Market Roundup
- Japan Cab spokesman – No comment on FX, long-term rate levels, fundamentals solid, FX market moves on risk-off – Reuters.
- BoJ-inspired ETFs for big spending Japan firms struggle to get investors - Reuters.
- Japan Post CEO - Eyeing acquisitions at home - Nikkei.
- PBOC fixes CNY at 6.6857 vs USD, 6.69 handle trades, highest since Nov ’10.
- PBOC DepGov Chen Yulu – Will continue to study leverage ratios especially for corporate – Reuters.
- China postal bank moves toward $8 bln IPO – Nikkei.
- NY Fed Dudley – Brexit and other uncertainties mean Fed can be patient.
- New Zealand Fonterra GDT price index -0.4%, prices continue to fall, demand subdued.
Economic Data Ahead
- (0300 ET/0700 GMT) Spain May industrial output, +1.8% y/y eyed; last +2.7%.
- (0830 ET/1230 GMT) United States May int’l trade bal, $40 bln deficit eyed; last $37.4 bln deficit.
- (0945 ET/1345 GMT) United States Jun Markit services, composite PMI – final; flash 51.3, 51.2.
- (1000 ET/1400 GMT) United States Jun ISM non-mfg PMI, 53.3 eyed; last 52.9, new orders 54.2.
Key Events Ahead
- N/A ECB Governing Council meeting.
- N/A Frankfurt ECB Statistics Conference, Pres Draghi, others to speak.
- (0330 ET/0730 GMT) Riksbank policy announcement, no change in -0.5% repo rate eyed.
- (0330 ET/0730 GMT) BoS Gov Linde speaks in Santander, Spain.
- (0400 ET/0800 GMT) Austria fiscal council Felderer to speak to reporters.
- (0500 ET/0900 GMT) Greece E1.25 bln 26-week bill auction.
- (0530 ET/0930 GMT) Germany E4 bln zero% 2018 Schatz auction.
- (0800 ET/1200 GMT) NY Fed Dudley at Binghamton University event in Vestal, New York.
- (0900 ET/1300 GMT) Fed Gov Tarullo in WSJ-hosted panel discussion in Washington, DC.
- (1400 ET/1800 GMT) FOMC June meeting minutes.
FX Beat
USD: The dollar index, against a basket of currencies rose to 96.36, hovering towards a high of 96.77 touched on June 27.
EUR/USD: The euro came under bearish pressure, as markets continue to support the dollar against most majors amid persisting risk-off profile. The major trades 0.2 percent lower at 1.1052, pulling away from a peak of 1.1185 touched in the previous session. Growing expectations of a BoE rate cut in the near-term also continues to drag the European currency lower. Markets now await ECB’s President Draghi’s speech and release of FOMC June 15 meeting minutes for further cues on the economic and monetary outlook. While the Eurozone economic calendar remains data-empty, attention will remain on the U.S. goods trade balance, ISM services PMI report and Fed's Tarullo speech. Immediate support is located at 1.1010, break below could drag the pair lower 1.1000 level. On the upside, resistance is seen at 1.1103 (5-DMA), break above targets 1.1130 / 1.1159.
USD/JPY: The greenback slumped below the 101 level, as renewed concerns over Brexit led risk aversion increased demand for the safe-haven yen. The major is seen attempting a minor recovery as markets speculate about BoJ verbal intervention. The pair trades 0.9 percent lower at 100.77, having touched an early low of 100.58. Weakness in sterling continues to strengthen risk off market sentiment. The major will track broader market sentiment, ahead of the series of U.S economic data, Fed official speech and the FOMC meeting minutes. Immediate support is seen at 100.58 (Session Low), break below targets 100 level. On the higher side, resistance is located at 102.00 level.
GBP/USD: Sterling breached $1.2800 level, as rising uncertainty over the Brexit triggered a fresh wave of risk-aversion across the financial markets. The major continues to decline as market see Britain economy driving into recession and on expectations of further interest rate cut by the BoE. Sterling trades 0.9 percent lower at 1.2897, having touched an early low of 1.2791, its lowest since 1985. The pair will track broader market sentiment amid lack of UK fundamental data, ahead of U.S. ISM services report and FOMC minutes. Immediate resistance is located at 1.2791 (Session Low), while on the higher side, resistance is seen at 1.3150 (5-DMA). Against the euro, the pound declined to 86.26 pence, and was trading around 85.69 pence.
AUD/USD: The Australian dollar extended losses, weighed down by sterling led risk-off sentiment. The Aussie trades 0.4 percent lower at 0.7430, having declined to 0.7407 earlier in the session. The weakness in the major also comes in as oil prices declined for the third consecutive session. Markets focus will remain on developments surrounding Australian elections, ahead of series of economic data from the U.S. Immediate support is seen at 0.7400, break below could drag the pair till 0.7379. On the higher side, resistance is located at 0.7475 (5-DMA).
NZD/USD: The New Zealand dollar declined below the 0.7100 level, as flight to safety boosted the U.S. dollar. The major weakened after the global dairy trade prices declined 0.4 percent in the July auction. The Kiwi trades 0.8 percent lower at 0.7096, pulling away from a peak of 0.7240 touched earlier in the week. The pair will be driven by overall market sentiment ahead of the US ISM non-manufacturing report release. Immediate support is seen at 0.7141, break below could take it till 0.7040. On the higher side, resistance is located at 0.7169, break above targets 0.7200.
Equities Recap
Asian share decline as investors wary over instability in the European Union, as the pound touched three-decade lows.
MSCI's broadest index of Asia-Pacific shares outside Japan skid 1.7 percent.
Tokyo's Nikkei declined 1.85 pct at 15,378.99, Australia's S&P/ASX 200 index lost 0.59 pct at 5,197.20 points and Seoul shares slump 1.88 pct.
Shanghai composite index edged up 0.1 percent at 3,012.18 points, while CSI300 index also nudged up 0.1 percent at 3,211.61 points.
Hong Kong’s Hang Seng was trading 1.5 percent lower at 20,425.30 points. Taiwan shares dropped 1.6 pct at 8,575.7 points.
Commodities Recap
Oil prices extended losses amid market turmoil triggered by increasing concerns over the economic impact of Britain's vote to leave the European Union. Brent crude oil was down 1 percents at $47.71 a barrel by 0356 GMT. U.S. crude was down at $46.29 a barrel and the contract declined 5 percent to end at $46.60 on Tuesday.
Gold touched its highest in over two years amid global markets turbulence as fallout mounted from Britain's decision to leave the European Union. Spot gold was trading 0.8 percent higher at $1,367.29 an ounce by 0401 GMT, having touched it’s highest since March 2014 at $1,371.13. U.S. gold was up 0.5 percent at $1,365.30 and Silver was up 1.7 percent at $20.25.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.3598 percent down by 0.007 bps, while 5-year stood at 0.9383 percent.
The Australian government bonds continue to rally as investors poured into safe-haven assets amid deepening global economic growth fears. The yield on the benchmark 10-year Treasury note fell 9 basis points to 1.848 percent and the yield on short-term 2-year note also dipped 6 basis points to 1.532 percent.
New Zealand's 10-year yield reached 2.240 percent, away from the mid-December high of 3.680 percent.
Canadian government bond prices were higher across the maturity curve, with the 2-year price up 5 Canadian cents to yield 0.493 percent and the benchmark 10-year jumping 49 Canadian cents to yield 0.994 percent. The 10-year yield slumped as low as 0.961 percent during the session, its lowest since Feb. 11.
