Market Roundup
- GBP/USD +0.55%, USD/JPY -0.35%, EUR/USD -0.03%
- DXY -0.1%, DAX +1.0%, Brent +1.2%, Iron -0.6%
- Germany May Ind output -1.3% m/m vs revised +0.5% previous, 0.0% exp
- Switzerland May CPI -0.4% y/y vs -0.4% previous, -0.5% exp
- UK Jun Halifax Hse Prices +8.4% 3m/yy vs 9.2% previous, 7.7% exp
- UK May Mfg Output +1.7% y/y vs revised +1.5% previous, 0.7% exp
- Germany Chamber of Commerce-Sees 1% drop in exports to UK 2016 post Brexit
- BoJ Nagoya-many firms in central .Japan resilient to FX volatility
- BoJ Osaka: Many western Japan firms worried about yen rises
- BoJ Gov Kuroda – Sticks to script, economy expanding moderately
- Kuroda inflation lagging, slightly negative or @zero for now
- Kuroda BoJ to stick to current policy, ease more if needed
- S&P cuts Australia rating outlook to negative from stable, rating still AAA
- China output glut will be touchy topic at G20 talk – Nikkei
- Oil industry losing the burn of Asian demand
Economic Data Preview
- (0815 ET/1215 GMT) Payrolls processor ADP releases U.S. national employment data for the month of June. The report is expected to show that 159,000 jobs were added in June, compared with 173,000 jobs in May.
- (0830 ET/1230 GMT) New applications for U.S. unemployment benefits is likely to have increased 2,000 to a seasonally adjusted 270,000 for the week ending July 2, while continuing claims for the week ending June 24 is expected to have declined to 2.113m from 2.120m.
- (0830 ET/1230 GMT) The statistics Canada is likely to report that building permits have increased by 2 percent in May after a 0.3 percent decline in April.
- (0900/1300) Mexico's inflation rate in the 12 months through June is expected to have increased to 2.60 percent, same as the rate in April.
- (1000 ET/1400 GMT) Canada's Ivey Purchasing Managers Index is expected to rise 50.2 in June from prior 49.4.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Natural Gas Storage for the week ending July 1.
- (1100 ET/1500 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending July 1.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade operation 30-year Ginnie Mae max $1.325 bln.
- (1145 ET/1545 GMT) FedTrade operation 15-yr F.Mae/ Fr.Mac max $675 mln.
FX Beat
USD: The dollar index, against a basket of currencies trades lower at 96.06, pulling away from a peak of 96.50 touched in the previous session.
EUR/USD: The euro declined, as investors remained cautious over the monetary policy divergence between the Fed and ECB. The major failed to extend gains above the 1.1100 level after rising to 1.1107 earlier in the session. The pair trades 0.2 percent lower at 1.1078, having touched an early low of 1.1056. Markets now await U.S. labour market report for further cues on the Fed’s interest rate outlook. The short term bearish trend from 1.14278 till 1.09115 will come to an end only if the pair breaks above 1.1188 level. Any break above 1.1188 would take the pair to next immediate resistance 1.1235 (21 day MA and also 61.8% retracement of 1.14279 and 1.0911)/1.13000. The minor resistance is around 1.1120/1.1150. On the lower side, the break below 1.1050 targets 1.1000/1.0970.
USD/JPY: The greenback continues to decline for the fifth consecutive session as risk-off sentiment drove investors towards perceived safe-haven yen. The major trades 0.2 percent lower at 101.03, having touched a low of 100.62 earlier in the session. Investors will closely watch U.S. monthly employment report for further momentum amid persisting Brexit-related uncertainty across the financial markets. The short term trend is slightly bearish as long as resistance 101.50 (55 H EMA) holds. The minor resistance is around 101.50 and any break above confirms minor trend reversal, a jump till 102/102.69/103.50 is possible. On the lower side minor support is around 100 and any break below will drag the pair till 98.80/98.
GBP/USD: Sterling rose above $1.3000 level, after declining below $1.2800 for the first time in more than three decades on Brexit worries. The major was supported by better-than-expected industrial production and manufacturing production data. Britain's industrial production for the month of May came in at 1.4 percent y/y versus forecast 0.5 percent, while manufacturing production for May stood at 1.7 percent y/y against consensus of 0.8 percent. Sterling gained 0.8 percent to 1.3029, pulling away from a 31-yeaqr low. On the higher side major resistance is around 1.3012 and any break above 1.3012 will take the pair till 1.3235 (200 HMA)/1.3300. On the lower side any break below 1.2960 will drag the pair till 1.2870/1.2790. Against the euro, the pound was trading higher at 85.08 pence.
USD/CHF: The Swiss franc declined as upbeat U.S economic data strengthened the dollar against most of its peers. The greenback trades 0.2 percent higher at 0.9771, hovering towards a high of 0.9805 touched in the previous session. The Swiss National Bank's foreign exchange reserves increased 608.811 billion Swiss francs at the end of June versus 602.148 billion francs in May. Data released earlier showed that the economy's consumer price index for June came in at -0.4 percent y/y against forecast -0.5 percent. The short term decline from 0.9960 till 0.9512 will come to end if the pair closes well above 0.9840. On the higher side, major resistance is around 0.9840 and any indicative break above 0.9840 will take the pair till 0.9900/0.9960 in the short term. The minor resistance is at 0.9764/0.9805. Any short term weakness can be seen only below 0.9670 (21 day MA) and any violation below targets 0.9630/0.9580/0.9520.The minor support is at 0.9740. Overall bullish invalidation is only below 0.9500.
