Market Roundup
• TRY hit as S&P cuts Turkey FX ratings to BB/B, outlook negative; heightened unpredictability may constrain inflows.
• Euro-Zone consumer confidence falls in July after Brexit vote, -7.9 vs -8 forecast -7.3 previous.
• Spain's budget watchdog: 2016 deficit outlook has worsened, Madrid already facing sanction on 2015 deficit miss.
• BoE: No clear evidence of sharp Brexit hit yet, GBP rallies on doubts about scale of August stimulus.
• BoE’s Forbes: There is a valid case to ease monetary policy to support demand.
• Oil prices rise after U.S. crude inventory drawdown.
• USD hits 4-month high as peers dip on easing expectations, ECB likely to show dovish bias.
• Japan stimulus seen at Yen 20 trillion (double expectations) according to sources – Kyodo.
Looking Ahead - Economic Data (GMT)
• 23:00 Japan Reuters Tankan DI Jul 3-previous
Looking Ahead - Events, Other Releases (GMT)
• 21:00 New Zealand RBNZ update on economic assessment
Currency Summaries
EUR/USD is likely to find support at 1.0970 levels and currently trading at 1.1010 levels. The pair has made session high at 1.1029 and hit lows at 1.0980 levels. Euro declined slightly against the dollar on Wednesday on the view that the U.S. economy is on solid footing and European Central Bank is unlikely to announce further easing on Thursday. The dollar has benefited in recent weeks from data showing strength in the U.S. labor market and inflation that has bolstered expectations the Federal Reserve may raise rates before the end of the year. The euro fell 0.15 percent against the dollar as markets sold euros ahead of the European Central Bank policy meeting on Thursday. Policymakers are not expected to announce further easing but could signal a bias for monetary stimulus in the future. The dollar index, which tracks the currency against a basket of six major rivals, hit a peak of 97.323 in European trade, its highest level since March 10. It was last trading at 97.173, up 0.1 percent on the day.
GBP/USD is supported in the range of 1.3064 currently trading at 1.3235 levels. It reached session high at 1.3231 and hit low at 1.3129 levels. Sterling edged higher against the U.S. dollar on Wednesday after a Bank of England survey showed no clear evidence of a slowing of economic activity after last month's Brexit vote. The survey reported signs that demand for credit was easing and that there were lower expectations for investment spending, but it also said the majority of companies did not expect any near-term impact on capital spending from the vote. In the run-up to last month's vote, Britain's jobless rate fell to its lowest level since 2005, a separate report from the Office for National Statistics showed on Wednesday. Sterling, which fell 1 percent on Tuesday, rose a full cent to $1.3220 after the BoE survey was published, gaining more than half a percent on the day. It rose 0.6 percent to 83.56 pence per euro.
USD/CAD is supported at 1.3000 levels and is trading at 1.3072 levels. It has made session high at 1.3095 and lows at 1.3024 levels. The Canadian dollar slightly declined against U.S. dollar on Wednesday as the International Monetary Fund (IMF) trimmed Canada's economic growth forecasts and traders unwound bets that the central bank could cut rates this year. Uncertainty over Britain's looming exit from the European Union prompted the IMF to cut Canada’s growth forecasts for 2016. Its forecast for Canada was cut by 0.1 percentage point to 1.4 percent for 2016. However, the IMF now expects Canada's economy will grow 2.1 percent in 2017, 0.2 percentage point more than its last projection in April. Oil prices recovered from a two-month low in reaction to U.S. data that showed a further drawdown in crude inventories, reducing worries about a domestic supply glut. Oil prices recovered from a two-month low in reaction to U.S. data that showed a further drawdown in crude inventories, reducing worries about a domestic supply glut.
AUD/USD is supported around 0.7460 levels and currently trading at 0.7481 levels. It hit session high at 0.7492 and made session lows at 0.7460 levels. The Australian dollar declined against US dollar on Wednesday as speculation about a rate cut as early as August weighted on the currency pair. The Australian dollar fell another 0.2 percent to $0.7452 before recovering a bit to trade at 0.7461, as expectations for rate cut or monetary stimulus from the Reserve Bank of Australia intensified. Many analysts suspect that a soft inflation report next week would greatly strengthen the case for a cut to 1.5 percent at the RBA's meeting on Aug. 2. Financial markets imply around a 50-50 chance of an easing, following a previous cut in May. Australian government bond futures were unchanged, with the three-year bond contract at 98.550 and the 10-year contract at 98.0650.
Equities Recap
European shares advanced on Wednesday, with the technology sector leading the market higher after SAP and ASML reported forecast-beating quarterly results.
UK's benchmark FTSE 100 closed up by 0.5 percent, the pan-European FTSEurofirst 300 ended the day up by 0.99 percent, Germany's Dax ended up by 1.6 percent, France’s CAC finished the day up by 1.2 percent.
Wall Street gained on Wednesday and the S&P 500 and Dow industrials set fresh records, as Microsoft's strong results boosted the indexes and marked the latest sign that U.S. corporate earnings season may be less dour than feared.
Dow Jones closed up by 0.19 percent, S&P 500 ended up by 0.43 percent, Nasdaq finished the day up by 1.07 percent.
Treasuries Recap
U.S. Treasury debt yields rose on Wednesday in thin trading, bolstered by gains in stocks worldwide as well as a growing view that the Federal Reserve could raise interest rates at least once this year despite risk seen from recent geopolitical events.
In late trading, benchmark U.S. 10-year Treasury notes were down 6/32 in price for a yield of 1.578 percent, up from 1.558 percent late on Tuesday.
U.S. 30-year bond prices fell 21/32 to yield 2.303 percent, up from 2.274 percent late Tuesday.
U.S. two-year notes slipped 1/32, with a yield of 0.714 percent.
Commodities Recap
Oil prices rose as much as 1 percent on Wednesday, lifting U.S. crude from two-month lows, after the U.S. government reported a ninth straight week of crude inventory draws, easing some concerns in a market worried about a glut.
U.S. West Texas Intermediate (WTI) crude's August contract expired as the front-month after rising 29 cents, or 0.7 percent, to settle at $44.94 a barrel. August WTI hit a two-month low of $43.69 earlier. September WTI , front-month from Thursday onwards, also settled up 0.7 percent.
Gold fell to its lowest level in three weeks on Wednesday as equities rose and the dollar hit a four-month high following strong U.S. economic data, which raised expectations the Federal Reserve may hike interest rates before the end of the year.
Spot gold fell as much as 1.4 percent to $1,313.26 an ounce earlier and was down 1.05 percent at $1,317.80 by 2:42 p.m. EDT (1842 GMT).
U.S. gold futures settled down 1 percent at $1,319.30 per ounce.
