Market Roundup
- Japan MoF Asakawa – Will respond to excessive FX moves, closely monitoring market moves - Reuters.
- Japan Nissan seeks to boost So.Korea output on post-Brexit JPY surge
- China FX regulator – QDII for outbound investment operating normally
- China issuers return to dollar bond market amid refinancing pressure
- Australia Q2 wage price index +0.5% q/q, +2.1% y/y, +0.5% and +2.0% forecast.
- Moody’s affirms Australia AAA rating, maintains stable outlook.
- New Zealand Q2 unemployment 5.1%, employment +2.4% q/q, participation 69.7%, 5.3%, +0.6% and 68.8% forecast, Q1 5.2%, +1.4% and 68.8%.
- New Zealand Q2 PPI outputs +0.2% q/q, inputs +0.9%, capital goods price index +0.9% q/q, +3.4% y/y.
- New Zealand Fonterra GDT price index +12.7%, last auction +6.6%.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Jul claimant count, 9.5k forecast; last 0.4k.
- (0430 ET/0830 GMT) Great Britain Jun ILO unemployment, 4.9% forecast; last 4.9%.
- (0430 ET/0830 GMT) Great Britain Jun average earnings – 3-mo avge, +2.4% y/y forecast; last +2.3%.
- (0430 ET/0830 GMT) Great Britain Jun - ex-bonus, +2.3% y/y forecast; last +2.2%.
- (0500 ET/0900 GMT) Switzerland Aug ZEW investor sentiment index; last 5.9.
Key Events Ahead
- N/A Annual Norway political forum, various speakers (till tomorrow).
- (0530 ET/0930 GMT) UK DMO GBP1.25 bln 4.25% 2055 Gilt auction.
- (0540 ET/0940 GMT) Portugal E0.75-1.0 bln 3 and 12-month treasury bill auctions.
- (1300 ET/1700 GMT) St Louis Fed Bullard speaks at St Louis conference.
- (1400 ET/1800 GMT) FOMC July 27 meeting minutes.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent higher at 94.93, pulling away from a 7-week low of 94.43 touched in the previous session.
EUR/USD: The euro edged off 7-week highs following hawkish comments from Federal Reserve officials, however, doubts about the Fed's willingness to tighten policy limited the dollar’s recovery. Atlanta Fed President Dennis Lockhart stated that two hikes in 2016 was a possibility, while New York Fed President William Dudley noted that the Fed could possibly increase rates as soon as September. The greenback was also supported by upbeat U.S. industrial production and housing starts, which expanded in July, although consumer prices were unchanged from June, following two consecutive monthly increases of 0.2 percent. The European currency trades flat at 1.1275, within the sight of an overnight rise of 1.1322, it’s highest since June 24. Markets attention now remains on FOMC minutes, which will provide insights on strength of the U.S economy and rate hike outlook. Immediate support is seen at 1.1236 (Jun-22 Low), break below could drag it near 1.1200 handle. On the higher side, resistance is located at 1.1350, break above targets 1.1400.
USD/JPY: The greenback gained, pulling away from a 7-week low touched on Tuesday. The dollar attempted a minor recovery across the broad after comments from Federal Reserve officials and U.S. data released overnight supported the views of interest rate hike this year. However, the gains were capped as investors were uncertain over BoJ's monetary policy, with the central bank conducting a comprehensive policy review in September. The major trades 0.3 percent higher at 100.58, after declining to a low of 99.54 in the previous session. The pair will continue to track broad market sentiment, ahead of minutes of the last Fed policy meeting for further clues. Immediate resistance is seen at 101.47 (10-DMA), break above targets 102.00. On the downside, support is located at 99.98, break below could take it till 99.55.
GBP/USD; Sterling eased after rising 1.3 percent overnight largely on the back of slightly higher-than-expected U.K. inflation data. On Tuesday, the British pound pulled away from a 3-year lows against the euro and a 5-week trough against the dollar, after consumer price rose 0.6 percent in July compared with a year earlier, posting their biggest rise since the end of 2014. Sterling trades 0.1 percent lower at 1.3040, having touched 1-week high of 1.3070 earlier in the session. Investors will look to the British employment data and FOMC minutes for further cues on the major. Immediate resistance is located at 1.3100, break above targets 1.3174/ 1.3200. On the lower side, support is seen at 1.2965 (5-DMA), Break below could take it till 1.2900. Against the euro, the pound trades 86.41, off 3-year low.
