Market Roundup
- BOE keeps the interest rate at 0.5% and asset purchase facility at 375B GBP.
- Australia July Employment +38.5k vs 7.3k previous, +10.0k expected.
- Australia July Unemployment rate 6.3% vs 6.0% previous, 6.0% expected.
- Japan June Leading indicator +1.2 vs -0.2 previous.
- Japan June Coincident indicator +0.7m/m vs -1.8 previous.
- MoF flow data week-ended Aug 1 - Japanese buy net Y168.1bn foreign stocks.
- MoF flow data - Japanese buy Y119.8bn bonds, sell Y7.2bn bills.
- MoF flow data - Foreigners sell net Y2.8bn Japanese stocks, Y93.6bn bills.
- MoF flow data - Foreigners buy Y263.9bn bonds, stock volume massive, Y10.8tn buys/sales.
- Saudis to tap markets for $27bn.
- German June Industrial orders 2.0%m/m vs -0.2% previous, 0.1% expected.
- German industrial orders post strongest quarterly rise in more than 4 years.
- No IMF decision on Greek bailout until autumn, Swedish rep tells paper.
- Poland approves Swiss franc mortgage partial conversion bill.
- ECB- Polish FX mortgage restructure plan could hurt banks, economy.
- Swiss Q3 Consumer confidence -19 vs -6 previous.
- UK July Halifax house prices -0.6%m/m vs 1.7% previous.
- UK June Industrial output -0.4%m/m vs 0.4% previous, 0.1% expected.
- UK June Industrial output 1.5%y/y vs 2.1% previous, 2.2% expected.
- UK June Manufacturing output 0.2%m/m vs -0.6% previous, 0.2% expected.
- UK June Manufacturing output 0.5%y/y vs 1.0% previous, 0.4% expected.
Economic Data Ahead
- (0730 ET/1130 GMT) US July Challenger layoffs; last 44.84k.
- (0830 ET/1230 GMT) US weekly initial jobless claims, 273k eyed; last 267k.
- (0900 ET/1300 ET) Mexico consumer confidence index, previous 94.7.
- (0930 ET/1330 ET) Brazil auto sales.
Key Events Ahead
- (0745 ET/1145 GMT) BoE Governor Carney press conference due to start.
- (0945 ET/1345 GMT) Fed Trade operation 15-year Fannie Mae / Freddie Mac, max $475mn.
- (1145 ET/1545 GMT) Fed Trade operation 30-year Ginnie Mae, max $900mn.
FX Recap
EUR/USD is supported around 1.0900 levels and currently trading at 1.0896 levels. It has made intraday high at 1.0941 and low at 1.0883 levels. The euro jumped to fresh daily highs after upbeat German factory data for June came in far better than anticipated. Industrial orders in the euro area's number one economy grew 2.0% in June vs -0.3% in previous release. 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. Investors got an insight into Friday's non-farm payrolls report overnight with the release of the Automatic Data Processing (ADP) employment figures, which showed 185,000 job gains for July, missing the expected gain of 216,000. US ISM non manufacturing PMI data released with positive numbers at 60.3 mm vs 56.0 previous release. Initial support is seen around at 1.0789 and resistance at 1.1195 levels. Option expiries are at 1.0850 (1.1BLN),1.0950 (505M), 1.10 (422M), 1.1050-55 (820M).
USD/JPY is supported above 124.00 levels and posted a high of 124.90 levels. It has made intraday low at 124.68 and currently trading at 124.83 levels. The US dollar edges slightly lower versus the Japanese currency in the mid-Asian session, with USD/JPY keeping range in the upper band of 124 handle as the US bulls take a breather after rallying to fresh two-month highs following stronger than expected US services sector data. The ADP employment change for July dropped sharply, from 237,000 in June to only 185,000 in July. This led to some losses for the greenback, although it managed to erase nearly all of them after services sector PMI for July printed 55.7 and ticked higher from June's 55.2, surprising markets on the upside. Looking ahead, pair is likely to resume the upside ahead of weekly jobless claims due later today while Friday's BOJ policy decision and US NFP may provide fresh direction for the pair. Initial resistance is seen at 125.68 and support is seen at 120.63 levels. Option expiries are at 124.00 (825M), 124.70-75 (890M), 125.00 (1.4BLN).
GBP/USD is supported around $1.5500 levels. It made an intraday high at 1.5635 and low at 1.5490 levels. Pair is currently trading at 1.5501 levels. BOE keeps the interest rate and asset purchase facility unchanged as expected. The Bank of England's nine-strong rate-setting committee saw the first split since December last year, as Ian McCafferty voted for a 25 basis point rate hike at the August meeting. The rift is less dramatic than expected as economists had been anticipating at least two members to vote for a rate hike, the minutes from the August meeting of the Monetary Policy Committee (MPC) showed on Thursday. Sterling rose on Thursday as more investors bet that the Bank of England is edging closer to an interest rate hike in the coming months. It rose 0.15 percent at $1.5628, with bulls targeting its recent high of $1.5691 and also gained a fifth of a percent against the euro to trade at 69.75 pence per euro. UK manufacturing production accelerated to 0.2% in June, up from a 0.6% decline in the previous month, while the total gauge dropped 0.4%, slowing pace from 0.3% growth observed in the previous month. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels. Option expiry is at 1.5615 (221M).
