Market Roundup
- Bank of England poised to cut rates to cushion Brexit hit – Reuters.
- BoJ Watch: Fiscal policy, oil prices could brighten bank’s outlook – Nikkei.
- Japan’s public pension fund manager to disclose holdings - Nikkei.
- MoF flow data week-ended July 9 – Japanese buy net Y221.2 bln foreign stocks, whopping Y2.5491 trln bonds, sell Y23.5 bln bills; foreign investors sell net Y306.8 bln Japan stocks, buy Y27.4 bln bonds, sell Y226.8 bln bills; volume very heavy in Japanese stocks, foreign bonds.
- Philly Fed Harker – Now sees just up to two rate hikes this year, fairly shallow path of rate hikes, economy solid – Reuters.
- Australia June employment +7.9k, unemployment 5.8%, participation 64.9%, +10k, 5.8% and 64.8% eyed, full-time employment +38.4k.
- Australia July MI expected inflation WM +2.4% AR, TM +3.7%, Jun +2.4%, +3.5%.
- Moody’s – Australian banks face rising challenges.
- Non-residents held 64.4% of NZ govt debt in June, May 65.2%.
- New Zealand July ANZ-RM consumer confidence index 118.2, off touch, June 118.9.
- New Zealand June PMI 57.7, May 57.2, expansion continues.
- New Zealand Fonterra update – Dairy exports remains strong for NZ, Australia, Europe, import growth strong in China, LatAm, export for US down – Reuters.
Economic Data Ahead
- (0315 ET/0715 GMT) Swizterland Jun producer/import prices; last +0.4% m/m, -1.2% y/y.
- (0830 ET/1230 GMT) United States Jun PPI - final demand, +0.3% m/m, -0.1% y/y eyed; last +0.4%, -0.1%.
- (0830 ET/1230 GMT) United States Jun – ex-food/energy, +0.1% m/m, +1.0% y/y eyed; last +0.3%, +1.2%.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 265k eyed; last 254k.
Key Events Ahead
- (0500 ET/0900 GMT) ECB/Buba Weidmann at Frankfurt event.
- (0600 ET/1000 GMT) Irish debt agency releases annual report, press conference to follow.
- (0700 ET/1100 GMT) BoE MPC announcement, 25 bp bank rate cut eyed, unch QQE, split vote.
- (1115 ET/1515 GMT) Atlanta Fed Lockhart speaks at Victor Rocky Mountain Economic Summit.
- (1315 ET/1715 GMT) KC Fed George speaks at Oklahoma City event.
- N/A St Louis Fed Bullard, Dallas Fed Kaplan at St Louis forum.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent lower at 96.21, pulling away from a peak of 96.79 touched earlier in the week.
EUR/USD: The euro edged up, attempting to sustain gains above the 1.1100 handle. The major continued its gradual recovery mode on the back of renewed weakness in the greenback across the board, except the yen. The dollar lost ground following downbeat U.S. jobs opening and import prices data, which diminished expectations of Federal Reserve interest rate hikes this year. U.S. import prices for the month of June edged up to 0.2 percent, against forecast of 0.5 percent, after posting a 1.4 percent gain in May. Markets will closely watch BoE policy outcome and U.S. economic data including PPI and jobless claims data for further momentum. The major trades 0.1 percent higher at 1.1109, pulling away from a low of 1.1042 touched in the previous session. Immediate resistance is located at 1.1140 (20-DMA), break above targets 1.1200 handle. On the downside, support is seen at 1.1052, break below could take the pair near 1.1000.
USD/JPY: The greenback rallied above 105 handle, supported by renewed buying interest in the major. The dollar trades 1.1 percent higher at 105.66, after declining to an early low of 103.97. The upside in the pair remains capped as a fresh selling in the US dollar against its major peers, drags the major lower. Investors focus will be on Bank of Japan policy meeting later this month, to see whether the central bank will expand its monetary stimulus. Markets will closely watch US PPI and unemployment claims data for further cues. Immediate resistance is located at 106.00 handle, break above could take it over 106.81 . On the lower side, support is 103.90 (Previous Session Low), break below targets 103.43/ 103.10.
