Market Roundup
- Fed's Powell bolsters rate cut bets
- JGB yields track Treasuries lower as Powell raises rate-cut hopes
- Gold hits 1-week high on Fed Powell's comments
- Powell: central bank stands ready to “act as appropriate”
Economic Data Ahead
- (0530 ET/0930 GMT) UK Financial Stability Report
- (0530 ET/0930 GMT) UK FPC meeting minutes
- (0730 ET/1130 GMT) ECB monetary policy meeting accounts
Key Events Ahead
- (0615 ET/1015 GMT) ECB Coeure's speech
FX Beat
DXY: The dollar index plunged to a 6-day low after Federal Reserve Chair Jerome Powell highlighted that the U.S. economy is still under threat from disappointing factory activity, tame inflation and a simmering trade war, reinforcing prospects of a U.S. interest rate cut later this month. The greenback against a basket of currencies traded 0.2 percent down at 96.93, having touched a high of 97.59 on Tuesday, its highest since June 19.
EUR/USD: The euro rallied to a near 1-week peak, as the greenback weakened after comments from Federal Reserve Chairman Jerome Powell bolstered expectations for an interest rate cut later this month. The European currency traded 0.2 percent up at 1.1275, having touched a high of 1.1280 earlier, its highest since July 5. Investors’ attention will remain on the ECB monetary policy meeting accounts, ahead of the U.S. unemployment benefit claims, consumer price index and Fed Chair Powell's testimony. 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 declined, extending previous session losses, after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month, as the U.S. economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war. Moreover, the minutes from the Fed’s previous policy meeting showed many policymakers thought more stimulus would be needed soon, reviving speculation of an aggressive rate cut. The pair was trading 0.5 percent down at 107.96, 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. unemployment benefit claims, consumer price index and Fed Chair Powell's testimony. Immediate resistance is located at 109.08, a break above targets 109.62 (May 31 High). On the downside, support is seen at 107.56 (June 28 Low), a break below could take it lower at 107.10 (June 26 Low).
GBP/USD: Sterling advanced, extending gains for the second straight session, as investors continued to digest yesterday's better-than-expected UK GDP figures, that showed the economy's overall output expanded 0.3 percent after contracting by 0.4 percent in April. However, the upside appears limited as worsening economic outlook and rising fears about a no-deal Brexit under a new Prime Minister dented the bid tone around the British pound. The major traded rose 0.3 percent to 1.2530, having hit a low of 1.2439 on Tuesday, it’s lowest since Jan. 3. 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 1.2443 (July 10 Low), a break below targets 1.2400. Against the euro, the pound was trading flat at 89.95 pence, having hit a low of 90.10 on Wednesday, it’s lowest since Jan. 11.
AUD/USD: The Australian dollar rose to a 3-day high as the greenback plummeted across the board after the Federal Open Market Committee meeting minutes reiterated policymakers’ support for monetary easing. The Aussie trades 0.2 percent up at 0.6971, 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 0.6901 (June 13 Low), a break below targets 0.6871 (May 22 Low). On the upside, resistance is located at 0.6994 (June 26 High), a break above could take it near 0.7048 (May 7 High).
NZD/USD: The New Zealand dollar gained as dovish signals from the U.S. Federal Reserve send the treasury yields and the greenback sharply lower. The Kiwi trades 0.3 percent up at 0.6664, 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 0.6694 (July 5 High), a break above could take it near 0.6726 (July 1 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 rose amid growing concerns Federal Reserve policymakers considering cutting rates for the first time in a decade.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.8 percent.
Tokyo's Nikkei rallied 0.5 percent to 21,643.53 points, Australia's S&P/ASX 200 index rose 0.4 percent to 6,716.10 points and South Korea's KOSPI surged 1.1 percent to 2,080.58 points.
Shanghai composite index gained 0.05 percent to 2,916.71 points, while CSI 300 index traded 0.1 percent down at 3,783.06 points.
Hong Kong’s Hang Seng traded 0.7 percent higher at 28,408.08 points. Taiwan shares added 0.4 percent to 10,843.42 points.
Commodities Recap
Crude oil prices rallied to a 6-week high as a storm built in the Gulf of Mexico, threatening crude output, while an incident with a British tanker in the Middle East highlighted ongoing tensions in the region. International benchmark Brent crude was trading 0.9 percent higher at $67.19 per barrel by 0455 GMT, having hit a high of $67.33 earlier, its highest since May 30. U.S. West Texas Intermediate was trading 0.7 percent up at $60.67 a barrel, after rising as high as $60.81 earlier, its highest since the May 23.
Gold prices surged to their highest level in over a week as the greenback pulled back from multi-week highs after comments from Federal Reserve Chairman Jerome Powell bolstered expectations for an interest rate cut later this month. Spot gold was trading 0.3 percent up at $1,423.03 per ounce by 0520 GMT, having touched a high of $1,427.06 earlier, its highest since July 3. U.S. gold futures jumped 1.1 percent to $1,427.40 an ounce.
Treasuries Recap
The benchmark 10-year Japanese government bond futures climbed, with the 10-year JGB futures gaining 0.08 points to 153.60. The yield on benchmark 10-year JGBs declined one basis point to minus 0.140 percent, while the 40-year yield and the 20-year yield also fell one basis point each to 0.380 percent and 0.220 percent, respectively. The 30-year yield dropped 1.5 basis points to 0.350 percent.
The Australian government bonds remained tad higher during Asian trading session tracking a similar movement in the U.S. Treasuries after Federal Reserve Chair Jerome Powell put out a dovish testimony in front of the House Financial Services Committee, indicating a greater probability of a 25bps cut at the July FOMC meeting. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1-1/2 basis points to 1.337 percent, the yield on the long-term 30-year bond remained flat at 1.977 percent and the yield on short-term 2-year suffered 2-1/2 basis points to 0.955 percent
