- IMF review recommends delaying currency basket adoption of CNY.
- IMF won't revisit selection criteria now, current basket in place till Sept 30 2016.
- China July Caixin PMI services 53.8 vs 51.8 previous.
- Japan July PMI services 51.2 vs 51.8 previous.
- Australia July AIG 54.1 vs 51.2 previous.
- New Zealand Q2 unemployment 5.9%, 5.9% exp, employment +0.3% q/q, +0.5% expected.
- New Zealand Fonterra GDT price index -9.3% but volumes up at auction.
- Germany July Markit services PMI 53.8 vs 53.7 previous, 53.7 expected.
- Germany July Markit composite final PMI 53.7 vs 53.4 previous.
- Euro zone business growth exceeds expectations is ignored.
- Euro zone July Markit services final PMI 54.0 vs 53.8 previous, 53.8 expected.
- Euro zone July Markit comp final PMI 53.9 vs 53.7 previous, 53.7 expected.
- Euro zone June Retail sales -0.6%m/m vs 0.2% previous, -0.3% expected.
- Euro zone June Retail sales 1.2%y/y vs 2.4% previous, 1.9% expected.
- Switzerland July CPI -0.6m/m vs 0.1% previous, -0.4% expected.
- Switzerland July CPI -1.3y/y vs -0.1% previous, -1.1% expected.
- UK NIESR expects economic growth to slow to +0.4% q/q in Q3.
- UK July Markit/CIPS services PMI 57.4 vs 58.5 previous, 58.0 expected.
- (0700 ET/1100 GMT) US MBA Weekly Mortgage application activity indices.
- (0815 ET/1215 GMT) US July ADP national employment, +215k eyed; last +237k.
- (0830 ET/1230 GMT) US Treasury announces new 3- and 10-year notes and 30-year bonds, e: $24/24/16bn.
- (0830 ET/1230 GMT) US June trade balance, $42.8 bln deficit eyed; last $41.9 bln deficit.
- (0830 ET/1230 GMT) Canada June trade balance, C$2.8 bln deficit eyed; last C$3.34 bln deficit.
- (0900 ET/1300 GMT) Brazil releases the services and composite PMIs for July.
- (0945 ET/1345 GMT) US July Markit PMI services final; flash 55.2.
- (0945 ET/1345 GMT) US July Markit PMI composite final; flash 55.2.
- (1000 ET/1400 GMT) US July ISM PMI non-manufacturing, 56.2 eyed; last 56.0.
- (1130 ET/1530 GMT) Brazil to report foreign exchange flows.
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade operation 30-year Fannie Mae / Freddie Mac, max $1.950 bn.
FX Recap
USD: The dollar touched a 3-1/2 month high against a basket of currencies on Wednesday after a voting member of the U.S. Fed's policy-setting committee expressed support for an interest rate hike in September. The dollar index rose 0.1 percent at 98.096, having hit a high of 98.218 in Asian trade, its highest since late April. That took the euro to a 2-week low of $1.0847.
EUR/USD is supported below 1.0900 levels and currently trading at 1.0855 levels. It has made intraday high at 1.0892 and low at 1.0846 levels. The euro remained subdued and continued to trade in a tight range on Wednesday, ignoring the relatively upbeat data from across the currency bloc and staying under pressure from a strong USD. The Euro zone services sector maintained a solid hold on growth and continued expanding in July, with the final reading booking 54.0 points in the measured month, slightly worse than the 54.4 a month ago. The pair keeps the weekly range below the 1.1000 handle, against a backdrop of a cautious tone from investors in light of relevant releases in the US economy and ahead of the critical Non-farm Payrolls due on Friday. Pair was stamped on by the bears when Atlanta's FED President Dennis Lockhart changing from his usual dovish tone to say that September would be an appropriate time to hike rates, unless "significant deterioration" in data would occur between now and then. The focus now shifts to the US ADP employment data, which is expected to show 210k growth in private sector jobs in July. The ISM non-manufacturing is seen rising to 56.2 in July from 56.00 in June. Initial support is seen around at 1.0789 and resistance at 1.1195 levels. Option expiries are at 1.0890 (250M), 1.0945-50 (600M), 1.1000 (251M).
USD/JPY is supported above 124.00 levels and posted a high of 124.46 levels. It has made intraday low at 124.25 and currently trading at 124.41 levels. The greenback remained better bid in Asia against the Japanese currency as the USD bulls continued to ride higher on Fed Lockhart's comments, stating that Sept would be the appropriate time to raise interest rates which offered the much-need impetus to the US dollar. Moreover, downbeat Japanese services PMI data added to further losses in the yen, driving USD/JPY higher. Meanwhile, the buck appears to gather pace in a bid to retest the key level - 124.50 for the fifth time ahead of Friday's NFP. Later in the day, the pair could be influenced by US ADP employment data, trade figures and services PMI report ahead of Friday's BOJ's monetary policy statement. Initial resistance is seen at 124.57 and support is seen at 120.63 levels. Option expiries are at 123.70 (300M), 125.00 (300M).
GBP/USD is supported below $1.5600 levels. It made an intraday high at 1.5605 and low at 1.5525 levels. Pair is currently trading at 1.5583 levels. Sterling dropped against the dollar and the euro on Wednesday, after UK Service PMI slowed unexpectedly in July. The UK services PMI came at 57.4 in July, compared to the 58.5 seen a month earlier. The Bank of England is set to convene on interest rates on August 6th and for the first time it will publish Monetary Policy Committee (MPC) minutes and the Inflation Report all at the same time. Although no change in the interest rates is expected, given the recent verbal hawkishness from the MPC members, including David Miles and BOE's governor Mark Carney, sterling is likely to be boosted should the inflation forecast be accompanied by a solid wage growth forecast, justifying monetary tightening markets shrugged off upbeat UK manufacturing PMI data which continued its expansion in July. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.
