Market Roundup
- Fed ViceChair Fischer – Close to full employment, 2% inflation targets.
- CFTC IMM CTA flows - Specs reduce USD bets in latest week, longs smallest in more than month, GBP net shorts at all-time high, JPY longs up – Reuters.
- BoJ Gov kuroda – Won’t rule out deepening negative rate cut – Sankei.
- Japanese banks face US CP market-induced squeeze – IFR.
- Japan’s Renesas in talks to buy US chipmaker Intersil, $3 bln deal – Nikkei.
- Japan Teijin taking over DuPont stakes in Japan, Indonesia ventures - Nikkei.* China Citic unit plans Japan private equity fund as China buying jumps – BBG.
- Typhoon hits Kanto area, dulls first, post-O-Bon summer holiday Tokyo trade.
Economic Data Ahead
- (0830 ET/1230 GMT) United States Jul Chicago Fed national activity index; last 0.16.
Key Events Ahead
- N/A Germany-France-Italy mini-summit on Brexit in Italy.
- N/A UK DMO GEMMS investor meeting, Norway treasury bill auction.
- (0530 ET/0930 GMT) Germany E1.5 bln 12-month Bubill auction.
- (0850 ET/1250 GMT) France E2.7-3.1/0.4-0.8/0.7-1.1 bln 3/6/12-month BTF note auctions.
- (1700 ET/2100 GMT) RBNZ Gov Wheeler speaks.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.4 percent higher at 94.94, pulling away from last week's low of 94.07, it’s lowest since June 24.
EUR/USD: The euro declined below the 1.1300 handle, extending previous session losses, as U.S. Federal Reserve policymaker’s upbeat comments on the economy supported a near-term U.S. interest rate hike. Fed Vice Chairman Stanley Fischer gave an overall upbeat assessment of the U.S. economy stating the job market was near full strength and still improving. The European currency trades 0.3 percent lower at 1.1282, hovering away from 1.1366, it’s highest since June 24 touched on Thursday. Markets will continue to track broad based sentiment, in absence of relevant macro-data from both the continents. Immediate support is located at 1.1228 (10-DMA), break below could take it near 1.1200. On the upside, resistance is seen at 1.1350, break above targets 1.1382/1.1400.
USD/JPY: The greenback opened on a bullish gap, but slipped to hit lows of 100.27 and is then recovering to extend gains towards the 101 handle. The major continues to strengthen following comments from Federal Reserve officials, which supported a near-term U.S. interest rate hike. The Japanese yen came under renewed selling pressure earlier in the session after BOJ Governor Kuroda’s comments delivered over the weekend suggested that there was still room for further cut in the interest rates. The dollar trades 0.6 percent up at 100.72, attempting to re-gain the 101.00 handle. The pair will be driven by broad market sentiment amid a data-empty macro calendar today. Immediate resistance is located at 101.00, break above could test 101.80 (20-DMA). On the lower side, support is seen at 100.27 (Session Low), break below could take it lower 100.00.
GBP/USD: Sterling edged down, hovering towards a low of 1.3022 touched on Friday, on speculation that Britain could formally begin the process of leaving the European Union early next year. Meanwhile, a government spokeswoman said Prime Minister Theresa May would not invoke Article 50 until the end of this year. The major trades 0.2 percent lower at 1.3040, having declined more than 1 percent to a low of 1.3022 from a 2-week high of 1.3184 on Friday. In absence of macro- economic data, the major will continue to track market sentiments. Immediate support is seen at 1.3011, break below could take it near 1.2976. On the higher side, resistance is located at 1.3100, break above targets 1.3172. Against the euro, the pound trades 0.1 percent higher at 86.48 pence.
AUD/USD: The Australian dollar slumped below the 0.7600 handle as the U.S. dollar was boosted by speculation the U.S. Federal Reserve may raise interest rates this year. The Aussie trades 0.4 percent lower at 0.7592, hitting fresh 2-week low of 0.7592 earlier in the session. Investors now await comments by Fed Chair Janet Yellen later this week at the annual economic symposium in Jackson Hole, Wyoming, with markets pricing a 50-50 chance of a Fed hike by the end of the year. Immediate support is seen at 0.7568 (Aug 3 Low), break below could drag it to 0.7550. On the higher side, resistance is located 0.7637 (Aug. 2 High), break above targets 0.7663 (10-DMA).
NZD/USD: The New Zealand dollar came under intense selling pressure as the buying interest surrounding the greenback strengthened across the broad. The major opened up on a bearish gap and now targets 0.7200 handle. The Kiwi trades 0.8 percent lower at 0.7210, hovering towards a 4-day low of 0.7201. In absence of fundamental data today, focus will remain on RBNZ Gov Wheeler speech for fresh cues on the pair. Immediate support is seen at 0.7200 handle, break below could take it till 0.7180. On the higher side, resistance is located at 0.7267, break above targets 0.7300.
Equities Recap
Asian shares declined, while the dollar strengthened on expectations that the Federal Reserve might hike interest rates this year.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent, having lost 0.3 percent last week.
Tokyo's Nikkei rose 0.32 pct at 16,598.19, Australia's S&P/ASX 200 index declined 0.27 pct at 5,511.90 points and South Korea's KOSPI trades 0.6 percent down at 2,044.62 points.
Shanghai composite index lost 0.2 percent at 3,101.92 points, while CSI300 index was trading 0.3 percent lower at 3,353.46 points.
Hong Kong’s Hang Seng was trading 0.4 percent lower at 22,837.43 points. Taiwan shares shed 0.6 pct at 8,981.81 points.
Commodities Recap
Crude oil prices declined, pulling away from a 6-week high touched on Friday as investors doubted upcoming producer meeting would reduce the oversupply. International Brent crude was trading at $49.98 per barrel at 0614 GMT, down 1.6 percent. U.S. West Texas Intermediate crude was up 0.1percent, at $48.61 a barrel.
Gold continued to slump for the second consecutive session, as the dollar pulled away from last week's lows after statements from Federal Reserve officials increased speculation on a U.S. interest rate hike this year. Spot gold was down 0.5 percent at $1,333.28 an ounce at 0615 GMT, after touching a low of $1,331.67, its lowest since Aug. 9. U.S. gold dropped 0.4 percent to $1,341.20 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5952 percent up by 0.013 bps, while 5-year was 0.03 bps higher at 1.1920 percent.
The Australian government bonds slumped, following hawkish remarks made by the Federal Reserve officials, which boosted chances of an interest rate hike in 2016. The yield on the benchmark 10-year Treasury note rose 4 basis points to 1.972 percent and the yield on short-term 2-year also jumped 4 basis points to 1.467 percent.
The New Zealand bonds closed marginally weaker as investors drove out from safe-haven buying after US Fed rate hike speculation gathered steam following hawkish comments from the Fed policymakers. The yield on the benchmark 10-year bond increased 1/2 basis point to 2.315 percent and the yield on 7-year note also closed ½ basis point higher at 1.985 percent and the yield on short-term 2-year note bounced 1/2 basis point to 1.810 percent.
