Market Roundup
- Trump administration adds to China trade pressure with higher tariff plan
- Fed leaves rates unchanged, stays on course for September hike
- BOJ's Amamiya says c. bank will buy bonds if yields rise rapidly
- Bank of England poised to raise rates in the face of Brexit risk
- Australia Jun Trade Balance G&S (A$), 1,873 mln, 900 mln f'cast, 827 mln prev
- Japan w/e Foreign Bond Investment, 526.5 bln, -209.2 bln prev
- Japan w/e Foreign Invest JP Stock, -63.4 bln, 173.5 bln prev
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Jul Markit/CIPS Cons PMI, 52.8 f'cast, 53.1 prev
- (0500 ET/0900 GMT) EZ Jun Producer Prices MM, 0.3% f'cast, 0.8% prev
- (0500 ET/0900 GMT) EZ Jun Producer Prices YY, 3.5% f'cast, 3.0% prev
Key Events Ahead
- (0700 ET/1100 GMT) BoE releases inflation report in London
- (0700 ET/1100 GMT) BOE Bank Rate, 0.75% f'cast, 0.50% prev
FX Beat
DXY: The dollar index rallied after the Federal Reserve kept interest rates unchanged, as expected, characterizing the U.S. economy as strong and staying on course to raise borrowing costs in September and likely again at the end of this year. The greenback against a basket of currencies trades 0.1 percent up at 94.79, having touched a low of 94.16 on Tuesday, its lowest since July 26. FxWirePro's Hourly Dollar Strength Index stood at 106.14 (Highly Bearish) by 0500 GMT.
EUR/USD: The euro tumbled to a 6-day low as the greenback gained after the Federal Reserve gave an upbeat assessment of the U.S. economy and stayed on course to gradually raise interest rates. The European currency traded 0.1 percent down at 1.1648, having touched a low of 1.1645, its lowest since July 27. FxWirePro's Hourly Euro Strength Index stood at -91.94 (Slightly Bearish) by 0500 GMT. Investors’ attention will remain on the Eurozone producer price index, ahead of the U.S. unemployment benefit claims and factory orders. Immediate resistance is located at 1.1687 (21-DMA), a break above targets 1.1762 (June 10 High). On the downside, support is seen at 1.1640 (July 26 Low), a break below could drag it till 1.1600.
USD/JPY: The dollar eased, extending losses for the second straight session, as investors remained focused on the U.S.-driven trade war after U.S. administration officials stated that President Donald Trump is proposing a higher 25 percent tariff on $200 billion worth of Chinese imports. The major was trading 0.1 percent down at 111.58, having hit a high of 112.15 the day before, its highest since July 20. FxWirePro's Hourly Yen Strength Index stood at -28.72 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. unemployment benefit claims and factory orders. 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 111.36 (5-DMA), a break below could take it lower 111.00.
GBP/USD: Sterling consolidated within narrow ranges as investors remained on the sidelines ahead of the Bank of England policy meeting, where it is widely expected to raise interest rates to their highest level since the financial crisis almost a decade ago. The major traded 0.2 percent down at 1.3101, having hit a high of 1.3213 last week; it’s highest since July 17. FxWirePro's Hourly Sterling Strength Index stood at -51.56 (Bearish) 0500 GMT. Investors’ attention will remain on the BoE interest rate decision, quarterly inflation report and Governor Carney's speech, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3166 (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 88.91 pence, having hit a low of 89.35 on Tuesday, it’s lowest since July 23.
AUD/USD: The Australian dollar slumped to a 6-day low despite domestic trade surplus surpassing expectations in June as exports to China rose to their second highest on record. Australia's trade surplus surged by 158 percent to A$1.87 billion ($1.38 billion), double the market forecast and the largest since May last year. The Aussie trades 0.2 percent down at 0.7384, having hit a high of 0.7483 last week; it’s highest since June 14. FxWirePro's Hourly Aussie Strength Index stood at -99.49 (Slightly Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7345, a break below targets 0.7300. On the upside, resistance is located at 0.7444 (July 6 High), a break above could take it near 0.7490.
NZD/USD: The New Zealand dollar eased amid growing concerns that trade tensions between the United States and China were set to escalate after reports that Washington plans to propose higher tariffs on $200 billion in Chinese imports. The Kiwi trades 0.2 percent down at 0.6778, having touched a low of 0.6773 earlier, its lowest level since July 27. FxWirePro's Hourly Kiwi Strength Index was at -101.03 (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 0.6800 (5-DMA), a break above could take it near 0.6834 (July 30 High) . On the downside, support is seen at 0.6736 (June 29 Low), a break below could drag it below 0.6700.
Equities Recap
Asian shares tumbled as the latest escalation in the China-U.S. trade war undermined investor risk sentiment, while the greenback surged after the Federal Open Market Committee kept its bias towards further policy tightening.
MSCI's broadest index of Asia-Pacific shares outside Japan slumped 0.9 percent.
Tokyo's Nikkei plunged 1.06 percent to 22,507.04 points, Australia's S&P/ASX 200 index eased 0.4 percent to 6,247.60 points, and South Korea's KOSPI declined 1.5 percent to 2,274.13 points.
Shanghai composite index fell 2.8 percent to 2,745.88 points, while CSI300 index traded 2.9 percent down at 3,345.00 points.
Hong Kong’s Hang Seng traded 2.3 percent lower at 27,683.17 points. Taiwan shares shed 1.5 percent to 10,929.77 points.
Commodities Recap
Crude oil prices steadied, after declining in the previous session on the back of a surprise increase in U.S. crude inventories and renewed trade concerns between the U.S. and China. International benchmark Brent crude was trading 0.05 percent up at $72.53 per barrel by 0449 GMT, having hit a high of $75.58 on Tuesday, its highest since July 13. U.S. West Texas Intermediate was trading 0.2 percent lower at $67.72 a barrel, after rising as high as $70.41 on Monday, its highest since July 16.
Gold prices surged, recovering from the previous session losses, as the U.S. dollar edged lower against the Japanese yen. Spot gold was 0.2 percent up at $1,218.54 an ounce at 0451 GMT, having hit a low of $1,213.88 on Tuesday, its lowest since July 19. U.S. gold futures were nearly unchanged at $1,227.30 an ounce.
Treasuries Recap
The Japanese government bonds remained mixed in a muted trading day ahead of the Bank of Japan’s (BoJ) June monetary policy meeting minutes, scheduled to be released today by 23:50GMT. The yield on Japan’s benchmark 10-year bond, which moves inversely to its price, rose nearly 1 basis point to 0.13 percent, the yield on the long-term 30-year jumped 2 basis points to 0.82 percent while the yield on short-term 2-year fell nearly 1-1/2 basis points to -0.09 percent.
The Australian government bonds plunged across the board after the Federal Open Market Committee’s (FOMC) kept its bias towards further policy tightening, while keeping the fed funds rate target unchanged at 1.75-2 percent. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 3-1/2 basis points to 2.744 percent, the yield on the long-term 30-year Note also jumped 4 basis points to 3.224 percent and the yield on short-term 2-year traded rose 1/2 basis point to 2.055 percent.
The Canadian government bond prices were lower across a steeper yield curve. The 10-year declined 58 Canadian cents to yield 2.378 percent, its highest since May 25. The gap between the 10-year yield and its U.S. equivalents narrowed by 2.8 basis points to a spread of 62.5 basis points.
