Market Roundup
- EUR/USD -0.39%, USD/JPY +0.52%, GBP/USD -0.48, EUR/GBP +0.06%
- DXY +0.44%, DAX +0.74%, FTSE +0.37%, Brent -0.08%, Gold -0.55%
- Ruling LDP/PM Abe suffer major defeat in Tokyo elections
- Polls reflection of ebbing LDP support, may need to resort to fiscal stimulus
- Japan's tax revenue in 2016/17 below previous year's level - sources
- Euro zone factories round off first half of 2017 on 6-year high -PMI
- Eurozone Jul Markit manufacturing Final PMI, 57.4 vs forecast 57.3, previous 57.3
- Eurozone May Unemployment Rate, +9.3% vs forecast +9.2%, previous +9.3%
- UK factories lose pace as exports slow despite weaker pound
- Great Britain Jun Markit/CIPS manufacturing PMI, 54.3 vs forecast 56.3, previous 56.7 revised 56.3
- German factory growth reaches 74-month high in June- PMI
- German Markit/BME Mfg PMI, 59.6 vs forecast 59.3, previous 59.3
- Saudi Arabia, allies give Qatar two more days to accept demands
- Trump talks North Korea threat in calls with China, Japan leaders
- Oil stages longest rally since 2012, OPEC output may cap gains
- Gold hits 7-week low as dollar firms, Treasury yields climb
- Brisk trade marks launch of China, Hong Kong bond connect scheme
- China-HK "Bond Connect" sees 7.05 bln yuan of trade on the first day
Economic Data Ahead
- (0945 ET/1345 GMT) Financial firm Markit releases U.S. Manufacturing PMI for the month of June. The index is likely to show a final reading of 52.1 after posting similar gains in the previous month.
- (1000 ET/1400 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. manufacturing Purchasing Managers' index rose to 55.2 in June from a final reading of 54.9 in May.
- (1000 ET/1400 GMT) The Commerce Department is likely to report that U.S. construction spending rebounded 0.2 percent in May after declining 1.4 percent in the previous month.
- (1030 ET/1430 GMT) Markit releases Mexico's Manufacturing Purchasing Managers' Index for the month of June.
- N/A Mexico's central bank issues monthly poll of private-sector economists' forecasts on key indicators like inflation, GDP, and the peso exchange rate.
- (1530 ET/1930 GMT) Autodata Corp is expected to report that U.S. auto sales figures edged down to an annualized rate of 16.60 million units in June from 16.66 million units in May.
- (1700 ET/2100 GMT) The New Zealand Institute of Economic Research (NZIER) will report its Business Confidence for the second quarter. The indicator came in at 17 percent in the prior quarter.
Key Events Ahead
- (1330 ET/1730 GMT) Bank of England MPC Member Andrew G Haldane's Speech
FX Beat
DXY: The dollar rallied across the board following a rise in U.S. government bond yields and expectations that the Federal Reserve would hike interest rates again this year. The greenback against a basket of currencies traded 0.4 percent up at 96.06, having touched a low of 95.47 the prior session, it’s lowest since Oct. 3. FxWirePro's Hourly Dollar Strength Index stood at -114.36 (Highly Bearish) by 1000 GMT.
EUR/USD: The euro tumbled below the 1.1400 handle as the bid tone behind the dollar strengthened across the board. Investors seem to have ignored stronger manufacturing PMI reports from the Euro area economies, as markets continue to take profits on their USD short. The European currency traded 0.4 percent down at 1.1373, having touched a high of 1.1445 on Friday, its highest since May 5, 2016. FxWirePro's Hourly Euro Strength Index stood at 27.30 (Neutral) by 1000 GMT. The pair is facing strong resistance around 1.1450 and any further bullish continuation only above that level. On the lower side, near term support is around 1.1380 and any break below will drag it down till 1.1350/1.13180 (38.2% retracement of 1.1445 and 1.11092)/1.1290.
USD/JPY: The dollar rallied to a 1-1/2 month high following a rise in U.S. government bond yields to their highest in seven weeks. Moreover, risk-on sentiment around the equity markets and a rebound in the greenback from recent lows further weighed on the Japanese Yen's safe-haven demand. The major traded 0.6 percent up at 112.97, having hit a high of 112.99 earlier, its highest since May 17. FxWirePro's Hourly Yen Strength Index stood at -71.37 (Bearish) by 1000 GMT. The pair is facing near-term support at 111.75 (100- day MA) and any break below 111.75 will drag the pair down till 110.95/110. On the higher side, near term resistance is around 113, break above will take it to next level till 113.40/114.35.
GBP/USD: Sterling declined after rising for four consecutive sessions following the release of weaker-than-expected data from Britain's manufacturing sector. British factories grew more slowly than expected in June as the Markit UK Manufacturing PMI fell to 54.3 from a downwardly revised 56.3 in May, raising doubts whether the Bank of England will raise interest rates this year. Sterling traded 0.5 percent down at 1.2963, having hit a high of 1.3029 the prior session, its highest since May 23. FxWirePro's Hourly Sterling Strength Index stood at 83.53 (Slightly Bullish) by 1000 GMT. The pair should break above 1.3050 for further bullishness and any violation above will take it till 1.3110 (113% retracement of 1.30475 and 1.25894)/1.3150/1.33150 (88.6% retracement of 1.3440 and 1.19040). On the lower side, near-term minor support is around 1.2940 (4H 21- EMA) and any break below will drag it down till 1.29250 (23.6% retracement of 1.25895 and 1.30298)/1.2840(200- 4H MA). Against the euro, the pound traded 0.2 percent down at 87.74 pence, having hit a 7-month low of 88.79 on Thursday.
