Market Roundup
• Bank of England surprises markets by keeping rates on hold, signals August move.
• Yen slips, GBP surges after surprise hold from Bank of England.
• German bond yields at 2-week high as Britain holds rates post-Brexit.
• Asian local currency debt takes safe-haven appeal amid Brexit fallout.
• MSCI all-country world equity index hits eight-month high.
• U.S. jobless claims hover at low levels, unchanged at 254k; producer prices +0.5% in June, +0.3% y/y.
• Fed's Lockhart: Brexit, uncertainty, require patience on rates; Brexit is no Lehman but could create headwinds.
• Fed’s Lockhart: US yield curve flattening a result of safe haven flows & negative yields abroad.
• UK’s BOJO: Britain can have greater Europe role post-Brexit.
• S&P 500, Dow hit new records on earnings optimism; Safe-havens gold, Treasuries fall.
• Abe Adviser Honda calls for combined BOJ action, fiscal stimulus (DJ).
• Emerging market outflows to halve in 2016 to USD 350 billion-IIF.
Looking Ahead - Economic Data (GMT)
• Australia 02:00 TR IPSOS PCSI Jul 47.2 -previous
• China 02:00 Urban Investment YY Jun forecast 9.40%, 9.60% - previous
• China 02:00 Industrial Output YY Jun forecast 5.90%, 6.00% - previous
• China 02:00 Retail Sales YY Jun forecast 10.00%, 10.00% - previous
• China 02:00 GDP YY Q2 forecast 6.60%, 6.70% - previous
• China 02:00 GDP QQ SA Q2 forecast 1.60%
• China 02:00 TR IPSOS PCSI Jul 62.7- previous
• Japan 02:00 TR IPSOS PCSI Jul 38.2- previous
• Australia 02:00 TR IPSOS PCSI Jul 47.20- previous
Currency Summaries
EUR/USD is likely to find support at 1.1055 levels and currently trading at 1.1116 levels. The pair has made session high at 1.1166 and hit lows at 1.1095 levels. Euro initially inched against the greenback as the pair was dragged higher after the Bank of England wrong-footed investors by holding interest rates steady at its first meeting since Britain's vote last month to leave the European Union. But later, the euro gave up some gains against the US dollar after data showed US producer prices recorded their biggest gain in a year in June which indicated signs of sustained strength in the economy, together with a U.S. stock market rally which could allow the Federal Reserve to raise interest rates later this year. The Fed kept rates unchanged at its policy meeting in June, citing persistently low inflation and worries about the labor market after job growth weakened sharply in May. Policymakers were also cautious ahead of Britain's June 23 referendum on whether to remain in the European Union.
GBP/USD is supported in the range of 1.3246 levels and currently trading at 1.3335 levels. It reached session high at 1.3356 and hit low at 1.3291 levels. Sterling surged strongly against the dollar on Thursday, as the buyers stepped after the Bank of England (BoE) surprised the market by leaving interest rates unchanged. Eight out of the nine members of the BoE's monetary policy committee voted to keep rates on hold at 0.5 percent, wrong-footing the many investors who had expected a cut following Britain's shock vote on June 23 to leave the European Union. The BoE said it was likely to deliver a stimulus to the economy in three weeks, once it assessed how Britain's vote to leave the European Union has affected the economy. Sterling soared to as high as $1.3485 after the BoE announcement, up more than 2 percent on the day and its strongest since June 30, having traded at $1.3210 beforehand. It later pared those gains to trade at $1.3343, up 1.4 percent.
USD/CAD is supported at 1.2860 levels and is trading at 1.2896 levels. It has made session high at 1.2953 and lows at 1.2860 levels. The Canadian rose against U.S. dollar to hit a one-week high on Thursday as higher oil and stock prices supported the risk-sensitive commodity-linked currency. Gains for the loonie come one day after the Bank of Canada stayed optimistic about the economic outlook even as it cut its growth forecasts. Oil prices recovered from sharp losses the previous day, but brokers said the downtrend could resume soon as record-high stocks and worries over slowing economic growth dampened sentiment. U.S. crude prices were up 2.1 percent to $45.68 a barrel. Two major U.S. stock indexes set fresh record closing highs on Thursday on investors' optimism about big banks' second-quarter earnings, while European shares also rose. On the data front, new home prices in Canada rose by a higher-than-forecast at 0.7 percent in May from April, mainly on higher prices in Vancouver and the Toronto region, data from Statistics Canada showed.
AUD/USD is supported around 0.7570 levels and currently trading at 0.7607 levels. It hit session high at 0.7638 and made session lows at 0.7603 levels. The Australian dollar inched higher against US dollar on Thursday as domestic data showed an encouraging jump in full-time jobs. Australian employment rose only modestly in June while the unemployment rate ticked up to 5.8 percent, yet a sharp jump in full-time jobs was welcomed by investors who nudged the local dollar higher. Thursday’s data from the Australian Bureau of Statistics showed 7,900 net new jobs were created in June, after a 19,200 gain the month before. Full-time employment impressed with an increase of 38,400 as such positions tend to pay much better than temporary work. Yet the data were not so strong as lessen the chance of another cut in interest rates from the Reserve Bank of Australia (RBA), which analysts assume will depend on second-quarter inflation data due later this month. The Australian dollar was trading at $0.7630, from $0.7590 late Wednesday, but again failed to clear resistance in the $0.7650 zone.
Equities Recap
European shares ended higher on Thursday after the Bank of England surprised investors by keeping interest rates on hold.
UK's benchmark FTSE 100 closed down by 0.1 percent, the pan-European FTSEurofirst 300 ended the day up by 0.97 percent, Germany's Dax ended up by 1.5 percent, France’s CAC finished the day up by 1.3 percent.
The benchmark S&P 500 and the Dow scaled new highs yet again as JPMorgan's strong results on Thursday set an upbeat mood for earnings and spurred a rally in financial stocks.
Dow Jones closed up by 0.72 percent, S&P 500 ended up by 0.52 percent, Nasdaq finished the day up by 0.56 percent.
Treasuries Recap
U.S. Treasury prices weakened on Thursday after the Bank of England kept interest rates unchanged, surprising investors who had expected the first rate cut in more than seven years, and as U.S. data showed rising inflation.
Benchmark 10-year notes ended down 19/32 in price to yield 1.532 percent, up from 1.467 percent on Wednesday.
Commodities Recap
Gold fell to a two-week low on Thursday as global equities stayed in positive territory after the Bank of England (BoE) surprised investors by leaving interest rates unchanged.
Spot gold fell as much as 1.7 percent to $1,319.82 an ounce, the lowest since June 30, and was down 0.8 percent at $1,332.10 by 2:42 p.m. EDT (1842 GMT).
U.S. gold futures settled down 0.9 percent at $1,332.2 per ounce.
Oil prices rose 2 percent on Thursday as traders covered short positions a day after crude futures were hammered by data showing weak U.S. fuel demand in a busy summer driving season that heightened fears about a global oil glut.
Brent crude futures settled up $1.11, or 2.4 percent, at $47.37 a barrel. It rose to $47.47 at the session high.
U.S. crude's West Texas Intermediate (WTI) futures settled up 93 cents, or 2.1 percent, at $45.68 a barrel. The day's peak was $45.80.
