Market Roundup
- Canada off’l – Brexit to dominate G20 FinMin meeting – Reuters.
- US Tsy off’l – FX markets in line with fundamentals – Reuters.
- US May net capital outflow $11 bln, April rev $93.1 bln inflow, net foreign holdings of US Tsys -$18.3 bln, Apr -$74.6 bln, Japan holdings $1.133 trln, China $1.244 trln, Apr $1.143 trln and $1.243 trln.
- PBOC fixes yuan at 6.6971 vs USD, last close 6.7019, CNY range 6.6977-6.7011.
- Fitch – Policymakers fuelling China’s mounting debt problems.
- RBA July minutes – Watching economic data closely, will make any adjustment to policy stance as needed, reiterates rising AUD to complicate economic rebalancing, mkt expectations moving toward possible August move – Reuters.
- RBNZ – Proposed new restrictions to take effect September 1, sharp correction to house prices key risk to financial system, risks clearly up – Reuters.
- Greece’s EU/IMF lenders approve further easing of capital controls – Reuters.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Jun CPI, +0.2% m/m, +0.4% y/y eyed; last +0.2%, +0.3%.
- (0430 ET/0830 GMT) Great Britain Jun – core, +0.2% m/m, +1.3% y/y eyed; last +0.2%, +1.2%.
- (0430 ET/0830 GMT) Great Britain Jun RPI, +0.2% m/m, +1.5% y/y eyed; last +0.3%, +1.4%.
- (0430 ET/0830 GMT) Great Britain Jun RPIX; last +0.3% m/m, +1.5% y/y.
- (0500 ET/0900 GMT) Germany Jul ZEW economic sentiment index, 9.0 eyed; last 19.2.
- (0500 ET/0900 GMT) Germany Jul ZEW current conditions index, 51.8 eyed; last 54.5.
- (0830 ET/1230 GMT) United States Jun housing starts, 1.17 mln AR eyed; last 1.16 mln, -0.3% m/m.
- (0830 ET/1230 GMT) United States Jun bldg permits, 1.15 mln AR eyed; last 1.14 mln, +0.5% m/m.
- (0900 ET/1300 GMT) Belgium Jul consumer confidence index; last -6.0.
Key Events Ahead
- N/A ECJ ruling on bank bail-ins.
- N/A Spain 10-year Euro benchmark syndication, via BBVA, Caixa, Citi et al.
- (0330 ET/0730 GMT) Riksbank July 5 policy meeting minutes.
- (0415 ET/0815 GMT) BoE DepGov Woods parliamentary testimony.
- (0440 ET/0840 GMT) Spain E2.5-3.5 bln 3 and 9-month treasury bill auctions.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E41.3 bln allotment eyed, E42.47 bln maturing.
- (0630 ET/1030 GMT) ESM E1.5 bln 6-month bill auction.
- (1005 ET/1405 GMT) BoE DepGov Broadbent parliamentary testimony.
- N/A US Republican National Convention in Cleveland (till Thursday).
FX Beat
DXY: The dollar index, against a basket of currencies edged up to 96.60, hovering towards a 4-month high of 96.79 touched last week.
EUR/USD: The euro trades between a narrow range as investors remain cautious ahead of European Central Bank interest rate decision due on Thursday, amid persisting soft-risk-off sentiment in the markets. The ECB is widely expected to keep rates unchanged and refrain from any additional easing steps. However, some bond traders anticipate the central bank might attend to scarcity of bonds it can buy under its 1.7 trillion euro stimulus programme, with more than a half of German bonds now ineligible for its asset purchase. The major trades flat at 1.1076, hovering under the 1.1100 handle. With the Asia session absolutely data-empty, markets focus will remain on German and Eurozone ZEW economic sentiment in European session, ahead of series of U.S. housing data. Immediate resistance is located at 1.1100 handle, break above targets 1.1126/1.1164. On the downside, support is seen at 1.1024 (Jul-15 Low).
USD/JPY: The Japanese yen rose after touching a 3-week low of 106.32 earlier in the session, its lowest since June 24. The major was weighed down by growing expectations that the Bank of Japan will further ease its monetary policy at the rate review on July 29, as the government prepares new fiscal stimulus to strengthen the economy. The greenback trades 0.4 percent lower at 105.74, failing to sustain gains above the 106 handle. Amid lack of significant macro-fundamentals, the moves in the pair will be driven by broader market sentiment, ahead of U.S. housing starts an building permits report. Immediate support is seen at 105.30 (5-DMA), break below could take it lower 105 handle. On the upside, resistance is located at 106.32 (Session High), break above targets 106.81/107.00.
