hourly Dollar Strength Index stood at 78.83 (Bullish) by 0500 GMT.
EUR/USD: The euro eased after rising to a 1-week in the previous session, as the greenback gained ahead of the Federal Reserve's policy meeting outcome, where it is expected to keep interest rates unchanged at 1.75-2.00 percent today. However, investors will scrutinize the policy statement for clues on whether the US President Trump's criticism of rate hikes is forcing the Fed to adopt a more aggressive stance. The European currency traded 0.1 percent down at 1.1677, having touched a low of 1.1620 on Friday, its lowest since July 19. FxWirePro's Hourly Euro Strength Index stood at 30.44 (Neutral) by 0500 GMT. Investors’ attention will remain on the Eurozone Markit manufacturing PMI and ECB‘s non-monetary policy meeting, ahead of the U.S. ADP employment change, Markit manufacturing PMI, construction spending, and FOMC policy decision. Immediate resistance is located at 1.1762 (June 10 High), a break above targets 1.1801 (June 13 High). On the downside, support is seen at 1.1649 (July 12 Low), a break below could drag it till 1.1600.
USD/JPY: The dollar rallied to an over 1-week peak against the Japanese yen as investors speculated that solid U.S. economic growth is likely to keep the Federal Reserve on track for another two hikes this year. Meanwhile, data released on Tuesday showed U.S. consumer spending increased in June, while the core PCE index rose 1.9 percent from a year earlier for a third straight month. The major was trading 0.1 percent up at 111.97, having hit a high of 111.98 earlier, its highest since July 20. FxWirePro's Hourly Yen Strength Index stood at -117.43 (Highly Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. ADP employment change, Markit manufacturing PMI, construction spending and FOMC policy decision. Immediate resistance is located at 112.17 (July 11 High), a break above targets 112.56 (July 16 High). On the downside, support is seen at 111.53 (10-DMA), a break below could take it lower 111.00.
GBP/USD: Sterling tumbled, extending losses from the prior session, as investors refrained from taking big positions ahead of the Bank of England policy meeting this week at which markets now price in a near 90 percent chance of a 25 basis points rate hike. The major traded 0.2 percent down at 1.3101, having hit a high of 1.3213 on Thursday; it’s highest since July 17. FxWirePro's Hourly Sterling Strength Index stood at -51.56 (Bearish) 0500 GMT. Immediate resistance is located at 1.3172 (21-DMA), a break above could take it near 1.3244 (July 12 High). On the downside, support is seen at 1.3082 (July 27 Low), a break below targets 1.3010 (July 18 Low). Against the euro, the pound was trading 0.1 percent down at 89.14 pence, having hit a low of 89.35 on Tuesday, it’s lowest since July 23.
AUD/USD: The Australian dollar slumped, halting a 3-day winning streak on news that Washington was considering imposing higher import tariffs on Chinese goods. The Aussie trades 0.3 percent down at 0.7405, having hit a high of 0.7440 the day before; it’s highest since July 26. FxWirePro's Hourly Aussie Strength Index stood at 79.18 (Slightly Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7386 (July 30 Low), a break below targets 0.7340. On the upside, resistance is located at 0.7458 (July 11 High), a break above could take it near 0.7483 (July 10 High).
NZD/USD: The New Zealand dollar declined after data showed domestic unemployment rate edged up unexpectedly in the second quarter from the first quarter, indicating that the central bank is unlikely to change interest rates for now. The Kiwi trades 0.4 down at 0.6791, having touched a high of 0.6850 last week, its highest level since July 10. FxWirePro's Hourly Kiwi Strength Index was at -121.48 (Highly Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6860, a break above could take it near 0.6900. On the downside, support is seen at 0.6762 (July 27 Low), a break below could drag it below 0.6710.
Equities Recap
Asian shares gained following a firm Wall Street finish, however, the upside seems limited as intensifying fears over volatile China-U.S. trade relations weighed on investor sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 percent.
Tokyo's Nikkei rallied 0.9 percent to 22,746.70 points, Australia's S&P/ASX 200 index eased 0.1 percent to 6,275.70 points, and South Korea's KOSPI gained 0.5 percent to 2,307.07 points.
Shanghai composite index fell 1.8 percent to 2,824.53 points, while CSI300 index traded 0.2 percent down at 3,447.39 points.
Hong Kong’s Hang Seng traded 0.9 percent lower at 28,321.83 points. Taiwan shares added 0.4 percent to 11,098.13 points.
Commodities Recap
Crude oil prices declined, extending previous session losses after industry data showed U.S. stockpiles of crude surprisingly rose, and as economic growth slowed, especially in Asia. International benchmark Brent crude was trading 0.2 percent down at $73.92 per barrel by 0501 GMT, having hit a high of $75.58 the day before, its highest since July 13. U.S. West Texas Intermediate was trading 0.05 percent lower at $68.36 a barrel, after rising as high as $70.41 on Monday, its highest since July 16.
Gold prices slumped as news that the Trump administration has plans to propose higher tariffs on Chinese goods boosted demand for the U.S. dollar. Spot gold was 0.2 percent down at $1,221.55 an ounce at 0509 GMT, having hit a high of $1,235.12 on Thursday, its highest since July 17. U.S. gold futures were about 0.2 percent lower at $1,221.90 an ounce.
Treasuries Recap
The Japanese government bonds slumped during Asian session after investors’ risk sentiments improved, following an ease in global trade tensions between the United States and China, on the deemed possibility of a trade talk between the duo. The yield on Japan’s benchmark 10-year bond, which moves inversely to its price, jumped 6 basis points to 0.12 percent, the yield on the long-term 30-year climbed 6-1/2 basis points to 0.81 percent and the yield on short-term 2-year remained 2-1/2 basis points higher at -0.08 percent.
The New Zealand bonds ended Wednesday’s session on a choppy note as investors have started to shift away from safe-haven assets towards riskier counterparts, like oil and equities, following a rise of slight optimism from the ongoing U.S.-China trade talks. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped nearly 3 basis points to 2.81 percent, the yield on the long-term 20-year note surged 2-1/2 basis points to 3.11 percent while the yield on short-term 2-year closed 2 basis points to 1.86 percent.
The Australian government bonds slumped across the board ahead of the Federal Open Market Committee’s (FOMC) monetary policy decision, where the central bank is widely expected to keep its fed funds rate unchanged with a bias of further policy tightening. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 4-1/2 basis points to 2.704 percent, the yield on the long-term 30-year Note also jumped 4 basis points to 3.176 percent and the yield on short-term 2-year traded rose 2-1/2 basis points to 2.053 percent.
The Canadian government bond prices were lower across a steeper yield curve, with the two-year down 5 Canadian cents to yield 2.076 percent and the 10-year falling 34 Canadian cents to yield 2.339 percent. The 10-year yield touched its highest intraday since May 25 at 2.347 percent, while the gap between it and its U.S. equivalent narrowed by 4.9 basis points to a spread of 62.7 basis points in favor of the U.S. bond.
