Market Roundup
- Reuters poll – US primary dealers see one ’16 rate hike after strong data.
- CFTC IMM CTA data - Specs cut USD longs GBP shorts at record high 82.5k contracts, JPY longs up, EUR shorts off, AUD positions steady at +31.3k.
- BoJ Policy Board July 29 minutes – Policy review to work out best way to hit price goal, view of limits to monetary ease not helping, downward pressure on prices from FX too, overseas uncertainties highlighted, excessive ETF buys not good – Reuters.
- Japan June current account surplus Y974.4 bln, Y1.0567 trln forecast.
- MoF July flow data – Japanese buy net Y916.2 bln foreign stocks, Y5.4494 trln bonds, sell Y63.8 bln bills, trust banks-insurers buyers; foreign investors sell net Y224.4 bln Japan stocks, buy Y1.1419 trln bonds, Y2.3709 trln bills.
- MoF June flow data – Japan investors still favor US Treasuries, corporates, et al, net Y1.942 and Y2.6841 trln buys, German-French-EUR bond net sales.
- Japan July bank loans +2.1% y/y, rise steady, June +2.0%, Y499.591 trln.
- China July trade surplus $52.31 bln, $47.6 bln forecast, exports -4.4% y/y, imports -12.5%, -3.0% and -7.0% forecast, CNY-denominated +2.9%, -5.7%, pressure on exports likely to ease at start of Q4.
- China end-July FX reserves $3.20 trln, end-June $3.21 trln, gold reserves $78.89 bln vs $77.43 bln, 58.79 mln troy oz vs 58.62 mln.
- Australia July overall job ads -0.8% m/m, newspapers -12.6%, internet -0.7%.
Economic Data Ahead
- (0430 ET/0830 GMT) Eurozne Sentix index, 3.0 forecast; last 1.7.
- (1000 ET/1400 GMT) United States employment trends index; last 128.1.
Key Events Ahead
- (0530 ET/0930 GMT) Germany E3 bln 6-month Bubill auction.
- (0850 ET/1250 GMT) France E2.6-3.0/0.7-1.1/0.5-0.9 bln 3/6/12-month BTF note auctions.
FX Beat
DXY: The dollar index, against a basket of currencies trades at 96.17, within the sight of a 1-week high of 96.57, touched following better-than-expected U.S. non-farm payroll data release on Friday.
EUR/USD: The euro re-gained the 1.1100 handle after declining as low as 1.1045 in the previous session, its lowest level in over a week. Data released on Friday showed that U.S. nonfarm payrolls rose by 255,000 jobs in July, surpassing forecast of an increase of 180,000, while payroll growth in June was also revised up to 292,000. The upbeat U.S. payrolls data has increased expectations on U.S. rate hikes; however, investors think that the Fed will remain on the side-line given uncertainty from Brexit and slowdown in China. The major trades 0.2 percent higher at 1.1106, attempting to extend gains above the 1.1100 level. Investors will closely watch series of economic data from the Eurozone, ahead of U.S labor market conditions index for further cues. Immediate resistance is seen at 1.1136 (5-DMA), break above targets 1.1197. On the lower side, support is located at 1.1024 (Jul-15 Low), break below could drag it near 1.1000.
USD/JPY: The greenback extended gains against the yen after better–than expected U.S. job numbers strengthened expectations of faster economic growth and increased the probability of a Fed interest rate kike this year. The major continues to extend its slow recovery from Tuesday's 3-week low of 100.67, supported by upbeat U.S. payrolls data-led bullish run. The dollar trades 0.2 percent higher at 102.05, having touched an-intraday high of 102.24. The major will continue to track broad based market sentiment, ahead of U.S. LMCI data due later in the day. Immediate resistance is located at 102.67 (10-DMA), break above could take it till 103.39. On the lower side, support is seen at 101.42 (5-DMA), break below targets 101.00.
GBP/USD: The sterling steadied after dropping towards 1.3000 handle on Friday, it’s weakest in 3-weeks after better-than-expected jobs figures in the U.S bolstered expectations of Fed interest rate hike this year. The major attempted a minor recovery post-Non Farm payroll data release, however, it struggles to re-gain 1.3100 handle as BoE’s further stimulus measures and upbeat U.S. employment data continues to weigh on the pair. Sterling trades 0.1 percent higher at 1.3083, pulling away from a 3-week low of 1.3021 touched on Friday. In absence of relevant data releases today, markets now await Britain's manufacturing and industrial production due tomorrow. Immediate support is seen at 1.3000, break below could drag it till 1.2850. On the higher side, resistance is located at 1.3200, break above targets 1.3250/1.3300.