USD/CHF: The Swiss retreated from an 8-month high as the greenback gained across the board following a rise in the U.S. Treasury yields. The major trades 0.3 percent up at 0.9615, having touched a low of 0.9550 on Friday, its lowest since Nov. 9. FxWirePro's Hourly Swiss Franc Strength Index stood at -32.48 (Neutral) by 1000 GMT. The intraday major resistance is 0.9655 (200- HMA) and any break above will take the pair till 0.9687 (61.8% retracement of 0.9808 and 0.9550)/0.9710. On the lower side, major support is around 0.9550 and any break below will drag it till 0.9520/0.9495 level.
AUD/USD: The Australian dollar slumped, halting a 3-day winning streak as a larger-than-expected drop in Australian building permits, coupled with broad-based U.S. dollar strength undermined the bid tone around the major. The Aussie trades 0.4 percent down at 0.7655, having hit a high of 0.7712 on Friday, it’s strongest since Mar. 21. FxWirePro's Hourly Aussie Strength Index stood at 46.46 (Neutral) by 1000 GMT. On the lower side, near term support is around 0.7600 (10- day MA) and any break below will drag the pair till 0.7530 (200- MA). The near term resistance is around 0.7750 and any break above targets 0.7800/0.7835.
Equities Recap
European shares rose following a rebound in oil and banking stocks, while the greenback rallied across the board as the U.S. Treasury yields resume rise.
The pan-European STOXX 600 index climbed 0.7 percent to 381.99 points, while the FTSEurofirst 300 index rallied 0.8 percent to 1,502.66 points.
Britain's FTSE 100 trades 0.4 percent up at 7,340.10 points, while mid-cap FTSE 250 fell 0.2 percent to 19,297.37 points.
Germany's DAX rose 0.8 percent at 12,416.08 points; France's CAC 40 trades 1.02 percent higher at 5,172.89 points.
Commodities Recap
Crude oil prices tumbled, halting its seven-day winning streak, as a rise in OPEC output in June weighed heavily on prices. International benchmark Brent crude was trading 0.8 percent down at $48.61 per barrel by 0957 GMT, having hit a high of $48.97 the prior day, its strongest since Jun. 12. U.S. West Texas Intermediate traded 0.7 percent lower at $45.98 a barrel, after rising as high as $46.35 earlier, its strongest since Jun 14.
Gold prices slumped to a fresh 7-week low earlier in the session as a rise in global shares and a rebounded in greenback from nine-month lows strengthened market sentiment. Spot gold declined 0.6 percent at $1,234.00 per ounce at 1013 GMT, having lost over 2 percent in the month of June, its first monthly decline this year. U.S. gold futures for August delivery fell 0.1 percent to $1,240.80 per ounce.
Treasuries Recap
The UK gilts slumped as investors await the country’s 10-year auction, scheduled to be held on July 6. Also, the Bank of England (BoE) Governor Mark Carney’s speech, due later today will add more clarity to the debt market. The yield on the benchmark 10-year gilts, rose 1 basis point to 1.26 percent, the super-long 30-year bond yields climbed 1-1/2 basis points to 1.88 percent while the yield on the short-term 2-year hovered around 0.35 percent.
The Eurozone periphery bonds gained on rising demand for safe-haven assets and as investors have largely shrugged off the slightly higher-than-expected German manufacturing PMI for the month of June. However, the country’s unchanged unemployment rate added resistance to the continuous rise in bond prices. The benchmark German 10-year bond yields, fell nearly 1 basis point to 0.46 percent, the French 10-year bond yields also slipped close to 1 basis point to 0.81 percent, Irish 10-year bond yields collapsed 1-1/2 basis points to 0.86 percent, Italian slumped 3 basis points to 2.12 percent, Netherlands 10-year bond yield down 1 basis point to 0.64 percent, Portuguese equivalents plunged 2-1/2 basis points to 2.99 percent and the Spanish 10-year yields traded nearly 4 basis points lower at 1.48 percent.
The Japanese government bonds trended lower as investors remained cautious ahead of the country’s 10-year auction, scheduled to be held on July 4. Also, the 30-year JGB auction, due on July 6 will provide further direction to the debt market. The yield on the benchmark 10-year bond, rose 1/2 basis point to 0.08 percent, the long-term 30-year bond yields climbed nearly 1 basis point to 0.86 percent while the yield on the short-term 2-year note traded flat at -0.11 percent.
The New Zealand bonds closed on the downside as investors remained cautious ahead of the GlobaldairyTrade price auction, scheduled to be held on July 4 amid a silent trading week. At the time of closing, the yield on the benchmark 10-year bond, jumped 9-1/2 basis points to 2.99 percent, the yield on 7-year note surged 9 basis points to 2.88 percent and the yield on short-term 2-year note ended 6 basis points higher at 2.09 percent.
The Australian bonds slumped at the start of the trading week tracking weakness in the U.S. counterpart and as investors remain cautious ahead of the Reserve Bank of Australia’s (RBA) monetary policy decision, scheduled to be held on June 4. The yield on the benchmark 10-year Treasury note, jumped 4 basis points to 2.64 percent, the yield on 15-year note surged 3-1/2 basis points to 2.99 percent and the yield on short-term 2-year traded nearly 1 basis point higher at 1.75 percent.