NZDUSD is supported below 0.6600 levels and trading at 0.6525 levels and made intraday low at 0.6517 and high at 0.6548 levels. New Zealand's labour market took a turn for the worse in the June quarter, with job growth unable to meet population growth, pushing the unemployment rate higher. The jobless rate was seen rising from 5.8% in the March quarter to 5.9% in the June quarter, according to Statistics New Zealand, coming in line with market predictions. Employment growth slowed from 0.7% to just 0.3%, with only 7,000 more people employed over the quarter, the weakest increase since the March 2013 quarter. More bad news arrived for New Zealand overnight after Fonterra's fortnightly Global Dairy Trade (GDT) auction saw prices take another dive, with the GDT index sliding a further 9.3%, following the previous decline of 10.7%. Initial support is seen at 0.6465 and resistance at 0.6789 levels.
AUD/USD is supported below 0.7400 levels and trading at 0.7354 levels. It has made intraday high at 0.7382 levels and low at 0.7333 levels. The Aussie edged lower this session, erasing a part of yesterday's gains as a broadly stronger greenback on the back of Fed Lockhart's hawkish comments continue to boost the buck. Moreover, markets resorted to profit-taking after yesterday's RBA-driven rally to fresh two-week highs ahead of another big event due tomorrow from Australia employment data. Markets now await a series of crucial US economic releases due later in the US session. Initial support is seen at 0.7225 and resistance at 0.7647 levels. Option expiries are at 0.7300 (820M), 0.7390-0.7400 (250M).
USD/ZAR is currently trading at 12.7935 levels. It has made intraday high at 12.8051 and low at 12.7162 levels. South Africa's rand hit a fresh 14-year low against the dollar on Wednesday amid concerns about the ailing local economy and after a U.S. Fed's official backed a U.S. rate hike next month. The rand hit a session low of 12.7725; it's weakest since Dec. 2001. It was trading at 12.7580 by 0631 GMT, down 0.1 percent from Tuesday's close. A daily close above 12.62 levels may drag the parity towards 13.85 levels (March 2001 high). Alternatively, reversal from this level will take the parity around 12.14 levels.
Equities Recap
Europe's index of the leading 300 shares was up 0.8 percent at 1,593 points, Britain's FTSE 100 was up a third of one percent and Germany's DAX up 1 percent in early deals. France's CAC 40 was also up 1 percent, led by a 8.5 percent surge in SocGen shares after the bank reported forecast beating Q2 results.
Japan's Nikkei rose 0.5 percent but MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.2 percent. Shanghai Composite Index ended down 1.6 pct at 3,694.57 points, while CSI300 Index closed down 2.1 pct at 3,866.90 points.
Commodities Recap
Oil prices climbed for a second day on Wednesday, recovering from a drop below $50 a barrel after weekly data showed a fall in U.S. crude stocks, although a stronger dollar tempered gains. September Brent crude futures rose 43 cents to $50.42 a barrel by 0827 GMT after gaining 1 percent in the previous session, up from a six-month low on Monday. U.S. crude for September delivery rose 36 cents to $46.10 a barrel, recovering from Monday's 4-month low.
Gold slipped toward a 5-1/2-year low on Wednesday as the dollar strengthened after comments from a Fed official backed expectations that the U.S. central bank would hike interest rates as early as next month. Spot gold was down 0.2 percent at $1,085.10 an ounce by 0218 GMT. Bullion has stayed largely below $1,100 since breaching that key support level in a late July rout that pulled it to as low as $1,077, its weakest since February 2010. U.S. gold for delivery in December slipped 0.6 percent to $1,084.70 an ounce.
Treasuries Recap
Yields on 10-year US Treasury notes rose 3 basis points on the day to 2.24 percent, having hit two-month lows around 2.14 percent earlier this week.
JGB prices ended the day slightly lower, pushing yields up by 0.5bp to 1.5bp from yesterday's final close. A rise in US TSY yields and USD/JPY overnight weighed on JGBs amid higher Tokyo stocks today. as widely expected, the BoJ offered to buy JPY375bn of JGBs in the 1-yr to 5-yr zone, JPY425bn of JGBs in the 3-yr to 5-yr zone, and JPY400bn of JGBs in the 5-yr to 10-yr zone, including the new 10s, under its massive JGB purchase program. Lead Sept JGB futures moved in a range of 0.11 (vs 0.24 yesterday) before finishing the day down 0.11 (=0.074% of yesterday's closing price) at 147.68.
German 10-year yields were 3 basis points higher at 0.66 percent, rebounding from a two-month low hit on Tuesday and tracking a similar rise in U.S. Treasury yields. Yields on other top-rated euro zone bonds were also 3 bps up. Spanish and Italian bond yields were slightly lower at 1.86 percent and 1.77 percent, respectively.
UK Gilts opened 42 ticks lower than the settlement of 117.41, as predicted, after the hawkish comments noted overnight from Atlanta Fed Lockhart. Sellers broke through the 23.6% Fibo from June highs to July lows at 1.884%, and then took out former lows around the 1.93% level.
New Zealand government bond yields were as much as 3 basis points higher. Australian government bond futures fell, with the 3-year bond contract off 8 ticks at 98.000. The 10-year contract lost 8.5 ticks to 97.1450. The spread between 3 and 10-year bonds narrowed to 81 basis points, the smallest since early June.
