Market Roundup
- RBA cuts OCR 25 bps to 1.5% as forecast, global economy growing at below average pace, rising AUD could complicated economic transition, China growth moderating, inflation quite low, to remain so – Reuters.
- Japan FinMin Aso – No comment on FX levels, recent FX moves extremely nervous, eyeing market carefully – Reuters.
- Japan FSA Mori - Don’t Let Bank Regulators Create Another Japan - WSJ.
- Japan July monetary base Y403.95 trln, +24% y/y, new record high.
- Australia June trade deficit A$3.195 bln, A$2 bln forecast, exports -1% m/m, imports +2%, growth in domestic consumption cited.
- Australia June bldg approvals -2.9% m/m, +0.5% forecast, -5.9% y/y, May -5.4%, -9.1%m priv-sector house approvals -2.3% vs +0.3%, trend negative.
- RBNZ – NZ Q3 average 1-year inflation expectations 1.26%, 2-year 1.65%.
- New Zealand July QV residential property price index +14.1% y/y, June +13.5%.
Economic Data Ahead
- (0315 ET/0715 GMT) Switzerland Jun retail sales; last -1.6% y/y.
- (0330 ET/0730 GMT) Switzerland Jul PMI manufacturing, 51.7 forecast; last 51.6.
- (0430 ET/0830 GMT) Great Britain Jul PMI construction, 43.8 forecast; last 46.0.
- (0500 ET/0900 GMT) Eurozone Jun producer prices, +0.4% m/m, -3.5% y/y forecast; last +0.6%, -3.9%.
- (0830 ET/1230 GMT) United States Jun personal income, +0.3% m/m forecast; last +0.2%.
- (0830 ET/1230 GMT) United States Jun personal consumption, +0.3% sa forecast; last +0.4 sa, +0.3% nsa.
- (0830 ET/1230 GMT) United States Jun PCE price index; last +0.2% m/m, +0.9% y/y.
- (0830 ET/1230 GMT) United States Jun – core, +0.1% m/m forecast; last +0.2% m/m, +1.6% y/y.
- (0945 ET/1345 GMT) United States Jul ISM-New York index; last 715.8.
- N/A United States Jul total vehicle sales; last 16.66 mln AR, cars/trucks 6.76/9.9 mln.
Key Events Ahead
- (0530 ET/0930 GMT) ECB 7-day zero% refi, E45 bln allotment forecast, E49.593 bln maturing.
- (0530 ET/0930 GMT) UK DMO GBP2.5 bln 0.5% 2022 Gilt auction.
- (0540 ET/0940 GMT) Belgium E1.3-1.7 bln 3 and 6-month treasury certificate auctions.
- (0615 ET/1015 GMT) Dallas Fed Kaplan speaks in Beijing.
- (0630 ET/1030 GMT) ESM E1.5 bln 3-month bill auction.
- (0745 ET/1145 GMT) Irish CB Gov Lane speaks in Dublin.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent lower at 95.64, hovering towards a low of 95.38 touched last week.
EUR/USD: The euro rebounded after closing 0.1 percent lower at 1.1159 on Monday. Investors wary on Brexit fallout might have negative effects on Eurozone as well, hampering demand for the European currency. The major trades 0.1 percent higher at 1.1172, hovering towards a peak of 1.1197 touched on Friday. Markets await Eurozone's producer price index and series of U.S. economic data for further momentum on the pair. Immediate resistance is located at 1.1120 (July 29 High), break above targets 1.1242/1.1278. On the lower side, support is seen at 1.1127 (5-DMA), break below could take it till 1.1088.
USD/JPY: The Japanese yen hovers near 3-week highs after soft U.S. economic data weakened the case for an imminent U.S. Federal Reserve rate hike. The major came under renewed selling pressure after U.S. posted a weaker-than-expected manufacturing data released on Monday. The Institute for Supply Management's index of national factory activity declined to 52.6 in July below market expectations of 53.0 and previous 53.2 in June. Markets have slashed the possibilities of September rate hike, however, are pricing in less than a 40 percent chance of an interest rate hike by December. The greenback trades at 102.17, having touched an intra-day high of 102.82. The pair will continue to track the broader market sentiment ahead U.S. economic data for further momentum. Immediate resistance is located at 103.00, break above targets 103.51/104.00. On the downside, support is seen at 101.45 (Jul-5 Low), break below could take it lower 101.00.
