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Asia Roundup: Antipodeans extend gains, greenback eases on aggressive Fed rate cut expectations, Asian shares consolidate - Friday, July 12th, 2019

Market Roundup

  • Strong U.S. inflation tempers chance of aggressive Fed rate cut
     
  • Gold rises on fresh trade tensions, Fed rate cut bets
     
  • Crude oil at 6-week highs amid Gulf of Mexico storm, Middle East tensions
     

Economic Data Ahead

  • (0500 ET/0900 GMT) EZ industrial production w.d.a YoY May
     
  • (0500 ET/0900 GMT) EZ industrial production s.a MoM May
     

Key Events Ahead

  • (1000 ET/14000 GMT) Fed Evan's speech

FX Beat

DXY: The dollar index plunged amid growing expectations of a more aggressive 50 basis point cut at the Fed's July 30-31 meeting. The greenback against a basket of currencies traded 0.1 percent down at 96.94, having touched a high of 97.59 on Tuesday, its highest since June 19.

EUR/USD: The euro rose, extending gains for the third straight session, as the greenback eased as markets priced for a quarter percentage point cut as U.S. policymakers seek to support a slowing economy. The European currency traded 0.2 percent up at 1.1274, having touched a high of 1.1286 on Thursday, its highest since July 5.  Investors’ attention will remain on the Eurozone industrial production, ahead of the U.S. producer price index and Fed Evan's speech. Immediate resistance is located at 1.1304 (50.0% retracement of 1.1412 and 1.1193), a break above targets 1.1366 (78.6% retracement). On the downside, support is seen at 1.1207 (July 5 Low), a break below could drag it below 1.1181 (June 18 Low).

USD/JPY: The dollar eased, hovering towards a 6-day low hit in the previous session in response to dovish comments from Fed Chairman Jerome Powell, which revived the chance of a 50 basis-point cut. On Thursday, the major trimmed losses to end flat on the day after stronger-than-expected U.S. inflation data tempered the prospect of an aggressive Federal Reserve interest rate cut later this month.  The pair was trading 0.1 percent down at 108.36, having hit a high of 108.99 on Wednesday, its highest since May 31. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. producer price index and Fed Evan's speech. Immediate resistance is located at 109.08, a break above targets 109.62 (May 31 High). On the downside, support is seen at 107.76 (July 2 Low), a break below could take it lower at 107.10 (June 26 Low).

GBP/USD: Sterling surged above the 1.2500 handle, supported by broad-based dollar weakness, however, investors remained wary about Britain’s outlook on growing economic headwinds and political fears. The major traded rose 0.2 percent to 1.2541, having hit a low of 1.2439 on Tuesday, it’s lowest since Jan. 3. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2571 (38.2% retracement of 1.2783 and 1.2439), a break above could take it near 1.2652 (61.8% retracement). On the downside, support is seen at 1.2481(July 5 Low), a break below targets 1.2443 (July 10 Low). Against the euro, the pound was trading flat at 89.87 pence, having hit a low of 90.10 on Wednesday, it’s lowest since Jan. 11.

AUD/USD: The Australian dollar rallied to a 1-week peak as the greenback continued to be on a back foot, despite upbeat inflation numbers. However, the upside appears limited as additional challenges to the U.S.-China trade deal dented investor risk sentiment. The Aussie trades 0.4 percent up at 0.7003, having hit a low of 0.6910 on Wednesday, it’s lowest since June 21. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6941 (June 25 Low), a break below targets 0.6901 (June 13 Low). On the upside, resistance is located at 0.7023 (June 28 High), a break above could take it near 0.7047 (July 4 High).

NZD/USD: The New Zealand dollar advanced as the U.S. dollar weakened after the U.S. Federal Reserve policymakers, including Chairman Jerome Powell, held their bearish bias towards monetary policy easing. The Kiwi trades 0.4 percent up at 0.6683, having touched a low of 0.6565 on Wednesday, its lowest level June 21. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6726 (July 1 High), a break above could take it near 0.6775 (Apr. 17 High). On the downside, support is seen at 0.6602 (July 5Low), a break below could drag it below 0.6554 (June 21 Low).

Equities Recap

Asian shares consolidated within narrow ranges as worries over U.S.-China trade tensions countered optimism stoked by expectations of a Federal Reserve rate cut this month.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.1 percent.

Tokyo's Nikkei rallied 0.2 percent to 21,685.90 points, Australia's S&P/ASX 200 index eased 0.3 percent to 6,696.50 points and South Korea's KOSPI surged 0.3 percent to 2,086.66 points.

Shanghai composite index gained 0.5 percent to 2,930.64 points, while CSI 300 index traded 0.1 percent up at 3,809.73 points.

Hong Kong’s Hang Seng traded 0.3 percent higher at 28,506.46 points. Taiwan shares shed 0.2 percent to 10,824.35 points.

Commodities Recap

Crude oil prices gained, hovering towards a 6-week high hit in the previous session, as U.S. oil producers in the Gulf of Mexico cut more than half their output in the face of a tropical storm and as tensions continued to simmer in the Middle East. International benchmark Brent crude was trading 0.4 percent higher at $66.99 per barrel by 0535 GMT, having hit a high of $67.63 on Thursday, its highest since May 30. U.S. West Texas Intermediate was trading 0.3 percent up at $60.58 a barrel, after rising as high as $60.91 earlier, its highest since the May 23.

Gold prices rose and were on track to post a weekly gain as renewed U.S.-China trade tensions amid global growth concerns and prospects of an interest rate cut by the U.S. Federal Reserve stoked demand for safe-haven assets. Spot gold was 0.2 percent up at $1,406.20 per ounce by 0542 GMT, having touched a high of $1,427.06 on Thursday, its highest since July 3 and has risen nearly 0.6 percent so far this week. U.S. gold futures were up 0.2% at $1,409.90 an ounce.

Treasuries Recap

The Japanese government bonds suffered at close on the last trading day of the week tracking a retreat in the U.S. counterpart following a stronger-than-expected rise in the latter’s consumer price inflation (CPI) for the month of June, despite extreme dovish comments from Fed Chairman Jerome Powell, delivered earlier this week. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, jumped 2 basis points to -0.125 percent, the yield on the long-term 30-year surged 2-1/2 basis points to 0.380 percent and the yield on short-term 2-year improved to -0.180 percent.

The Australian 10-year government bond yield hit 1-month high during Asian session of the last trading day of the week Friday, tracking a similar movement in the U.S. Treasuries after the United States’ consumer price inflation (CPI) for the month of June came in stronger than market expectations. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, surged 10-1/2 basis points to 1.445 percent, the yield on the long-term 30-year bond jumped 11-1/2 basis points to 2.092 percent and the yield on short-term 2-year traded nearly 4-1/2 basis points to 0.997 percent.

By Lactus Fernandes
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