AUD/USD: The Australian dollar held its gains above the 0.7600, staying near its peaks despite China posting downbeat trade figures and the RBA's rate cut last week. Investors ignored Chinese trade figures: exports declined 4.4 percent against consensus of 3.0 percent, while imports slumped 12.5 percent versus market forecast of 7.0 percent drop. The major tumbled to an early low of 0.7597, following weak ANZ Job advertisement data, which came in at -0.8 percent in June, missing projections of 0.4 percent. The Aussie trades flat at 0.7612, within the sight of its 3-week high of 0.7664 touched just before Friday's U.S. payrolls data. Markets attention will remain on U.S. LMCI figures ahead of National Australia Bank Business Confidence survey. Immediate resistance is located at 0.7664 (Previous Session High), break above targets 0.7676 (10-week peak). On the lower side, support is seen at 0.7583 (Aug-4 Low), break below could take it till 0.7529.
NZD/USD: The New Zealand dollar continues to decline for the second consecutive session, but trimmed losses to sustain gains above the 0.7100 handle. The divergent monetary policy outlooks between the Federal Reserve and RBNZ, combined with the release of stronger U.S. jobs report weigh on the major. However, better risk tone prevalent in the markets, provide some support to the minor-recovery attempts seen in the pair above 0.7100 handle. The Kiwi trades 0.2 percent lower at 0.7118, having touched a low of 0.7087, it’s lowest since July 29. Investors will eye U.S. labor market conditions index and New Zealand's Electronic Card Retail Sales for further momentum. Immediate resistance is located at 0.7166 (5-DMA), break above targets 0.7200. On the lower side, support is seen at 0.7067, break below could take it till 0.7000.
Equities Recap
Asian shares gained as strong U.S. jobs data released on Friday priced in a U.S. rate hike, strengthening markets risk sentiment across the broad.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, hovering just below a 1-year high hit last week.
Tokyo's Nikkei gained 2.44 pct at 16,650.57, Australia's S&P/ASX 200 index rose 0.70 pct at 5,536.10 points and South Korea's KOSPI 200 added 0.4 percent at 2,027.65 points.
Shanghai composite index trades 0.5 percent up at 2,992.62 points, while CSI300 index trades 0.6 percent higher at 3,224.67 points.
Hong Kong’s Hang Seng was trading 1.2 percent higher at 22,418.30 points. Taiwan shares edged up 0.6 pct at 9,150.26 points.
Commodities Recap
Crude oil prices rose, hovering towards a 2-week high, supported by reports of Organization of the Petroleum Exporting Countries (OPEC) to restrain output talks. International Brent crude was trading 0.1 percent at $44.41 per barrel by 0541 GMT, while, U.S. West Texas Intermediate crude was at $41.95 per barrel.
Gold hovered near previous session lows, having declined nearly 2 percent on Friday after a stronger-than-expected July jobs report boosted the possibility of a U.S. Fed rate hike this year. Spot gold trades flat at $1,336.83 an ounce by 0544 GMT, having touched an early low of $1,331.26, its lowest since July 29. U.S. gold edged down 0.3 percent at $1,339.90 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5937 percent up by 0.012 bps, while 5-year was 0.011 bps higher at 1.1412 percent.
The Australian government bonds slumped after data showed that the United Sates non-farm payroll increased higher than expected in July, reinvigorating expectations of Fed tightening this year. The yield on the benchmark 10-year Treasury note rose 6-1/2 basis points to 1.955 percent and the yield on short-term 2-year note jumped 1 basis point to 1.495 percent.
The Chinese sovereign bonds gained after data showed that the country’s both exports and imports declined worse than many forecasters had expected in July. The yield on the benchmark 10-year note, dipped nearly 1 basis point to 2.775 percent, the yield on super-long 30-year bond fell 1-1/2 basis points to 3.355 percent and the yield on short-term 3-year note slid more than 1 basis point to 2.417 percent.
New Zealand government bond prices slipped, sending yields 2 basis points higher at the long end of the curve.
