Market Roundup
- CFTC IMM CTA data – Specs boost USD, JPY bet two weeks after Brexit, JPY longs highest since early May, GBP shorts up – Reuters.
- Divided Wall St clings to view of 1 ’16 Fed rate hike after jobs data.
- BoE considers curb on property funds – Telegraph.
- Japan ruling LDP-Komeito coalition left with 2/3 majority in Sunday Upper House elections, PM Abe likely to move to revise Japan Peace constitution – Japanese media.
- PM Abe – Must do what’s needed to beat deflation, to create new-powerful line-up in cabinet to promote economic policies – Reuters.
- Japan May core machinery orders -1.4% m/m, -11.7% y/y, +2.6%, -8.7% eyed, CAPEX this year expected to be lower than previously eyed.
- Japan June money supply M2 +3.4% y/y, M3 +2.9%, broadest liquidity +1.9%.
- Japan SMBC priced US$4.5 bln multi-tranche bonds, pricing A$ 3-year – IFR.
- China June CPI -0.1% m/m, +1.9% y/y, -0.3% and +1.8% eyed, June food CPI +4.6% y/y, non-food +1.2%, more policy stimulus eyed.
- China June PPI -0.2% m/m, -2.6% y/y, -2.5% y/y eyed.
- Australia May owner-occupied housing finance -1.0% m/m, -2% eyed, investment finance +3.9%.
- New Zealand June electronic card retail sales +1.2% m/m, +6.8% y/y.
- SNB Chair Jordan – CHF significantly overvalued vs EUR, not targeting particular level – Le Matin Dimanche.
Economic Data Ahead
- (0400 ET/0800 GMT) Italy May industrial output, -0.1% m/m eyed; last +0.5% m/m, +1.8% y/y.
- (0400 ET/0800 GMT) Norway Jun CPI, +0.1% m/m, +3.1% y/y eyed; last +0.3%, +3.4%.
- (0400 ET/0800 GMT) Norway Jun – core, unch m/m, +2.7% y/y eyed; last +0.4%, +3.2%.
- (0400 ET/0800 GMT) Norway Jun PPI; last -11.9% y/y.
- (1000 ET/1400 GMT) United States Jun employment trends index, LMCI; last 126.8, -4.8.
Key Events Ahead
- N/A EuroGroup meeting in Brussels.
- (0300 ET/0700 GMT) France FinMion Sapin press conference.
- (0530 ET/0930 GMT) Germany E3 bln 6-month Bubill auction.
- (0850 ET/1250 GMT) France E3.1-3.5/1.3-1.7/0.7-1.1 bln 3/6/12-month treasury note auctions.
- (1000 ET/1400 GMT) Greek CB Stournaras presentsw monetary policy report to parliament.
- (1000 ET/1400 GMT) KC Fed George speaks at Lake Ozark, Missouri conference.
- (1730 ET/2130 GMT) Cleveland Fed Mester speaks in Sydney.
FX Beat
DXY: The dollar index, against a basket of currencies was trading 0.2 percent higher at 96.47, having touched a high of 96.70 on Friday following strong U.S. non-farm payroll report.
EUR/USD: The euro declined, after recovering from Friday's low of 1.1002 following better-than-expected U.S. non-farm payroll data. The U.S. Labor Department showed that June job creation increased by 287,000, surpassing expectations 175,000 after May's unexpected weak reading of just 38,000. The report eased worries over the strength of the U.S. labor market; however, it did not change the view that the Fed is unlikely to hike rates this year. The major trades at 1.1036, attempting to sustain gains above the 1.1000 level. Investors continue to track broader markets sentiment, ahead of U.S. Labor Market Conditions report due later in the day. Immediate support is located at 1.1002, break below could take the pair till 1.0970. On the higher side, resistance is seen at 1.1092 (20-DMA), break above targets 1.1120.
USD/JPY: The greenback recovered, after headlines showed that Japan PM Abe is set to order a new economic stimulus package on July 12, which weakened the yen across the board. The major rose 1.3 percent to 101.86 yen, extending gains above the 101 handle. The yen was also weighed down by data released overnight showed Japan's machinery orders declining to -11.7 percent versus forecast of -8.7 percent. The dollar continues to rise amid improving investors’ appetite for riskier assets; however, the upside is capped as traders see the Federal Reserve cautious over interest rates hike. Markets will closely monitor the dollar moves amid a lack of significant economic releases in the Asian session, ahead, of the US LMCI data for further momentum. Immediate resistance is located at 101.99 (10-DMA), break above could take the pair till 102.47/102.93. On the lower side, support is seen at 100.19 (Jul-6 Low).
