Market Roundup
- Japan MoF Asakawa – FX market nervous, eyeing moves carefully – Reuters.
- BoJ Policy Board June 15-16 meeting minutes – Increase in service prices not enough to offset slowing gains in goods prices, to continue indefinitely? QQE effectiveness questioned by some too, shift away? Debate heated.
- Japan July services PMI 50.4, June 49.4, back in expansion, orders steady.
- China NDRC – Calls for more interest rate/RRR cuts – MNI.
- China July Caixin services PMI 51.7, June 52.7, employment down for first time in four months.
- Atlanta Fed Lockhart – Too soon to rule out hike at September meeting
- US July auto sales 17.88 mln AR, highest since Nov ’15 18.09 mln, June 16.74 Mln, July sales 1.52 mln units.
- UK NIESR – ’16 GDP +1.7%, ’17 +1.0%, May forecast +2.0%, +2.7%, 50% chance of technical recession in next 18-mos, eyes BoE rate cut this month, November.
- Australia July AIG PSI +2.6 points to 53.9, up for third month, sales jump.
- Australia July VFACTS new vehicle sales -29% m/m, -1.1% y/y, still resilient, second best result for July, record breaking year still forecast.
- RBNZ to cancel media ‘lockups’, move to electronic policy releases - Reuters.
- New Zealand Q2 LCI priv-sector wages ex-overtime +0.4% q/q, +1.6% y/y, +0.5% and +1.8% forecast, subdued.
- New Zealand July ANZ commodity price index +2.0% m/m, +2.0% y/y, June +3.7%, -5.4%.
Economic Data Ahead
- (0315 ET/0715 GMT) Spain Jul PMI services, 55.0 forecast; last 56.0.
- (0345 ET/0745 GMT) Italy Jul PMI services, 51.0 forecast; last 51.9.
- (0350 ET/0750 GMT) France Jul PMI services, 50.3 forecast; flash 50.3.
- (0350 ET/0750 GMT) France Jul PMI composite, 50.0 forecast; flash 50.0.
- (0355 ET/0755 GMT) Germany Jul PMI services, 54.6 forecast; flash 54.6.
- (0355 ET/0755 GMT) Germany Jul PMI composite, 55.3 forecast; flash 55.3.
- (0400 ET/0800 GMT) Eurozone Jul PMI services, 52.7 forecast; flash 52.7.
- (0400 ET/0800 GMT) Eurozone Jul PMI composite, 52.9 forecast; flash 52.9.
- (0430 ET/0830 GMT) Great Britain Jul PMI services, 47.4 forecast; last 47.4.
- (0500 ET/0900 GMT) Eurozone Jun retail sales, unch m/m, +1.7% y/y forecast; last +0.4%, +1.6%.
- (0500 ET/0900 GMT) Norway Jul housing prices; last +7.3% y/y.
- (0815 ET/1215 GMT) United States Jul ADP national employment, +170k forecast; last +172k.
- (0945 ET/1345 GMT) United States Jul Markit PMI services, composite – final; flash 50.9, 51.5.
- (1000 ET/1400 GMT) United States Jul ISM PMI non-mfg, 56.0 forecast; last 56.5.
Key Events Ahead
- N/A Japan PM Abe to formally announce new cabinet.
- N/A ECB Governing Council meeting.
- N/A Sweden SEK12.5 and 5 bln 103 and 75-day treasury bill auctions.
- (0500 ET/0900 GMT) Greece E625 mln 26-week treasury bill auction.
- (0530 ET/0930 GMT) Germany E5 bln zero% 2018 Schatz auction.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent up at 95.21, within the sight of a 6-week trough of 95.003 touched overnight.
EUR/USD: The euro edged down, after gaining 0.6 percent overnight to touch 1.1233, its highest since the Brexit referendum. The currency weakened after the dollar attempted a minor recovery across the broad, as investors eye the crucial ADP U.S. private sector monthly jobs report. Traders ignored Tuesday's upbeat U.S. consumer spending figures and focused more on soft inflation numbers, as weak business investment and the second quarter's economic growth rate, could support the Fed's decision to keep interest rates at current low levels for a while. The major trades lower at 1.1214, pulling away from a near 1-1/2 month high touched in the previous session. Markets now await final services PMI reports from the Eurozone's economies and Eurozone retail sales data, ahead of series of economic data from the U.S. for further impetus on the pair. Immediate support is seen at 1.1167 (5-DMA), break below could take it lower 1.1150. On the upside, resistance is seen at 1.1250, break above targets 1.3000.
USD/JPY: The greenback continues to decline as diminishing expectations of the Fed rate hike in near-term and the recently approved Japan's ¥ 28 trillion stimulus package, strengthened the bid tone around the yen. The dollar trades around 100.90 yen, after rising to an early high of 101.34. The movements in the major will be driven by developments surrounding yen intervention talks. Markets attention will also remain on U.S. ADP private employment report and Institute for Supply Management U.S. non-manufacturing activity data due later in the day for further momentum. Immediate support is located at 100.52, break below could drag it lower 100.00. On the higher side, resistance is seen at 101.76, break above targets 102.00.