GBP/USD: Sterling struggles to regain 1.3200 handle, as downbeat manufacturing survey released on Monday renewed markets worries over the economy's outlook. Bank of England will meet on Thursday, where it is expected to cut interest rates to a record low. The major found support from ongoing weakness in the dollar against its major peers, however, the upside will remain capped as markets await BoE policy decision. Sterling trades at 1.3190, having touched a high of 1.3272 on Monday. Investors will closely watch Construction PMI for further cues on the major. Immediate support is seen at 1.3117 (Jul-28 Low), break below could drag it lower 1.3100. On the upside, resistance is located at 1.3290, break above targets 1.3300/1.3340.
AUD/USD: The Australian dollar slumped below the 0.7500 handle after the Reserve Bank of Australia cut its interest rate to a record low 1.5 percent at its monthly policy meeting, in line with market expectations. The central bank has eased the interest rate for the second time this year as it seeks to restrain a rising currency and shield the economy from growing deflation. The Aussie fell as low as 0.7480, however, it trimmed losses to trade at 0.7524, still 0.1 percent down for the day. It was also weighed down by worse-than-expected trade balance report for June, which came in at -3,195 mln against consensus of -2,000 mln and previous -2,418 mln. However, it was provided some support by June building permits figures which stood at -5.9 percent y/y versus previous -9.2 percent. Markets will continue to digest headlines from the RBA, ahead of set of U.S. economic data. Immediate support is seen at 0.7480 (Session Low), break below could take it till 0.7450. On the higher side, resistance is located at 0.7565, break above targets 0.7600.
NZD/USD: The New Zealand dollar edged up after Reserve Bank of New Zealand released its inflation expectations data for the third quarter. RBNZ's inflation expectations nudged up to 1.7 percent y/y from previous 1.6 percent, which strengthened the bid tone around Kiwi. The major trades 0.2 percent higher at 0.7187, hovering towards 0.7200 handle. The movements in the pair will be driven by markets sentiments ahead of U.S. economic data, Global Dairy Trade (GDT) price auction and New Zealand's labor market report for the second quarter. Immediate resistance is located at 0.7229 (2-week High), break above could take it till 0.7250/ 0.7294. On the lower side, support is seen at 0.7144 (5-DMA), break below targets 0.7100.00.
Equities Recap
Asian shares edged lower, following modest falls on the Wall Street as U.S. crude oil prices tumbled, weakening market sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent in early trades.
Tokyo's Nikkei declined 1.47 pct at 16,391.45, Australia's S&P/ASX 200 index shed 0.73 pct at 5,546.80 points and South Korea's KOSPI dropped 0.4 percent at 2,019.91 points.
Shanghai composite index trades flat at 2,953.87 points, while CSI300 index trades 0.1 percent down at 3,173.63 points.
Hong Kong’s Hang Seng was trading 1.0 percent higher at 22,129.14 points. Taiwan shares edged down 0.1 pct at 9,068.76 points.
Commodities Recap
Crude oil prices slightly edged up after U.S. crude slumped below $40 per barrel in the previous session, as markets continue to wary on crude glut. International Brent crude oil was trading flat at $42.22 per barrel by 0630 GMT, having touched a low of $41.85 a barrel in the previous session. U.S. West Texas Intermediate crude was at $40.10 a barrel, up 0.2 percent after dipping below $40 for the first time since April in the previous session.
Gold declined, pulling away a 3-week high hit on Friday as prospects of a near-term U.S. interest rate hike diminished following disappointing U.S. growth figures. Spot gold was trading flat at $1,351.99 an ounce by 0631 GMT, having gained 0.2 percent to end up at $1,352.43 on Monday. U.S. gold was flat at $1,359.8 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5128 percent up by 0.016 bps, while 5-year was 0.013 bps higher at 1.0670 percent.
The Japanese government bonds 10-year futures extend losses after release of 10-year auction results, down more than 1.5 points on the day.
The Australian government bonds continued to rally after the Reserve Bank of Australia lowered its key interest rate by 25 basis points for the first time in last three months to a new record low of 1.50 percent. The yield on the benchmark 10-year Treasury note fell 8 basis points to 1.824 percent and the yield on short-term 2-year note dipped 10 basis points to 1.436 percent.
The New Zealand government bonds plunged after the RBNZ in its latest survey mentioned that the country’s inflation will expand 1.65 percent in two-year span of time. The yield on the benchmark 10-year bond rose 1-1/2 basis points to 2.180 percent, the yield on 7-year note also jumped 1-1/2 basis points to 1.935 percent and the yield on short-term 2-year note ended 2-1/2 basis points higher at 1.820 percent.
