Market Roundup
• US July producer prices fall 0.4% vs 0.1% forecast, core PPI 0.7% y/y vs 1.2% forecast.
• US Retail sales ‘unchanged’ in July vs 0.4% forecast, June revised up to 0.8%; Core RS flat; auto sales +1.1%.
• US June business inventories rise 0.2% vs 0.1% forecast.
• University of. Michigan prelim consumer sentiment index Aug 90.4 vs 90.5 forecast, 1-yr inflation 2.5% vs 2.7% previous.
• Weak US retail sales, inflation data dim prospect of Fed rate hike.
• Stocks wobble, dollar, global yields dip after tepid US RS/PPI data.
• US Treasury yields fall to near 2-wk low on weak US inflation data, 10-yr yields fall to lowest level since Aug 1.
• Atlanta Fed’s GDPNow model pares US Q3 GDP view to 3.5% from 3.7% on Aug 9.
• NY Fed Nowcast model sees Q3 GDP at 2.4% for 2016, down from last week’s number of 2.6%.
• Brazil real falls on Temer concern over currency strength.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan GDP QQ Q2 forecast 0.2%, 0.5%-previous
• 23:50 Japan GDP QQ Annualized Q2 forecast 0.7%, 1.9%- previous
• 23:50 Japan GDP QQ Pvt Consumption Prelim Q2 forecast 0.2%, 0.6%- previous
• 23:50 Japan GDP QQ Capital Expend Q2 forecast -0.1%, -0.7%- previous
• 23:50 Japan GDP QQ External Demand Q2 forecast 0%, 0.2%- previous
• 04:30 Japan Industrial Output Rev* Jun 1.9%- previous
• 04:30 Japan Capacity Utilization Index Change MM* Jun -2.4%- previous
Looking Ahead - Events, Other Releases (GMT)
No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1110 levels and currently trading at 1.1163 levels. The pair has made session high at 1.1221 and hit lows at 1.1156 levels. Euro inched higher against the greenback on Friday after data showed U.S. retail sales weakened unexpectedly in July, while producer prices also fell in the same month, contrary to expectations, raising concerns about the strength of third-quarter economic growth. U.S. retail sales were unexpectedly flat in July as Americans cut back on discretionary spending. Retail sales were flat in July, missing economists' expectations for a modest 0.4 percent rise, and producer prices recorded their biggest drop in nearly a year last month on declining costs for services and energy products. The dollar fell 0.15 percent against a basket of six major currencies to 95.725, after falling as low as 95.254, the lowest in a week. The greenback also tumbled 0.77 percent against the yen to 101.19 yen and 0.20 percent against the euro to $1.1165.
GBP/USD is supported in the range of 1.2900 currently trading at 1.2908 levels. It reached session high at 1.3012 and hit low at 1.2906 levels. The British pound fell to one-month low against the dollar on Friday on expectations that poor economic data will lead the Bank of England to ease monetary policy again in the coming months. Sterling, which has fallen since the Bank of England announced a package of policy easing last week, fell 0.1 percent at $1.2924, its lowest since July 11. It had risen to above $1.30 after weak U.S. data weighed on the dollar earlier in the afternoon session in London, but those gains turned out to be temporary. Traders said sterling would head lower if the divergence in monetary policy between the Federal Reserve and BoE becomes more entrenched. While the Fed is still expected to raise interest rates, the BoE cut rates to record levels last week and announced a slew of new bond buying.
USD/CAD is supported at 1.2900 levels and is trading at 1.2960 levels. It has made session high at 1.2985 and lows at 1.2922 levels. The Canadian dollar strengthened against its U.S. counterpart on Friday, as the pair was weighted down by higher oil prices and weaker-than-expected U.S. data. Oil prices rose, supported by the prospect of talks by exporters about ways to prop up a market grappling with a supply overhang. Adding to support for Canada's risk-sensitive currency, world stocks were headed for their fourth week of gains in five after Wall Street's three main indexes rose to coordinated record highs on Thursday for the first time since 1999. The dollar had rallied last Friday on data showing employers added more jobs than expected in July, raising expectations the Federal Reserve will raise U.S. interest rates this year. It gave up those gains this week, however, as investors see a rate hike in September as a long shot and with the Fed’s December meeting still far away.
AUD/USD is supported around 0.7625 levels and currently trading at 0.7640 levels. It hit session high at 0.7724 and made session lows at 0.7646 levels. The Australian dollar declined against US dollar on Friday as investors booked profits following recent gains in the pair after the market focused on the possibility of higher U.S. interest rates this year. A Federal Reserve official said that an interest rate increase this year is appropriate. San Francisco Fed President John Williams told the Washington Post that the U.S. central bank should raise rates this year because of improving labor market conditions and the likelihood that inflation is heading higher. The Australian dollar declined to hit low at $0.7645, from a three-month peak of $0.7760 touched on Thursday. A break above $0.7760 would then aim for the year's high of $0.7836.Yet the Aussie was on track to end the week 0.8 percent higher, despite falling interest rates at home. It has bounced two U.S. cents since the Reserve Bank of Australia (RBA) cut rates to a record low 1.5 percent last week.
Equities Recap
European shares edged back after setting a fresh seven-week high on Friday, with weaker miners offsetting gains in companies such as A.P. Moller-Maersk, which rose sharply following its earnings update.
UK's benchmark FTSE 100 closed up 0.5 percent, the pan-European FTSEurofirst 300 ended the day up by 0.70 percent, Germany's Dax ended up 0.70 percent, France’s CAC finished the day up by 1 percent.
The Dow and S&P 500 eased from record highs on Friday as tepid data dampened investor confidence in the economy's expansion, while the Nasdaq inched up to a second straight record high close.
Dow Jones closed up by 0.63 percent, S&P 500 ended up by 0.47 percent, Nasdaq finished the day up by 0.46 percent.
Treasuries Recap
Benchmark U.S. Treasury yields fell to their lowest level in nearly two weeks on Friday after weaker-than-expected readings on U.S. retail sales and producer prices suggested U.S. inflation could be slowing, cutting expectations for the Federal Reserve to raise overnight interest rates.
Yields on benchmark 10-year Treasury notes fell to their lowest level since Aug. 1 after the data, at 1.48 percent. The 30-year Treasury bond its lowest yield since Aug. 5, at 2.21 percent.
The 10-year note was last up 16/32 in price for a yield of 1.52 percent, down more than 5 basis points from its late Thursday close.
The 30-year Treasury bond rose 1-4/32 in price to yield 2.24 percent, about 5 basis points lower than Thursday's close.
Commodities Recap
Gold turned slightly lower as the U.S. dollar pared losses on Friday, with investors grabbing profits after the metal jumped more than 1 percent following U.S. retail sales data that were unexpectedly flat in July.
Spot gold was down 0.3 percent at $1,334.36 an ounce by 2:50 p.m. EDT (1850 GMT). It was on track to finish the week up 0.04 percent. The most-active U.S. gold futures for December delivery settled down 0.5 percent at $1,343.20.
Oil rose about 2 percent on Friday, clinching its biggest weekly gains since April, after a short covering rally was triggered by comments from Saudi Arabia's oil minister in the previous session about possible action to help stabilize the market.
Brent crude futures settled 93 cents higher at $46.97 at barrel after touching $47.05, the highest in more than three weeks.
U.S. crude settled up $1 at $44.49 after touching its highest level since July 22 at $44.60 per barrel.