NZDUSD is supported below 0.6600 levels and trading at 0.6536 levels and made intraday low at 0.6504 and high at 0.6552 levels. The kiwi recovered from its six-year lows seen in the previous session, when it was flattened by weak New Zealand jobs figures and the strongest US ISM data since 2005. 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. 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%. Traders will now focus on the US session, with weekly jobless claims on the schedule. Initial support is seen at 0.6465 and resistance at 0.6789 levels. Option expiry is at 0.6550 (329M).
USDCHF is supported above 0.9800 levels and currently trading at 0.9828 levels. Pair made in intraday high at 0.9840 and low at 0.9766. The Swiss currency was persistent sold-off versus the US dollar in the European session, pushing USD/CHF to fresh four-month highs beyond 0.98 handle, as markets continue to favour the US dollar ahead of a key US jobs reports. Swiss CPI figures which revealed that consumer prices in Switzerland failed to rebound in July and slid into negative territory on a monthly basis as well. Moreover, broad based USD strength following surprisingly upbeat US services sector PMIs adds further to the rate hike case this September. To the topside, the next resistance is located at 0.9850 levels and to the downside, immediate support might be located at 0.9769 (Today's Low) levels and below that at 0.9700 levels.
AUD/USD is supported below 0.7400 levels and trading at 0.7321 levels. It has made intraday high at 0.7390 levels and low at 0.7314 levels. Among the Asian currencies, Aussie extends losses for the second straight losses as the bulls remained unimpressed by above estimates Australia's jobs data. Job growth in Australia far outpaced expectations - rising by 38,500 in July compared with the market forecast of 10,000, with the participation rate jumping from 64.8% to 65.1%. However, unemployment grew by a staggering 40,100 and the jobless rate rose from a revised 6.1% in June to 6.3% last month, according to the Australian Bureau of Statistics. Initial support is seen at 0.7225 and resistance at 0.7647 levels. Option expiries are at 0.7300 (251M), 0.7350-60 (510M).
Equities Roundup
Emerging market stocks fell to their lowest in over two years as nervousness about an end to record low U.S. and global interest rates and continued weakness in commodity markets took their toll.
The pan-European FTSEurofirst 300 index, which rose 1.3 percent in the previous session, fell back 0.4 percent in early deals as weak oil prices also weighed on energy stocks. UK's FTSE fell 0.2 pct, France's CAC dropped 0.2 pct and Greek equity index rose 0.43 pct in early deals.
Tokyo's Nikkei Average closed up 0.24 pct at 20,664.44. Shanghai Composite Index ended down 0.9 pct at 3,661.54 points, while the CSI300 Index finished down 0.9 pct at 3,831.85 points. MSCI's benchmark emerging markets index hit its lowest level since mid-2013 as fresh losses in China, large parts of Asia and Russia once again weighed.
Commodities Recap
Oil traded near multi-month lows on Thursday with Brent at under $50 a barrel as a supply glut persisted despite record U.S. refinery runs, and little sign of any reduction in production. U.S. crude was down 17 cents at $44.96 a barrel at 0855 GMT after touching an intraday low of $44.82, the weakest since March 20. Brent crude futures were up 9 cents at $49.68 a barrel after dipping to $49.02 on Wednesday, the lowest since Jan. 30.
Gold struggled to pull away from a 5-1/2-year low on Thursday after more upbeat U.S. economic data bolstered prospects that the US Fed could lift interest rates as soon as next month. Spot gold was up 0.1 percent at $1,086.20 an ounce by 0633 GMT. U.S. gold for December delivery was flat at $1,085.70 an ounce.
Treasuries Recap
Most other euro zone bond yields were flat, German Bund yields were unchanged at 0.74 percent, having risen 15 basis points on Wednesday, mainly driven by comments from Atlanta Fed President Dennis Lockhart. Spanish 10-year yields traded at 1.96 percent, Italian yields were 1.89 percent and Portuguese yields at 2.48 percent.
UK Gilts opened 17 ticks higher than the settlement of 116.54, as predicted, as external core markets drew support from a softer equity complex. Buyers also garnered support from some early data after July Halifax house prices showed prices slowing. 10-year cash is sitting in the middle of the 1.95% to 2.00% recent trading range.
JGB prices ended the day lower, with the curve steepening. JGBs opened softer across the curve on a relatively sharp rebound in German Bund yields overnight, and then extended their earlier losses after lunch. According to JGB traders, cash activity was limited to transactions among dealers, except for sporadic dip-buying of the new 10-yr JGBs by several regional banks above the average accepted yield of 0.40% in Tuesday's auction.
New Zealand government bond yields were up to 6 basis points higher. Australian government bond futures fell, with the 3-year bond contract off 1 tick at 98.010. The 10-year contract was down 2.5 ticks to 97.1350.