GBP/USD: Sterling edged down, struggling to sustain gains above the 1.3200 handle amid persisting risk-aversion profile in the market. On Monday, the major rose to 1.3314 following Bank of England policymaker Martin Weale's hawkish comments. Weale stated that he was uncertain if he would support an interest rate cut at next month's policy meeting, as he did not see any reason to worry among consumers or businesses after Brexit vote. Sterling trades 0.3 percent lower at 1.3216, having touched a low of 1.3203 earlier in the session. Investors now await Britain's consumer price index figures, which are expected to edge higher in June. Immediate support is located at 1.3112 (10-DMA), break below could take it near 1.3000 handle. On the higher side, resistance is seen at 1.3359 (20-DMA), break above targets 1.3400/ 1.3480. Against the euro, the pound trades 0.2 percent lower at 83.76 pence.
AUD/USD: The Australian dollar declined nearly 1 percent after Reserve Bank Australia's July meeting minutes suggested that the central bank might ease its monetary policy further. According to July meeting minute, the RBA will monitor data on inflation, employment and housing to determine whether it requires to change policy again. The Aussie trades 0.9 percent lower at 0.7519, pulling further away from a peak of 0.7676 touched last week. The major is also weighed down by weaker oil prices and lower Asian equities. The pair will continue to track the broad based market sentiment ahead of the U.S. macro-economic data due later in the day. Immediate support is seen at 0.7500, break below could take it till 0.7470/0.7453. On the higher side, resistance is located at 0.7600, break above targets 0.7638/0.7653.
NZD/USD: The New Zealand dollar dropped below the 0.7100 handle, after the Reserve Bank of New Zealand raised deposit requirements for mortgage borrowers, which boosted speculation the bank would cut rates in August. The Kiwi trades 1.1 percent lower at 0.7032, declining for a high of 0.7115, its fifth consecutive session of weakness. Trader’s attention now remains on U.S. housing starts and building permits ahead of Fonterra Global Dairy Trade auction, for further momentum on the major. Immediate support is seen at 0.7000, break below could take it to 0.6980. On the higher side, resistance is located at 0.7115 (Session High).
Equities Recap
Asian shares declined, as a downturn in crude oil prices triggered risk-off sentiment across the financial markets.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.6 percent, hovering away from a 9-month high touched last week.
Tokyo's Nikkei gained 1.37 pct at 16,723.31 and Australia's S&P/ASX 200 index edged down 0.18 pct at 5,448.50 points.
Shanghai composite index trades 0.7 percent lower at 3,020.16 points, while CSI300 index slumped 0.9 percent at 3,232.95 points.
Hong Kong’s Hang Seng was trading 0.5 percent lower at 21,692.47 points. Seoul shares edged down 0.23 pct.
Commodities Recap
Oil prices extended losses as concerns over a crude and fuel oil glut outweighed a likely reduction in U.S. shale production and in U.S. crude stocks. Brent crude oil declined 0.2 percents to $46.82 a barrel at 0628 GMT after finishing the previous session 1.4 percent lower. U.S. West Texas Intermediate crude slipped 0.3 percent to $45.03 a barrel after settling down about 1.6 percent in the previous session.
Gold hovered near its previous session losses, having dropped about 0.7 percent, as risk aversion sentiment reduced expectations of easing monetary policies across the financial markets. Spot gold trades 0.1 percent up at $1,329.06 an ounce by 0629 GMT, having closed down at $1,328.39 on Monday. U.S. gold was unchanged at $1,329.40 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5595 percent down by 0.029 bps, while 5-year was 0.023 bps lower at 1.1071 percent.
The Australian government bonds gained as the Reserve Bank of Australia in its July meeting minutes left hopes alive for the future rate cut in August. The yield on the benchmark 10-year Treasury note fell 5 basis points to 1.950 percent and the yield on short-term 2-year note also dipped nearly 5 basis points to 1.592 percent.
The New Zealand government bonds closed higher as investors remained cautious ahead of the Global Dairy Trade price index figure. The yield on benchmark 10-year bond fell 7 basis points to 2.275 percent, the yield on 7-year note also dipped 7 basis points to 2.025 percent and the yield on short-term 2-year note ended 7 basis points lower at 1.915 percent.
Canadian government bond prices were flat to slightly lower across the maturity curve, with the 2-year price down 0.2 of a Canadian cent to yield 0.579 percent and the benchmark 10-year fell 15 Canadian cents to yield 1.098 percent.