GBP/USD: Sterling lost momentum after rising above the 1.3300 handle in the previous session. On Tuesday, it rose more than 1 percent to near its highest level for 3 weeks, as the greenback weakened broadly after soft U.S. data reduced the prospects of an imminent interest rate hike from the Federal Reserve. The major was also supported by Britain's construction industry survey, which came in slightly better than expected. Sterling trades 0.2 percent lower at 1.3319, attempting to sustain gains above 1.3300. Investors will closely watch UK's Markit Services PMI for further cues, ahead of Bank of England policy meeting due tomorrow. Immediate support is seen at 1.3246 (5-DMA), break below could take it near 1.3200. On the higher side, resistance is located at 1.3400, break above targets 1.3480.
AUD/USD: The Australian dollar slumped below the 0.7600 handle, following dovish comments from Australian PM Turnbull. However, the major was provided some support following upbeat AiG Performance of Services data. AiG performance of service index for July rose to 53.9 from 51.3 in June. The Aussie trades 0.2 percent lower at 0.7594, pulling away from a high of 0.7637 touched in the previous session, despite an interest rate cut by the Reserve Bank of Australia. Markets await U.S employment and Non-manufacturing PMI data, ahead of Australia's retail sales figures. Immediate support is located at 0.7566, break below could take it till 0.7529. On the higher side, resistance is seen at 0.7637 (Previous Session High), break above targets 0.7650/ 0.7676.
NZD/USD: The New Zealand dollar declined, after touching a 3-week high of 0.7256 on Tuesday. The major slumped below 0.7200 on data that showed New Zealand's labor cost index for the second quarter dropping to 1.6 percent y/y, missing forecast and previous 1.8 percent. However, the losses were limited as Global Dairy Trade price index rose 6.6 percent from previous 0.0 percent. Investors will continue to track broad based market sentiment ahead of U.S. economic data. Immediate support is seen at 0.7178 (5-DMA), break below could take it till 0.7106. On the higher side, resistance is located at 0.7256 (Previous Session High), break above targets 0.7300.
Equities Recap
Asian shares slipped, while the yen strengthened against a weaker U.S dollar as markets fear that the Bank of Japan may retreat from its massive bond-buying campaign, triggering risk-aversion sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 1 percent, pulling away from its recent 1-year peak.
Tokyo's Nikkei declined 1.88 pct at 16,083.11, Australia's S&P/ASX 200 index lost 1.24 pct at 5,472.10 points and South Korea's KOSPI dropped 0.9 percent at 2,000.59 points.
Shanghai composite index trades flat at 2,970.99 points, while CSI300 index trades 0.1 percent lower at 3,185.55 points.
Hong Kong’s Hang Seng was trading 1.6 percent down at 21,758.21 points. Taiwan shares edged down 0.7 pct at 9,001.71 points.
Commodities Recap
Oil prices edged down, with the U.S. crude trading below $40 per barrel and Brent lower $42 amid ongoing fuel oversupply. International Brent crude oil was trading 0.4 percent down at $41.73 per barrel by 0630 GMT, extending losses below the $42 level. U.S. West Texas Intermediate crude was trading 0.5 percent lower at $39.49 per barrel, a level last seen since April.
Gold held on to moderate gains from the previous session, as weakness in equities and greenback strengthened the bid tone around the safe-haven metal. Spot gold was trading at $1,364.84 an ounce by 0631 GMT, having hit a high of $1,367.15 on Tuesday, it’s highest since July 11. U.S. gold was flat at $1,372.6 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5506 percent up by 0.014 bps, while 5-year was 0.011 bps higher at 1.0863 percent.
The yields on the Japanese government bonds declined. The benchmark 10-Year JGB yield fell 1.5 basis points to minus 0.080 pct and the 5-year JGB yield dropped 2 basis points to minus 0.170 pct. The 40-year JGB yield rose 4.5 basis points, hitting 3 1/2-month high after Japan MOF said it will increase issuance.
The Australian government bond yields recovered after data released by the Reserve Bank of Australia showed that the country’s commodity price index rebounded in July. The yield on the benchmark 10-year Treasury note jumped 11 basis points to 1.936 percent and the yield on short-term 2-year note climbed 4-1/2 basis points to 1.488 percent.
The New Zealand government bonds closed higher as investors had anticipated a further easing from the Reserve Bank of New Zealand in its upcoming policy meeting in the wake of rising deflationary pressure. The yield on the benchmark 10-year bond fell 2 basis points to 2.205 percent, the yield on 7-year note also dipped 2-1/2 basis points to 1.950 percent and the yield on short-term 2-year note ended 2-1/2 basis points lower at 1.835 percent.
Canadian government bond prices were lower across a steeper maturity curve. The 2-year bond dipped 3.5 Canadian cents to yield 0.558 percent and the benchmark 10-year declined 47 Canadian cents to yield 1.077 percent.
