Market Roundup
- Allianz El-Erian – No major policy statement at Jackson Hole, Fed only game in town for far too long, CBs becoming less influential in delivering outcomes, BoJ becoming ineffective if not counter-productive – CNBC.
- FOMC ViceChair Fischer – Overheating, policy being discussed by board
- SF Fed Williams – Fed is going to keep running the economy hot – Reuters.
- Fed officials stress risk of recession if it acts too slowly – MNI.
- The great unraveling: Years of Fed missteps fueled disillusion with the economy and Washington – Jon Hilsenrath, Wall Street Journal.
- Japanese regulators consider allowing off-hours margin trading – Nikkei.
- Japan July nationwide core CPI -0.5% y/y, Tokyo August core -0.4%, -0.4% and -0.3% eyed, July nationwide core drop matches drop in March ’13, no progress, July core-core (ex-food, energy) +0.3% y/y.
- Japan housing market rare bright spot amid stalling growth – Reuters.
- World Bank to issue 3-year SDR bonds in China’s interbank market Wednesday.
- Foreign CB US debt holdings +$3.322 bln to $3.206 trln Aug 24 week, Treasury holdings +$4.926 bln to $2.882 trln, agencies -$1.930 bln to $264.875 bln.
- NY Fed – FX swaps with foreign CBs $22 mln Aug 24 wk, BoJ $12 mln, rest ECB.
- Lipper – Investors pull $6.4 bln from US-based stock funds latest week.
Economic Data Ahead
- (0245 ET/0645 GMT) France Q2 GDP – details; prelim unch q/q.
- (0300 ET/0700 GMT) Spain Jul retail sales; last +5.6% y/y.
- (0400 ET/0800 GMT) Eurozone Jul money supply M3, +4.9% AR; last +5.0%.
- (0400 ET/0800 GMT) Eurozone Jul loans to non-financials, households; last +1.7%, +1.7%.
- (0430 ET/0830 GMT) Great Britain Q2 GDP 2nd release, +0.6% q/q, +2.2% y/y eyed; prelim +0.6%, +2.2%.
- (0830 ET/1230 GMT) United States Q2 GDP 2nd estimate, +1.1% eyed; prelim +1.2%.
- (0830 ET/1230 GMT) United States Q2 GDP deflator, +2.2% y/y eyed; prelim +2.2%.
- (0830 ET/1230 GMT) United States Q2 PCE prices/core, +1.9%, +1.7% eyed; prelim +1.9%, +1.7%.
- (0830 ET/1230 GMT) United States Q2 corporate profits; prelim +8.1%.
- (0830 ET/1230 GMT) United States Jul advance goods trade balance; last $64.54 bln deficit.
- (1000 ET/1400 GMT) United States Aug U.Mich sentiment index – final, 90.6 eyed; prelim 90.4.
Key Events Ahead
- (0600 ET/1000 GMT) UK DMO GBP0.5/2.5/3.0 bln 1/3/6-month treasury bill auctions.
- N/A Annual KC Fed Jackson Hole central banker symposium.
- (1000 ET/1400 GMT) FOMC Chair Yellen speaks at Jackson Hole conference.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent lower at 94.62, extending previous session losses, as investors await Federal Reserve Chair Janet Yellen's speech at a global central bankers' meeting.
EUR/USD: The euro edged up, extending previous session gains, as the dollar remain subdued ahead of Federal Reserve Chair Janet Yellen's speech later in the session, with markets anticipating it could provide clarity on U.S. monetary policy. In recent weeks, Fed officials have pushed a hawkish message on interest rate hikes, given progress on employment and inflation. Data released overnight showed that new orders for U.S. manufactured capital goods increased for a second straight month in July, while the number of Americans filing for unemployment benefits surprisingly declined, strengthening the case of imminent of rate hike. The European currency trades 0.1 percent higher at 1.1288, attempting to regain the 1.1300 handle. Investor’s attention will remain on U.S. preliminary GDP figures, ahead of Fed's Yellen speech. Immediate resistance is located at 1.1330, break above could take it till 1.1360/ 1.1400. On the lower side, support is seen at 1.1259, break below targets 1.1200.
USD/JPY: The major continues to trade in a narrow range, ahead of the Fed Symposium – Day 2 and Yellen’s speech. The demand for the safe-haven yen strengthened, keeping pair in the red zone amid persisting risk-off sentiment across the markets. Japanese data released overnight put the Bank of Japan under pressure to expand an already massive stimulus programme next month, as the economy headed towards deflation. Japan's core consumer prices declined for a fifth straight month, recording its biggest annual fall in more than three years in July, The greenback trades lower at 100.49, largely range bound in this week. Investors will remain cautious ahead of Federal Reserve Chair Janet Yellen's speech later in the day. Immediate support is seen at 100.09 (Aug-24 Low), break below could take it near 99.64. On the higher side, resistance is located at 100.93, break above targets 101.45/ 102.00.