AUD/USD: The Australian dollar trades flat amid improving risk conditions and mixed fundamentals. The major declined to a low of 0.7466 after S&P revised Australia’s sovereign credit outlook to negative, however, it attempted a recovery to sustain gains above 0.7500 handle. The Aussie was supported by rising oil prices and European shares, amid recovering investor’s sentiments across the markets. The pair trades at 0.7516, well away from sessions low. On the higher side any break above major resistance 0.7550 will take it till 0.7580/0.7635.The major support is around 0.7480 and break below will drag the pair till 0.7430/0.7370.
NZD/USD: The New Zealand dollar rallied, extending gains above the 0.7200 handle. The major strengthened after RBNZ deputy governor Grant Spencer said that the central bank would use macro-prudential tools in order to curb housing market. The Kiwi trades 1.2 percent higher at 0.7220, hovering towards a peak of 0.7240. Immediate resistance is seen at 0.7250 level, break above targets 0.7298. On the lower side, support is seen at 0.7108 (20-DMA), break could take the pair lower 0.7100 handle.
Equities Recap
European shares advanced as upbeat U.S. economic data strengthened market sentiments, easing some of the Brexit worries.
The European market started firmer with the STOXX 600 higher at 1.5 pct, Germany's DAX gaining 1.0 pct and France's CAC up 1.6 pct.
Britain's FTSE 100 rose1.3 percent, while mid-cap FTSE 250 index added 1.4 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8 percent.
Tokyo's Nikkei dropped 0.67 pct at 15,276.24, Australia's S&P/ASX 200 index rose 0.74 pct at 5,235.80 points and South Korea's KOSPI added 1.06 pct.
Shanghai composite index ended flat at 3,016.85 points, while CSI300 index declined 0.2 pct at 3,209.95 points. Hong Kong’s Hang Seng index rose 1.0 pct at 20,706.92 points.
Commodities Recap
Oil prices edged higher after a report showed a decline in U.S. crude oil inventories, amid a glut of refined products and economic growth worries. Brent crude oil were trading at $49.33 per barrel at 1035 GMT, while U.S. West Texas Intermediate crude was trading at $47.95 per barrel.
Gold advanced for a seventh consecutive session, having touching its highest over two years in the previous session, as investors seeking safe-haven assets even as share markets gains. Spot gold was trading flat at $1,364.62 an ounce by 1039 GMT, having touched its highest since March 2014 at $1,375.02 on Wednesday. U.S. gold was up 0.1 percent at $1,369.
Treasuries Recap
The US Treasuries were little changed in the wake of the June FOMC minutes released that highlighted increased uncertainty in the employment outlook following weaker employment gains seen in recent months. The yield on the benchmark 10-year Treasury note hovered around 1.38 percent mark and the yield on short-term 2-year note rose 1 basis points to 0.597 percent.
The UK gilts plunged as stock markets mostly firmed Thursday after a rebound on Wall Street, bolstered by gains in oil prices and sign the U.S. economy remains on track. The yield on the benchmark 10-year gilts rose 1 basis point to 0.777 percent, the yield on super-long 40-year bonds jumped 2-1/2 basis points to 1.397 percent and the yield on 25-year bonds also climbed 2 basis points to 1.467 percent.
The German bund yields rebounded as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. The yield on the benchmark 10-year bond rose nearly 1-1/2 basis point to -0.165 percent, yield on super-long 30-year bonds jumped more than 2 basis points to 0.366 percent and the yield on 20-year note bounced 2 basis points to 0.192 percent.
The Japanese government bonds traded mixed on Thursday, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. The yield on the benchmark 10-year bonds fell 1/2 basis points to -0.270, short-term 2-year JGB yield fell 1 basis point to record low of -0.340 percent, super-long 40-year bonds rose nearly 3 basis points to 0.084 percent, the yield on 30-year JGB also jumped more than 2 basis points to 0.066 percent and the yield on 20-year JGB also bounced nearly 2 basis points to 0.042 percent (fell below zero to -0.005 percent for the first time on Wednesday).
The New Zealand government bonds closed Thursday's session in positive terrain after dairy and milk prices fell at the latest Global Dairy Trade (GDT) auction. The yield on benchmark 10-year bond fell 1-1/2 basis point to 2.250 percent in the end session, the yield on 7-year note also dipped 1-1/2 basis point to 1.950 percent and the yield on short-term 2-year note ended ½ basis points lower at 1.975 percent.
The Australian government bonds slumped as data indicating a strengthening US economy offered a respite to weeks of market turmoil following the UK’s vote to leave the EU. The yield on the benchmark 10-year Treasury note rose more than 3 basis points to 1.900 percent and the yield on short-term 2-year note also jumped 2-1/2 basis points to 1.578 percent.