GBP/USD: Sterling edged up, but continues to trade below the 1.3000 handle as traders cheered U.S. jobs figures, which boosted the dollar. The pound declined almost 10 percent in the past three weeks - its steepest drop since September 1992, when Britain fell out of the pre-euro Exchange Rate Mechanism. Sterling trades 0.2 percent higher at 1.2964, attempting to regain the 1.3000 handle. Markets will closely British Retail Consortium's Retail Sales Monitor for further cues on the major. Looking ahead in the week, Bank of England will meet to decide on its monetary policy this Thursday. Immediate resistance is seen at 1.3135, break above targets 1.3200 level. On the lower side, support is seen at 1.2800 level. Against the euro, the pound trades at 85.22 pence.
AUD/USD: The Australian dollar edged higher, as political uncertainty ended in Australia after Prime Minister Malcolm Turnbull declared victory on Sunday. The major was also supported by upbeat home loan and investment lending for homes data. Australia's home loans for the month of May came in at -1.0 percent versus consensus of -2.0 percent, while Investment lending for homes in May rose to 3.9 percent from previous 5.0 percent decline. The pair rose to 0.7571 from a low of 0.7470 on Friday despite U.S. economy posting strong non-farm payrolls report. The Aussie trades at 0.7562, having touched an early high of 0.7575. The major will track the broader market sentiments amid lack of significant data. Resistance is located at 0.7600 handle, while support is seen at 0.7517 (5-DMA).
NZD/USD: The New Zealand dollar declined from its 1-year highs after rising above 0.7300 level on the back of improving global risk appetite and fading expectations of RBNZ's interest rate cut. The Kiwi trades 0.4 percent lower at 0.7267, but still within the sight of Friday's peak of 0.7306, a level not seen since May 2015. The major remains under pressure amid ongoing weakness in oil prices. While the New Zealand's remains absolutely data-empty, markets attention will remain on U.S. Labor Market Conditions Index. Immediate support is seen at 0.7214 (5-DMA), break below could drag the pair below 0.7200. On the up side, resistance is located at 0.7306 (2016 High).
Equities Recap
Asian share rallied as strong U.S. jobs data reduced concerns about the strengthen of the economy, boosting investors confidence to invest in riskier assets.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.9 percent to a one-month peak.
Tokyo's Nikkei advanced 3.98 pct at 15,708.82, Australia's S&P/ASX 200 index climed 1.89 pct at 5,329.60 points and Seoul shares rose 1.30 pct.
Shanghai composite index gained 0.7 percent at 3,008.78 points, while CSI300 index added 0.8 percent at 3,220.12 points.
Hong Kong’s Hang Seng was trading 1.6 percent higher at 20,886.94 points. Taiwan shares rose 1.7 pct at 8,786.47 points.
Commodities Recap
Oil price edged down as signs that U.S. shale drillers have decided to lower prices and signalls of renewed of economic weakness in Asia, weakened market sentiment. International Brent crude oil futures were trading lower at $46.46 per barrel at 0409 GMT, while U.S. West Texas Intermediate crude was down 44 cents at $41.97 a barrel.
Gold prices were firm, strengthened by uncertainty following Britain's Brexit vote, despite rallying equity markets on the back of strong U.S. employment data. Spot gold was trading 0.1 percent higher at $1367.20 an ounce by 0413 GMT, having hit a low of $1,335.34 on Friday following better-than-expected U.S. jobs data. U.S. gold was up 0.6 percent at $1,366.80 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.3847 percent up by 0.02 bps, while 5-year was 0.034 bps higher at 0.9860 percent.
The Australian government bonds slumped as data indicating a strengthening US economy offered a respite to weeks of market turmoil. The yield on the benchmark 10-year Treasury note rose nearly 3 basis points to 1.912 percent and the yield on short-term 2-year note also jumped 1-1/2 basis points to 1.612 percent.
New Zealand government bonds held firm, sending yields 1 basis point lower at the long end of the curve.
