- RBA leaves OCR as is at 2.0%, to continue assessing whether current settings appropriate, policy needs to be accommodative, growth below long-term average, AUD adjusting to declines in commodity prices, drop reference on need for more depreciation, inflation consistent with target.
- Australia growing as IPO destination for Chinese firms spooked by slump.
- Australia June retail sales +0.7% m/m, +0.5% eyed, Q2 chain volume sales +0.8% q/q, +0.4% eyed.
- Australia June trade deficit A$2.933 bln, A$3.1 bln eyed, exports +3% m/m, imports +4%.
- NZ July ANZ commodity price index -11.2% m/m, 6-year low, largest drop ever, 4th consecutive, June -3.1%.
- NZ July QV residential property price index +10.1% y/y, 7-yr high, June +9.3%.
- BOJ Deputy Gov Iwata - Don't see risks from any possible Fed, BoE rate hikes, FX markets have priced in hikes? Stable FX reflecting fundamentals desired, FX set by markets, central bank concentration on price stability, achieving price target, moves in interest rate differentials hard to gauge, BOJ conducting ETF simulations taking place, too early to discuss exit.
- Japan June total cash earnings -2.4% y/y, biggest drop since Dec '09, real wages -2.9%, biggest drop in 7-mos, overtime pay -0.4%, 4th straight drop.
- Japan end-July monetary base record high trln, +33.9% y/y.
- China CITIC Securities suspends short-selling of shares.
- US officials eye risks from high frequency bond trading, Fed calls for bond liquidity conference October 21-22.
- US Treasury plans to borrow more in Q3 than previously eyed.
- US July auto sales +5.3% y/y, 1.51 mln units, 17.55 mln AR, 17.1 mln AR eyed, June 17.16 mln AR.
- (0300 ET/0700 GMT) Norway July PMI manufacturing; last 44.0.
- (0400 ET/0800 GMT) Spain July unemployment, -44.5k eyed; last -94.7k.
- (0430 ET/0830 GMT) UK July PMI construction, 58.4 eyed; last 58.1.
- (0500 ET/0900 GMT) Euro zone June producer prices, unchanged m/m, -2.2% y/y eyed; last unchanged, -2.0%.
- (0945 ET/1345 GMT) US July ISM-New York index; last 690.2.
- (1000 ET/1400 GMT) US June factory orders, +1.8% m/m eyed; last -1.0%, +0.1% ex-transport.
Key Events Ahead
- N/A ESM E2 bln 3-mo bill, Belgium E1.5-1.9 bln each 3/6-mo certificate sales.
- (0500 ET/0900 GMT) Austria bln 1.2% and 3.15% 2025 and 2044 RAGB auctions.
- (0530 ET/0930 GMT) UK DMO GBP3 bln 2.0% 2025 Gilt auction.
- (0530 ET/0930 GMT) ECB 7-day refinance at fixed 0.05%, E75 bln allotment eyed, last bln.
FX Recap
EUR/USD is supported below 1.1000 levels and currently trading at 1.0940 levels. It has made intraday high at 1.0955 and low at 1.0931 levels. European currency started the busy week on a soft note, with a rather muted reaction to the PMI figures from economies across the euro zone. The euro turned somewhat lower, falling deeper under the $1.10 handle after the releases. Initial support is seen around at 1.0789 and resistance at 1.1195 levels.
USD/JPY is supported around 124.00 levels and posted a high of 124.09 levels. It has made intraday low at 123.90 and currently trading at 124.01 levels. Pair trades modestly flat at fresh session highs of 124.10, struggling to resist 124 handle. USD/JPY edged slightly higher in Asia, erasing a part of yesterday's losses following a poor show displayed US factories with ISM manufacturing PMI easing to 52.7 in July from 53.5 results booked in June, which was the highest reading since January. We have a crucial week ahead in terms of key US economic releases while BOJ's monetary policy statement will also remain in focus. Initial resistance is seen at 124.57 and support is seen at 120.63 levels.
