Market Roundup
• Fed's Dudley eyes Sept balance sheet move, sees one more rate hike this year.
• US inflation expectations low, steady - NY Fed.
• Under pressure, Trump calls neo-Nazis and KKK criminals.
• Merck CEO resigns from Trump council over Charlottesville.
• Trump signs memo directing probe into China's IP practices.
• Germany’s Schaeuble: Hope ECB's low-interest rate policy ends soon.
• Bundesbank's Dombret: Inflation recovery "muted".
• Dombret: ECB expansionary monetary policy "very much justified".
• Euro zone June industry output drops by more than expected.
• Argentine markets celebrate mid-term primary results.
• Canada suggests it could quit NAFTA talks over dispute mechanism.
• Post-bailout Portugal grows on strong domestic demand.
Looking Ahead - Economic Data (GMT)
• 04:30 Japan Industrial Output Rev Jun, 1.6% previous
• 04:30 Japan Capacity Util Index Change MM Jun, -4.1% previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.1750 levels and currently trading at 1.1783 levels. The pair has made session high at 1.1801 and hit lows at 1.1769 levels. Euro declined against the dollar in the US session on Monday as the dollar recovered as traders unwound bearish bets against the U.S. currency that have come in the wake of increasing tensions with North Korea and underwhelming inflation data. After a week of market jitters from escalating rhetoric between the nuclear-armed nations, investors were emboldened after South Korea's president said resolving North Korea's nuclear ambitions must be done peacefully and U.S. officials played down the risk of an imminent war. Last week's fear was prompted by U.S. President Donald Trump's warning North Korea would face "fire and fury" if it threatened the United States and North Korea's announcement it was considering plans to fire missiles at the U.S. island territory of Guam. While investors were relieved the weekend passed without further escalation, some were mindful that tensions could resurface the day ahead of North Korea's Liberation Day celebration marking the end of Japanese rule. US Dollar rose 0.4 percent against a basket of major currencies but has fallen 8.6 percent so far this year.
GBP/USD is supported in the range of 1.2930 levels and currently trading at 1.2970 levels. It reached session high at 1.3000 and dropped to session low at 1.2955 levels. The British pound fell against the dollar on Monday a series of negative headlines from the first weeks of Brexit negotiations weighed on the British pound.Banks are divided on the outlook for the pound for the rest of this year, with some forecasting more losses as the economy slows while others argue the worst of the market reaction to Britain's decision to leave the European Union is over. It lost 0.2 percent to $1.2965 by late US session, while inching higher to 90.78 pence per euro. Signs that Britain's pro-European finance minister Philip Hammond was suspending hostilities with "hard" Brexiteers in the cabinet who want a cleaner break from the EU did little to shift prices. The pound reached as high as $1.3267 per dollar on Aug. 3 on a brief surge in expectations that the Bank of England could raise interest rates over the next year. But the Bank's latest meeting and minutes quashed much of that talk in the market and a retreat in pricing on rates has weakened the pound since. Inflation data on Tuesday and wage numbers a day later should be the centre piece of this week. If inflation rises to 2.7 percent, as expected, it will underline the pain being felt by households whose income is not rising as fast.
AUD/USD is supported around 0.7830 levels and currently trading at 0.7854 levels. It hit session high at 0.7918 and made session lows at 0.7835 levels. The Australian declined against dollar on Monday as fall in oil prices and stronger dollar across the board pushed Australian dollar lower. The Australian dollar trading down at $0.7855, falling from high of $0.7839 on Friday when a surprisingly low reading on U.S. inflation was taken as lessening the chance of another rate hike there. The head of the Reserve Bank of Australia (RBA) last week made it clear there was scant chance of a hike in domestic rates until next year as inflation is only very gradually returning to target. The Aussie took a glancing blow when a raft of Chinese economic data missed forecasts. China is Australia's single biggest export market, particularly for iron ore. The ore slipped in price for a second session on Monday when the Shanghai futures exchange increased transaction fees to fight speculative trading. U.S. crude fell 2.56 percent to $47.57 per barrel after climbing to $49.16 earlier in the session. Brent was last at $50.72, down 2.65 percent on the day after rising as high as $52.38 earlier.
USD/CAD is supported at 1.2661 levels and is trading at 1.2716 levels. It has made session high at 1.2725 and lows at 1.2679 levels. The Canadian dollar lost ground against its U.S. counterpart on Monday as oil fell and the greenback posted broader gains, while investors awaited the start of renegotiations of the NAFTA trade pact this week. Prices of oil, one of Canada's major exports, fell as a slowdown in Chinese refining raised concerns about demand for crude in the Asian country. The U.S. dollar edged higher against a trade-weighted basket of currencies after posting its biggest weekly drop in three weeks as expectations of U.S. interest rate increases dwindled further after weak inflation data. The Canadian government's goals for talks on modernizing the North American Free Trade Agreement include preserving the pact's dispute-settlement mechanism, Foreign Minister Chrystia Freeland said, setting up a potential clash with the United States. At 9:16 (1915 GMT), the Canadian dollar was trading at C$1.2718 to the greenback, or 78.72 U.S. cents, down 0.2 percent. The currency traded in a range of C$1.2675 to C$1.2716. On Friday, the loonie touched its weakest in four weeks at C$1.2753.
Equities Recap
European shares rose on Monday after geopolitical tension had sent them to their worst weekly losses of the year, with a softening currency buoying euro zone firms.
UK's benchmark FTSE 100 closed up 0.7 percent, FTSEurofirst 300 ended the day up by 1.15 percent, Germany's Dax ended up by 1.4 percent, and France’s CAC finished the day up by 1.4 percent.
U.S. stocks recovered further on Monday from last week's selloff, with the S&P 500 posting its biggest one-day percentage gain since April as worries eased about a conflict between the United States and North Korea..
Dow Jones closed up by 0.59 percent, S&P 500 ended up 0.98 percent, Nasdaq finished the day up by 1.32 percent.
Treasuries Recap
U.S. Treasury yields rose on Monday, with benchmark yields bouncing from six-week lows on signs of easing tensions between the United States and North Korea, driving investors to pare holdings of low-risk government debt.
The yield on benchmark 10-year Treasury notes was 2.225 percent, up nearly 4 basis points from late on Friday, when it hit a six-week trough at 2.182 percent.Two-year Treasury yields increased 3 basis points to 1.326 percent.
Two-year yields hit an eight-week low of 1.286 percent on Friday after softer-than-expected inflation data for July lowered expectations the Federal Reserve would raise interest rates by year-end.
Commodities Recap
Gold prices fell by half a percent on Monday, retreating from last week's two-month highs, as dollar strength and the easing of tensions between the United States and North Korea pushed prices lower.
Spot gold fell 0.6 percent to $1,281.21 an ounce by 2:33 p.m. EDT (1833 GMT), having reached its highest since June 7 at $1,291.86 in the previous session. U.S. gold futures for December delivery fell 0.3 percent to settle at $1,290.40.
Oil prices tumbled more than 2.5 percent on Monday in volatile trade, as dollar strength and weak domestic demand data in China hammered prices that had received a short-lived boost on concerns about potential reductions in crude supply from Libya.
Global benchmark Brent crude futures settled down $1.37 or 2.63 percent at $50.73.
U.S. West Texas Intermediate crude futures settled down $1.23, or 2.52 percent at $47.59 a barrel.
