Market Roundup
- BoJ DepGov Iwata – Eased recently to deal with increased overseas risks, USD funding needs, JPY gains slowing price rises but inflation to eventually turn up, optimistic on growth, ready to ease again if needed, policy review focusing on mechanism, obstacles to QQE - Reuters.
- MoF flow data week-ended July 30 – Japanese buy net Y73.6 bln foreign stocks, Y312.1 bln bonds, Y19.9 bln bills; foreign investors sell net Y95.5 bln Japanese stocks, volume massive, buy Y1.0912 trln bonds, Y1.1229 trln bills.
- Minny Fed Kashkari – Racial economic gap needs forceful response – Reuters.
- Australia June retail sales +0.1% m/m, +0.4% eyed, Q2 chain volume sales +0.4% q/q, +0.5% eyed, fall in food retailing cited.
- Australian shoppers all Scrooges despite discounting fever - Reuters.
Economic Data Ahead
- (0730 ET/1130 GMT) United States Jul Challenger layoffs; last 38.54k.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 265k eyed; last 266k.
- (1000 ET/1400 GMT) United States Jun factory orders, -1.8% m/m eyed; last -1.0%, ex-transport +0.1%.
Key Events Ahead
- (0400 ET/0800 GMT) ECB economic bulletin.
- (0430 ET/0830 GMT) Spain E2-3 bln 0.55/0.75/6.0% 2019/21/29 Bono auctions.
- (0450 ET/0850 GMT) France E5-6 bln 0.5/5.75/4.75% 2026/32/35 OAT auctions.
- (0550 ET/0950 GMT) France E500-750 mln 1.85%, 3.4% 2027, 2029 index-linked OAT auctions.
- (0615 ET/1015 GMT) Dallas Fed Kaplan speaks in Shanghai.
- (0700 ET/1100 GMT) BoE MPC policy announcement, 25 bp bank rate cut to 0.25% eyed, vote 8-1.
- (0730 ET/1130 GMT) BoE Gov Carney press conference.
FX Beat
DXY: The dollar index, against a basket of currencies trades higher at 95.62, pulling away from a 6-week low after U.S. employment data came in better-than-expected.
EUR/USD; The euro declined, extending previous session losses as the greenback continued its bullish momentum on the back of a stronger-than-expected U.S. employment data. Payrolls processor ADP stated that U.S. private employers added 179,000 jobs in July, surpassing market projections for a gain of 170,000 jobs. Markets now expect U.S. non-farm employment to rise by 180,000 in July, while the unemployment rate is likely to edge down to 4.8 percent from 4.9 percent in June. Moreover, investors do not price in an interest rate increase as early as September, however, they see a chance of a hike in December. The major trades lower at 1.1143, pulling away from a 1-1/2 month peak of 1.1233 touched earlier in the week. Traders now await BoE policy decision, U.S. unemployment claims and factory orders data for further cues on the pair. On the lower side, support is seen at 1.1122, break below could take it lower 1.1100. On the upside, resistance is located at 1.1168, break above targets 1.1200 handle.
USD/JPY: The greenback declined below the 101 handle following Bank of Japan Iwata’s comments, however, it regained some ground as investors still cheer on upbeat U.S. employment data. BoJ’s Iwata reiterated that the central bank had increased ETF purchases in order to prevent deterioration of corporate and household sentiments and achieve its 2 pct price target of consumer prices in fiscal 2017. The dollar trades 0.2 percent higher at 101.48, extending recovery from a 3-week low of 100.67 hit on Tuesday. Investors continue to track broad based market sentiment, ahead of U.S. jobless claims and Factory orders report. Main focus will remain on Friday's U.S. non-farm payroll figures; strong numbers could revive hopes of U.S interest rate hike this year. Immediate resistance is located at 101.76, break above could take it over 102. On the lower side, support is seen at 100.67 (Aug-2 Low), break below targets 100.00 handle.