GBP/USD: Sterling steadied after dropping from a 3-week high against the dollar on Thursday as investors continue assessing the economic impact of Britain's vote to leave the European Union. Markets attention will remain on Britain's second-quarter GDP data, though it only covers a week of the post-EU-referendum period, it should show how the economy reacted during a time of heightened uncertainty. Sterling trades 0.1 percent higher at 1.3208, attempting to extend gains above the 1.3200 handle. Immediate resistance is located at 1.3260, break above could take it near 1.3300. On the down side, support is seen at 1.3161, break below targets 1.3150/1.3101. Against the euro, the pound was little changed at 85.48 pence.
AUD/USD: The Australian dollar gained, but is set to end the week barely changed, as investors remained on the side-line ahead of Federal Reserve Chair Janet Yellen's speech at a gathering of global central bankers. The Aussie rose 0.2 percent to 0.7633, however, trades between a tight range of 0.7584 to 0.7655. The major has added more than 5 percent in the last two months, but has been subdued in August largely due to divergent views on U.S. monetary policy. Investors will track broad based market sentiment ahead of Yellen's speech which could give a clearer signal on the path of U.S. interest rate hikes. Immediate resistance is located at 0.7650, break above targets 0.7690/ 0.7700. On the lower side, support is seen at 0.7600, break below could drag it near 0.7583/ 0.7550.
NZD/USD: The New Zealand dollar regained the 0.7300 handle, as a fresh bout of profit-taking in the U.S. dollar across the board, combined with recovery in the commodities’ prices underpinned the sentiment around the Kiwi. The major trades 0.3 percent higher at 0.7316, hovering closer to its 2016 highs and was on course for 0.5 percent gain so far this week. Markets will closely watch the U.S. GDP Data and Fed Yellen’s speech for further momentum on the pair. Immediate resistance is located at 0.7340, break above targets 0.7400. On the lower side, support is seen at 0.7276 (10-DMA), break below could drag it near 0.7250.
Equities Recap
Asian shares were steady as investors await speech by U.S. Federal Reserve Chair Janet Yellen to provide direction on whether the Fed would raise interest rates this year, at the annual gathering of central bankers in Jackson Hole, Wyoming.
MSCI's broadest index of Asia Pacific shares outside Japan was little changed.
Tokyo's Nikkei declined 1.18 pct at 16,360.71, Australia's S&P/ASX 200 index dropped 0.4 pct at 5,519.60 points and South Korea's KOSPI was trading 0.2 percent lower at 2,038.07 points.
Shanghai composite index added 0.2 percent at 3,076.22 points, while CSI300 index was trading 0.2 percent higher at 3,295.19 points.
Hong Kong’s Hang Seng was trading 0.4 percent up at 22,901.29 points. Taiwan shares rose 0.2 pct at 9,131.72 points.
Commodities Recap
Crude oil prices edged down in early trade after the Saudi energy minister dampened expectations of strong market intervention by producers at the upcoming meeting next month. International benchmark Brent crude oil prices were 0.2 percent down at $49.51 per barrel at 0348 GMT. U.S. West Texas Intermediate crude was also 0.2 percent lower at $47.23 a barrel.
Gold steadied after hitting a 4-week lows on Thursday, weighed down by upbeat U.S. economic data in the run-up to a speech by Federal Reserve Chair Janet Yellen later in the day that will be eyed for fresh clues on monetary policy. Spot gold was up 0.1 percent at $1,323.59 an ounce by 0352 GMT, having touched a low of $1317.97 an ounce in the previous session, its lowest since July 27. U.S. gold futures for December delivery settled down 0.4 percent at $1,324.60.
Treasury Recap
The 10-year U.S treasury yield stood at 1.5612 percent down by 0.015 bps, while 5-year was at 1.1492 percent lower by 0.008 bps.
The Australian government bonds traded modestly lower as investors await the Federal Reserve Chair Janet Yellen’s Jackson Hole speech. The yield on the benchmark 10-year Treasury note rose more than ½ basis point to 1.929 percent and the yield on short-term 2-year climbed 1-1/2 basis points to 1.471 percent.
The New Zealand government bonds closed higher as investors remained cautious ahead of the Federal Reserve Chair Janet Yellen’s Jackson Hole press conference, in an attempt to estimate the Fed's most likely step. The yield on the benchmark 10-year bond fell 2 basis points to 2.290 percent and the yield on 7-year note also ended 2-1/2 basis points lower at 1.975 percent and the yield on short-term 2-year note slid 1 basis point to 1.820 percent.
Canadian government bond prices were lower in sympathy with Treasuries, pressured by the solid U.S. data. The 2-year bond dipped 3 Canadian cents to yield 0.589 percent and the benchmark 10-year declined 23 Canadian cents to yield 1.062 percent.