Market Roundup
- GBP/USD 0.09%, USD/JPY 0.3%, EUR/USD -0.2%
- Japan PM Abe - Will do utmost to defeat deflation
- PM Abe: economy is top priority for the new cabinet
- Japan MOF Asakawa warns against speculative moves in FX market
- China Jul Caixin Services PMI 51.7 vs 52.7 previous
- New Zealand Q2 Labour Cost Index - q/q 0.4% vs 0.4 previous, 0.5 expected
- New Zealand Q2 Labour Cost Index - y/y 1.6% vs 1.8 previous, 1.8 expected
- Australia Jul AIG Services Index 53.9 vs 51.3 previous
- Saudi govt discussing rescue of construction company Oger-report in Lebanese newspaper
- Euro zone Jul Markit Serv Final PMI 52.9 vs 52.7 previous, 52.7 expected
- Euro zone Jul Markit Comp Final PMI 53.2 vs 52.9 previous, 52.9 expected
- Euro zone Jun Retail Sales m/m 0% vs 0.4 previous, 0 expected
- Euro zone Jun Retail Sales y/y 1.6% vs 1.6 previous, 1.7 expected
- One in five company bonds bought by ECB since June yielded less than zero
- German Jul Markit Services PMI 54.4 vs 54.6 previous, 54.6 expected
- German Jul Markit Comp Final PMI 55.3 vs 55.3 previous, 55.3 expected
- Goldman Sachs forecasts GBPUSD at 1.20 & EURGBP at 0.90 in 3 months
- 7 out of 8 Times shadow MPC members say BoE should keep rates unchanged Thurs
- UK Jul Markit/CIPS Serv PMI 47.4 vs 47.4 previous, 47.4 expected
Economic Data Ahead
- (0945 ET/1345 GMT) Markit Economics will release U.S. composite PMI for the month of July. The index posted a final reading of 51.5 in June.
- (0945 ET/1345 GMT) Financial firm Markit releases its July purchasing managers index for the services sector. The index posted a final reading of 50.9 in June.
- (1000 ET/1400 GMT) The ISM is expected to report its non-manufacturing index was steady at 56.0 in July, after rising to 56.5 in June.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending July 29.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae, max $1.375bn.
- (1430 ET/1830 GMT) FedTrade operation 15-year Fannie Mae / Freddie Mac, max $650mn.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent higher at 95.28, recovering from a low of 95.00, it’s lowest since July 5.
EUR/USD: The euro edged down from its 6-week high after Eurozone's posted a mix-set of economic data. Eurozone's Markit PMI composite for July came in better-than-expected at 53.2, surpassing consensus of 52.9, while Markit Service PMI stood at 52.9 versus forecast of 52.7. However, retail sales for June were at 1.6 percent y/y, missing projections of 1.7 percent. The European currency trades 0.2 percent lower at 1.1190, struggling to regain the 1.1200 handle. The major should break above 100 day SMA for further bullishness. Any break above 1.12380 will take the pair to next level till 1.12650/1.1300. On the lower side, break below 1.1155 (90 day EMA) will drag the pair down till 1.1090. The minor support is at 1.1200/1.1180. It should close below 1.1090 for further weakness.
USD/JPY: The Japanese yen declined, as the greenback attempted a minor recovery to sustain gains above the 101.00 handle. The major trades 0.2 percent higher at 101.15, pulling away from a 3-week low of 100.67 struck in the previous session. The short term trend is slightly weak as long as resistance 102 holds. The major resistance is around 102 and any break above confirms minor trend reversal, a jump till 103/104 is possible. On the lower side, major support is around 100 and any break below 100 will drag the pair till 98.
GBP/USD: Sterling recovered after declining to an early low of 1.3287. The major was provided some support after Britain's Markit service PMI for July came in line with consensus and previous 47.4. Investors now await Bank of England policy decision on Thursday, where markets price in a quarter point cut in the bank's interest rate. Sterling trades flat at 1.3353, within the sight of a 3-week high of 1.3371 touched earlier in the session. Against the euro, the pound trades at 0.2 percent higher at 83.85 pence. On the lower side, minor support is around 1.3280 and break below targets 1.3240/1.3160.Technically any break above 1.3300 will take the pair till 1.3480.
USD/CHF: The Swiss franc reversed its previous session gains, as the dollar strengthened across the broad. The greenback rose 0.4 percent to 0.9679, pulling away from a 1-month low of 0.9633 touched in the previous session. On the higher side any break above 0.9680 will take the pair to next level till 0.9745/0.9790 in the short term. The major should close above 0.9860 (200 Day MA) for further bullishness. Technically the low made on Jul 29th is acting as major support and slight weakness can be seen only below that level. Any break below 0.9630 will drag the pair down till 0.9580/0.9525.Further weakness can be seen only below 0.9500.