GBP/USD: Sterling steadied as investors remain cautious ahead of the Bank of England's policy decision later in the day, where it’s expected to cut interest rate to a record low. Markets price in a 25bps cut to the main interest rates, while some analysts expect the bank to expand their bond purchases by £50 billion to £425 billion in order to strengthen the economy from Brexit fallout shock. Sterling trades at 1.3310, within the sight of a near 3-week high of 1.3371 struck on Wednesday. Investor’s attention will remain on BoE policy outcome, ahead of economic data from the U.S. Immediate resistance is located at 1.3400, break above targets 1.3480. On the lower side, support is seen at 1.3215 (10-DMA), break below could take it lower 1.3200 handle.
AUD/USD: The Australian dollar rose, regaining the 0.7600 handle, despite Australia posting downbeat retail sales numbers. The major was largely boosted by an oil price recovery, which gained more than 3 percent in the previous session. The economy's retail sales for the month of June edged down 0.1 percent from 0.2 percent, missing forecast of 0.4 percent. The Aussie trades 0.3 percent higher at 0.7610, hovering towards a peak of 0.7637 touched earlier in the week. The major will be driven by broad based market sentiment, ahead of U.S. economic data, while the highly influential RBA Monetary Policy Statement and NFP data will be released tomorrow. Immediate resistance is located at 0.7637, break above targets 0.7676/ 0.7700. On the lower side, support is seen at 0.7547, break below could take it near 0.7500.
NZD/USD: The New Zealand dollar edged up after slumping below the 0.7200 handle on Wednesday. The major rose as the oil price recovered from 4-month lows; however, increasing Reserve Bank New Zealand rate cut speculation capped gains. The Kiwi trades up at 0.7162, having touched an intra-day high of 0.7184. The movement in the major will be driven by developments surrounding RBNZ rate cut talk, ahead of U.S. unemployment claim and factory orders data. Immediate resistance is located at 0.7229, break above could take it till 0.7256. On the downside, support is seen at 0.7114 (10-DMA), break below targets 0.7100.
Equities Recap
Asian shares rose after oil rebounded from its 4-month lows following inventory drawdown, while investors remained cautious head of Bank of England policy meeting.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, led by gains in resource shares, recouping some of its 1.5 percent losses on Wednesday.
Tokyo's Nikkei gained 1.07 pct at 16,254.89, Australia's S&P/ASX 200 index rose 0.27 pct at 5,480.40 points and South Korea's KOSPI added 0.3 percent at 2,001.05 points.
Shanghai composite index trades flat at 2,980.28 points, while CSI300 index trades 0.2 percent up at 3,200.30 points.
Hong Kong’s Hang Seng was trading 0.6 percent higher at 21,876.09 points. Taiwan shares edged up 0.3 pct at 9,024.71 points.
Commodities Recap
Crude oil prices were little changed after gaining over 3 percent in the previous session following a larger-than-expected gasoline draw, which eased concerns about global supply glut. International Brent crude oil was trading 0.1 percent lower at $43.34 per barrel by 0612 GMT, having gained $43 mark in the previous session. U.S. West Texas Intermediate crude was trading flat at $41.14 per barrel after rising 3.3 percent and back over $40 the previous session.
Gold extended its previous session losses, as the dollar strengthened following better-than-expected U.S. employment data. Spot gold dropped about 0.4 percent to $1,352.36 an ounce by 0613 GMT, having ended down 0.4 percent at $1,357.73 on Wednesday. U.S. gold edged down 0.2 percent at $1,362.30 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5471 percent up by 0.005 bps, while 5-year was 0.002 bps higher at 1.0718 percent.
The 40-year Japanese government bonds traded at 0.450 pct, its highest yield in 4- months, while the10-year JGB futures pare much of earlier small losses, now down 0.08 point on day.
The Australian government bonds slumped after data showed that the country’s retail sales increased for five consecutive months in June. The yield on the benchmark 10-year Treasury note rose 2 basis points to 1.968 percent and the yield on short-term 3-year note climbed 1/2 basis point to 1.456 percent.
The New Zealand bonds plunged after the benchmark S&P/NZX 50 stocks index rose 0.3 percent, following modest gains on Wall Street. The yield on the benchmark 10-year bond rose 2 basis points to 2.235 percent, the yield on 7-year note also climbed 2 basis points to 1.960 percent and the yield on short-term 2-year note ended 1/2 basis points higher at 1.825 percent.