AUD/USD: The Australian dollar declined, reversing most of its previous session gains, as the U.S. dollar strengthened on speculation the U.S. Federal Reserve may raise interest rates this year. The Aussie failed to sustain gains above the 0.7700 handle and now trades 0.4 percent lower at 0.7665. Moreover, on-going weakness in commodities prices also weigh down on the major, with oil prices nearly 0.4 percent lower. However, the downside will remain limited as Australia's wage price index edged up at an annualized rate of 2.1 percent for the second quarter, against expectations of 2.0 percent, while Westpac Leading Index rose 0.05 percent in June from -0.2 percent. Investors will continue to assess mixed U.S. macro data, ahead of the FOMC minutes release due later in the day. Immediate support is seen at 0.7636 (Aug-15 Low), break below could take it near 0.7600. On the higher side, resistance is located at 0.7750, break above targets 0.7800.
NZD/USD: The New Zealand dollar slumped below the 0.7300 handle, as the U.S. dollar recovered across the broad. The major rose to a high of 0.7321 on the back of stronger New Zealand’s employment report and better-than expected GDT auction results. A fortnightly auction held overnight showed dairy prices had risen 12.7 percent, which boosted the view that New Zealand's main export earner might be heading towards recovery. However, the major reversed gains as upbeat jobs figures were a result of a new methodology implemented to calculate the employment data. The Kiwi trades 0.3 percent lower at 0.7253, pulling away from a 1-year high of 0.7338 touched last week. The pair will be driven by broad market sentiment, ahead of FOMC minutes due later in the day. Immediate resistance is located at 0.7338, break above would take it over 0.7400. On the lower side, support is seen at 0.7226 (5-DMA), break below targets 0.7200.
Equities Recap
Asian shares edged down, hovering away from a 1-year high, as the U.S. dollar strengthened after Federal Reserve official stated that interest rates could rise as soon as September.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.3 percent.
Tokyo's Nikkei rose 0.90 pct at 16,745.64, Australia's S&P/ASX 200 index climbed 0.09 pct at 5,537.20 points and South Korea's KOSPI trades 0.5 percent down at 2,037.64 points.
Shanghai composite index trades flat at 3,109.29 points, while CSI300 index was trading lower at 3,378.01 points.
Hong Kong’s Hang Seng was trading 0.3 percent higher at 22,984.22 points. Taiwan shares added 0.1 pct at 9,117.70 points.
Commodities Recap
Crude oil prices edged down, pulling away from 5-week highs hit on Tuesday, as investors doubted possible producer talks to support prices in a oversupplied market. Brent crude oil was trading 0.3 percent lower at $48.88 per barrel at 0400 GMT, however, prices are still up over 17 percent since early August and not far off a 5-week high of $49.33 a barrel touched in the previous session. U.S. West Texas Intermediate crude was at $46.36 per barrel, down 0.1 percent, but still up 18 percent from early August.
Gold declined as hawkish comments from U.S. Federal Reserve officials increased expectations of a rate hike this year, with markets awaiting minutes of the last Fed policy meeting for further clues. Spot gold was 0.1 percent down at $1,344.04 an ounce at 0406 GMT, having gained 0.5 percent on Tuesday. U.S. gold fell 0.4 percent to $1,351.90 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5729 percent down by 0.003 bps, while 5-year was 0.001 bps higher at 1.1592 percent.
The Australian government bonds traded nearly flat, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 1.90 percent mark and the yield on short-term 3-year note remained steady at 1.41 percent.
The New Zealand bond yields snapped previous gain at the close of trading despite market witnessing better than expected employment figures. The yield on the benchmark 10-year bond fell 1 basis point to 2.200 percent and the yield on 7-year note ended 1 basis point lower at 1.895 percent and the yield on short-term 2-year note slid 1 basis point to 1.785 percent.
Canadian government bond prices were lower across the maturity curve, with the 2-year bond down 3.5 Canadian cents to yield 0.567 percent and the benchmark 10-year down 19 Canadian cents to yield 1.066 percent.