AUD/USD: The Australian dollar retreated after declining to an intra-day low of 0.7575, however, it failed to regain the 0.7600 handle, trading 0.1 percent lower at 0.7594. The ongoing weakness in the crude oil prices and weaker Chinese services PMI undermined the bid tone around the Aussie. On the higher side, any break above 0.7650 will take the pair to next level till 0.7680/0.7725. The major support is around 0.7480 and break below will drag the pair till 0.7420/0.7380.
NZD/USD: The New Zealand dollar slipped below the 0.7200 handle, weighed down by subdued wage growth figures, which renewed the pressure on the economy's central bank to ease further. The Kiwi trades 0.7 percent lower at 0.7188, pulling away from a 3-week high of 0.7256 touched in the previous session. Immediate support is located at 0.7141 (20-DMA), break below could take it till 0.7100. On the higher side, resistance is seen at 0.7294, break above targets 0.7324.
Equities Recap
World shares declined for a third consecutive session, weighed down by growing uncertainty surrounding central bank policy, despite European bank shares rebounding after two major earnings reports.
MSCI's global share index fell 0.5 percent for its third straight decline, a run not seen since early June, while MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1 percent, hovering away from its recent 1-year peak.
Banking shares gained 1.5 percent, boosted by HSBC and Societe Generale after their respective earnings reports, however, it failed to lift the broader European indexes.
Germany's DAX trades flat at 10,141.44 points, France's CAC 40 declined 0.4 pct, Britain's FTSE 100 was down 0.2 pct, while mid-cap FTSE 250 index lost 0.5 pct.
The pan-European STOXX 600 index declined 0.1 percent, while the FTSEurofirst 300 index also shed 0.1 percent to 1,320.62 points.
Tokyo's Nikkei slumped 1.88 pct at 16,083.11, Australia's S&P/ASX 200 index declined 1.24 pct at 5,472.10 points and South Korea's KOSPI shed 1.2 pct at 1,994.79 points.
Shanghai composite index rose 0.2 pct at 2,978.46 points, while CSI300 index edged up 0.1 pct at 3,193.51 points. Hong Kong's Hang Seng index closes down 1.8 pct at 21,739.12 points.
Commodities Recap
Oil prices edged up slightly, supported by weaker dollar. however, traded within the range of its lowest levels since April, as fuel oversupply and slow economic growth weighed on markets. International Brent crude oil trades 0.3 percent higher at $42.06 per barrel by 1037 GMT, U.S. West Texas Intermediate crude was trading at $39.81 per barrel, up by 0.3 percent, bur well below the $40 marker for the first time since April.
Gold nudged up, extending previous session gains as equities tumbled and soft U.S. economic data reduced prospects of a near-term interest rate hike. Spot gold rose 0.1 percent at $1,364.50 an ounce by 1041 GMT, after hitting a high of $1,367.15, its strongest since July 11, in the previous session. U.S. gold dipped about 0.1 percent to $1,371.50 an ounce.
Treasuries Recap
The US Treasuries were little changed during a relatively quiet session that was largely highlighted by the June personal income and spending release that reflected solid consumer support seen in the advance 1Q16 GDP release. The yield on the benchmark 10-year Treasury note hovered around 1.54 percent mark and the yield on short-term 2-year note remained steady at 0.67 percent.
The UK gilts strengthened as investors remained cautious ahead of the Bank of England’s (BoE) monetary policy meeting. The yield on the benchmark 10-year gilts fell 1 basis point to 0.799 percent and the yield on super-long 40-year bond also dipped 1 basis point to 1.481 percent.
The German bunds gained, with the yield on the benchmark 10-year bond declining 1-1/2 basis points to -0.044 percent, the yield on long-term 30-year note also dipped 1-1/2 basis points to 0.430 percent and the yield on short-term 3-year note slid 1/2 basis point to -0.629 percent.
The Japanese government bonds gained on Wednesday, following sharp sell-off in three years on fear that the Bank of Japan might reduce the pace of its bond buying. The benchmark 10-year bond yield, which moves inversely to its price, fell 2-1/2 basis points to -0.076 percent, the yield on 5-year note dipped nearly 3 basis points to -0.164 percent and the short-term 2-year JGB yield slid 1 basis point to -0.168 percent.
The New Zealand government bonds closed higher as investors had anticipated a further easing from the Reserve Bank of New Zealand (RBNZ) in its upcoming policy meeting in the wake of rising deflationary pressure. The yield on the benchmark 10-year bond fell 2 basis points to 2.205 percent, the yield on 7-year note also dipped 2-1/2 basis points to 1.950 percent and the yield on short-term 2-year note ended 2-1/2 basis points lower at 1.835 percent.
The Australian government bond yields recovered after data released by the Reserve Bank of Australia showed that the country’s commodity price index rebounded in July. The yield on the benchmark 10-year Treasury note jumped 11 basis points to 1.936 percent and the yield on short-term 2-year note climbed 4-1/2 basis points to 1.488 percent.