GBP/USD is supported below $1.5600 levels. It made an intraday high at 1.5599 and low at 1.5570 levels. Pair is currently trading at 1.5594 levels. At the start of the third quarter, UK Markit/CIPS PMI rose to 51.9 in July, up from last month's 26-month low of 51.4, exceeding expectations of 51.6. The Bank of England is set to convene on interest rates on August 6th and for the first time it will publish Monetary Policy Committee (MPC) minutes and the Inflation Report all at the same time. Although no change in the interest rates is expected, given the recent verbal hawkishness from the MPC members, including David Miles and BOE's governor Mark Carney, sterling is likely to be boosted should the inflation forecast be accompanied by a solid wage growth forecast, justifying monetary tightening markets shrugged off upbeat UK manufacturing PMI data which continued its expansion in July. Later in the day, UK HPI as well as construction PMI data will be in focus. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.
NZDUSD is supported below 0.6600 levels and trading at 0.6565 levels and made intraday low at 0.6548 and high at 0.6572 levels. The New Zealand dollar remains largely subdued versus its American counterpart following disappointing Chinese manufacturing PMI report which came in at lowest levels in two years. The latest Caixin China General Manufacturing PMI final reading stood at 47.8 versus 48.2 preliminary, witnessing sharpest deterioration in two years. Meanwhile, markets now await a set of NZD job data due tomorrow for the further directions. Initial support is seen at 0.6465 and resistance at 0.6789 levels.
AUD/USD is supported above 0.7300 levels and trading at 0.7350 levels. It has made intraday high at 0.7354 levels and low at 0.7262 levels. The Australian dollar extended overnight gains after the Reserve Bank of Australia (RBA) kept its policy unchanged, with rates untouched at 2%. Stevens further said that "domestic inflationary pressures have been contained" and that inflation is forecast "to remain consistent with the target over the next one to two years, even with a lower exchange rate." Today Australia also released retail sales data. Retail sales rose a seasonally-adjusted 0.7% month-on-month in June, and 0.8% in volume terms, according to the Australian Bureau of Statistics, coming in stronger than the revised 0.4% growth in the value of sales recorded in May. Initial support is seen at 0.7225 and resistance at 0.7647 levels.
Equity Recap
Asian stocks mostly fell Tuesday as weak Chinese manufacturing weighed on sentiment and investors looked ahead to a U.S. jobs report later this week that could cement expectations for a Fed interest rate hike.
Japan's benchmark Nikkei 225 inched down 0.1 percent to 20,524.39 while Australia's S&P/ASX 200 gained 0.7 percent to 5,719.10. Hong Kong's Hang Seng fell 0.5 percent to 24,283.84. The Shanghai Composite slipped 0.2 percent to 3,615.26. Benchmarks in Taiwan, Singapore, Indonesia and the Philippines fell. South Korea's Kospi added 0.4 percent to 2,016.08.
Australia's S&P/ASX 200 index closes up 0.37 pct at 5,700.60 points.
Tokyo's Nikkei average closes down 0.14 pct at 20,520.36.
Treasury Recap
China's five-year Treasury bond futures opened higher on Tuesday, with contract for settlement in September 2015 opening at 96.68 Yuan (15.8 U.S. dollars), up 0.02 percent.
South Korea sells 30-year treasury bonds at 2.680 pct.
The benchmark 10-year Japanese government bond yield hit a two-month low on Tuesday on prospects for an auction of the maturity being met by firm investor demand.
The 10-year JGB yield was down 2 basis points at 0.39 percent, the lowest since May 29.
10-year US Treasury yield at 2.156 percent vs US close of 2.152 percent on Monday.
Commodity Recap
Gold dropped for a third session in four on Tuesday, closing in on a 5-1/2-year low, pressured by expectations that the Federal Reserve was well on course to raise interest rates this year. Gold lost nearly 7 percent in July, its steepest monthly fall in two years, as the looming rate hike buoyed the dollar and spurred investors to cut their exposure to bullion. Spot gold slipped 0.2 percent to $1,083.25 an ounce by 0259 GMT, near last month's low of $1,077, the weakest since February 2010.
Oil prices moved in the green zone on Tuesday, recovering from a huge slump booked on Monday, with traders waiting for a fresh inventory report. Futures for WTI climbed 0.69% to $45.48 per barrel, while Brent futures were traded with a 0.38% gain at $49.71 per barrel, after both benchmarks booked about a 4% loss in the prior session. The global oil oversupply is the major concern for oil prices, with OPEC currently pumping around 30 million barrels per day (bpd), with its output reaching the highest monthly level in July.