GBP/USD: Sterling came under pressure as traders eye Bank of England policy meeting that is likely to cut interest rate to stabilize the economy from the immediate impact of the Brexit vote. Investors expect the central bank to announce a cut to its benchmark interest rate to a record low of 0.25 percent from 0.5 percent in its monthly policy statement. Sterling rose 0.4 percent, hovering towards a high of 1.3336 touched in the previous session. Immediate resistance is located at 1.3400, break above targets 1.3533/ 1.3600. On the downside, support is seen at 1.2971 (Jul-12 Low), break below could take it near 31-year low. Against the euro, the pound trades 0.2 percent higher at 84.19 pence.
AUD/USD: The Australian dollar nudged up on the back of mixed domestic employment report, combined with broadly weaker US dollar and oil price recovery. Australia's employment data showed that 7,900 net new jobs were created in June, after a 19,200 gain the month before, while full-time employment increased by 38,400. The unemployment rate edged up to 5.8 percent, in line with consensus. The Australian dollar was trading 0.2 percent up at 0.7631, pulling away from a low of 0.7577 touched on Wednesday. The gains in the major will be limited as oil price hover near 2-month low. Markets attention will remain on fresh batch of U.S. economic releases, ahead of the Chinese GDP data due Friday. Immediate resistance is located at 0.7657 (Jul-12 High), break above targets 0.7689/0.7700. On the lower side, support is seen at 0.7577 (Previous Session Low).
NZD/USD: The New Zealand dollar came under renewed selling pressure, after Reserve Bank of New Zealand announced it would give a brief update on its economic outlook on July 21. The Kiwi slumped below 0.7200 handle as markets expect a downward revision of New Zealand’s growth forecasts which will call for a RBNZ interest rate cut. However, the major recovered some ground to trade at 0.7215, still 0.8 percent down. The central bank's announcement overshadowed upbeat Business NZ PMI, which came in at 57.7 versus previous 57.2. Markets continue to digest the RBNZ news, ahead of series of macro data from the U.S. Immediate support is located at 0.7164 (20-DMA), break below could take it near 0.7100 handle. On the higher side, resistance is seen at 0.7324 (Jul-12 High), break above targets 0.7345/0.7395.
Equities Recap
Asian shares trades near 8-month highs as investors speculated that the Bank of England will ease policy to cushion the economy following Britain's vote to leave the European Union.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 percent, hovering near the highest level since November it reached on Wednesday.
Tokyo's Nikkei rose 0.95 pct at 16,385.89, Australia's S&P/ASX 200 index edged up 0.39 pct at 5,409.40 points and Seoul shares added 0.12 pct.
Shanghai composite index declined 0.4 percent at 3,047.96 points, while CSI300 index dropped 0.3 percent at 3,270.88 points.
Hong Kong’s Hang Seng was trading 0.2 percent higher at 21,378.06 points. Taiwan shares rose 0.1 pct at 8,866.36 points.
Commodities Recap
Crude oil prices reversed some of its losses from the previous session, however, the upside is likely to be capped by growing concerns that the global glut in oil is not reducing after two agencies issued bearish reports. Brent crude oil was 0.4 percent up at $46.81 a barrel at 0350 GMT, while U.S. crude rose 43 cents to $45.18 a barrel.
Gold edged down after rising more than 1 percent on Wednesday, as prospects for further economic stimulus helped to strengthen investor's risk appetite. Spot gold was 0.2 percent down at $1,338.67 an ounce by 0353 GMT, having touched $1,327.45, its lowest since July 1, in the previous session.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.4725 percent up by 0.005 bps, while 5-year was 0.001 bps lower at 1.0536 percent.
The Australian government bonds gained after data showed that the country’s unemployment rate ticked higher in June. The yield on the benchmark 10-year Treasury note fell nearly 6 basis points to 1.930 percent and the yield on short-term 2-year note dipped 2-1/2 basis points to 1.623 percent.
New Zealand government bonds gained, sending yields 2.5 basis points lower.
Canadian government bond prices were higher across the maturity curve, with the 2-year price up 2 Canadian cents to yield 0.495 percent and the benchmark 10-year rising 52 Canadian cents to yield 1.004 percent. The Canada-U.S. two-year bond spread narrowed to -17.4 basis points, while the 10-year spread was at -47.1 basis points.
