Market Roundup
• U.S. inflation tame as economy gains momentum, CPI flat in July +0.8% y/y, Core CPI +0.1%; up 2.2% y/y.
• US Housing starts climb 2.1 percent; permits dip 0.1 percent.
• US industrial Production +0.7% vs 0.3% forecast, Capacity Utilization 75.9% vs forecast 75.6%; Manufacturing Output m/m 0.5% vs 0.3% forecast.
• US July real weekly earnings +0.6% vs -0.1% in June.
• Atlanta Fed’s GDPNow raises U.S. Q3 GDP view to 3.6 pct from 3.5% Aug 12.
• Fed's Dudley says 'possible' to hike rates next month, premature to talk about increasing inflation target –FBN.
• Fed’s Lockhart: recent wage pressures signal economy may be approaching full employment, inflation moving in healthy direction.
• Stocks fall, bond yields rise as Dudley ups Fed rate hike bets, sees Sept hike possible.
• Sterling boosted by above-f/c UK inflation data, prices rising on weak sterling in the aftermath of Brexit.
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand HLFS Unemployment Rate* Q2 forecast- 5.3%, 5.70%-previous
• 22:45 New Zealand HLFS Job Growth QQ* Q2 forecast -0.6%, 1.20%- previous
• 22:45 New Zealand HLFS Participation Rate* Q2 forecast -68.8%, 69.00%- previous
• 22:45 New Zealand Producer Prices - Inputs QQ* Q2 -1.00%-p previous
• 22:45 New Zealand PPI Output* Q2 -0.20%- previous
• 01:30 Australia Wage Price Index QQ* Q2 forecast -0.5%, 0.40%- previous
• 01:30 Australia Wage Price Index YY* Q2 forecast -2%, 2.10%- previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1200 levels and currently trading at 1.1275 levels. The pair has made session high at 1.1320 and hit lows at 1.1244 levels. Euro initially inched higher against the greenback on Tuesday after data showed U.S. consumer prices were unchanged but gave some gains after Federal Reserve raised expectations for a rate hike this year. New York Fed President William Dudley and Atlanta Fed chief Dennis Lockhart's comments concurred with data that showed moderate economic growth with inflation still running below the Fed's 2 percent goal. Dudley and Lockhart's comments came nine days before an annual meeting of top central bankers in Jackson Hole, Wyoming, a venue the Fed often uses to telegraph policy plans. U.S. consumer prices were unchanged in July as the cost of gasoline fell for the first time in five months and underlying inflation moderated, while U.S. housing starts unexpectedly climbed and industrial production rose more than forecast in the same month. The euro was last up 0.72 percent against the dollar at $1.1277, while the dollar was last down 0.80 percent against the yen at 100.27 yen.
GBP/USD is supported in the range of 1.2940 levels and currently trading at 1.3036 levels. It reached session high at 1.3050 and hit low at 1.2952 levels. Sterling rose against the dollar on Tuesday, as better than expected inflation data boosted the sterling. Consumer price rises gathered speed, up 0.6 percent in July compared with a year earlier, their biggest rise since the end of 2014. And factory gate prices rose at their fastest in over two years as the fall in sterling after the vote to leave the European Union pushed up import prices. Two weeks ago, the BoE cut interest rates to record lows and announced a bond buying programme with analysts expecting slowing activity, after Britain's vote to leave the EU, likely to drive the central bank to ease policy further in coming months. Sterling rose to $1.3012 in afternoon trade, compared with $1.2937 before the data was released and recovering from a five-week low of $1.2865 on struck on Monday. It was last trading at $1.3040.
AUD/USD is supported around 0.7652 levels and currently trading at 0.7697 levels. It hit session high at 0.7725 and made session lows at 0.7670 levels. The Australian dollar declined against the dollar on Tuesday as comments from two top Federal Reserve officials rekindled bets the U.S. central bank may raise interest rates by year-end if the economy improves further. The Australian dollar fell to hit low at 0.7670 before recovering to trade at 0.7695 in late US session. Earlier in the Asian session, minutes of the Reserve Bank of Australia's (RBA) August policy meeting reiterated that a quarter point cut in official rates earlier in the month was necessary to boost economic growth. The RBA left its forecasts for inflation, unemployment, and growth broadly unchanged from May but appeared to have become more uncertain about momentum in the labour market. Investors will pore over the minutes of the Fed's July policy meeting, scheduled for release on Wednesday, for clues on the U.S. central bank's rate plans after recent blowout jobs data.
USD/CAD is supported at 1.2796 levels and is trading at 1.2856 levels. It has made session high at 1.2893 and hit low at 1.2819 levels. The Canadian dollar strengthened against the U.S. currency on Tuesday as higher oil prices and better than expected domestic data supported the loonie. However, dollar recouped some of its losses after Dudley's comments. New York Federal Reserve Bank President William Dudley said a rate hike in September was possible. Dudley cited evidence of wage gains and a tighter labor market that could boost inflation. Canadian factory sales increased 0.8 percent in June from May as sales of machinery and transportation equipment grew, according to Statistics Canada data. Economists had expected a 0.7 percent increase after sales fell 1 percent in May. Oil rose to its highest in one month as the market rode optimism over potential producer action to prop up the market. U.S. crude prices were up 0.57 percent to $46 a barrel. The dollar index, which measures the greenback against six major rivals, was last down 0.89 percent at 94.781.
Equities Recap
European shares pulled back from seven-week highs on Tuesday, weighed down by industrial stocks after Swiss firm Schindler lowered its outlook for 2016.
UK's benchmark FTSE 100 closed down by 0.5 percent, the pan-European FTSEurofirst 300 ended the day down by 0.58 percent, Germany's Dax ended down by 0.3 percent, France’s CAC finished the day down by 0.5 percent.
U.S. stocks eased from record highs on Tuesday after comments from Federal Reserve officials fueled speculation of an interest rate hike this year.
Dow Jones closed down by 0.45 percent, S&P 500 ended down by 0.55 percent, Nasdaq finished the day down by 0.65 percent.
Treasuries Recap
U.S. Treasury prices slipped on Tuesday, with the two-year yield touching a near-three-week high as comments from two top Federal Reserve officials rekindled bets the U.S. central bank may raise interest rates by year-end if the economy improves further.
Benchmark 10-year Treasury notes were down 6/32 in price for a yield of 1.575 percent, up 2 basis points from late on Monday.
The two-year yield, which is sensitive to traders' views on Fed policy, was up 2 basis points at 0.750 percent after touching a near three-week peak at 0.758 percent.
Commodities Recap
Oil settled up nearly 2 percent on Tuesday, hitting five-week highs for a second straight day as sources at OPEC spoke of Saudi Arabia's apparent desire for higher crude prices while Russia met the producer group to discuss the market.
Brent crude settled up 88 cents, or 1.8 percent, at $49.23 a barrel. It rose more after settlement, reaching $49.34, its highest since July 7.
U.S. West Texas Intermediate crude rose 84 cents, or 1.8 percent, to settle at $46.58. It reached $46.73 after settlement, its highest since July 12.
Gold cut its gains on Tuesday after mixed U.S. economic data failed to give clarity on the prospects for a U.S. interest rate rise this year and the U.S. dollar pared losses from a seven-week low.
Spot gold was up 0.7 percent at $1,347.95 an ounce by 3:07 p.m. EDT (1907 GMT), retreating from an earlier 1.3-percent gain. U.S. gold settled up 0.7 percent at $1,356.90.
