Market Roundup
- Japan government planning at least Y20 trln to support economy – Kyodo.
- BoJ could wipe out bets on July easing – Reuters.
- Japan Jul ReutersTankan mfg index +3, non-mfg +15, June +3/+17, mood subdued.
- Japan seeks more acquisitions of resource companies abroad - Nikkei.
- China June commercial bank net FX sales steady, $12.8 bln, H1 Y173.8 bln.
- BoE MPC Forbes – No need to rush on UK rate cuts, Brexit adjustment to take time – Telegraph.
- German FinMin – Economy in good shape but risks up post-Brexit – Reuters.
- Australia Q2 biz confidence index +2, conditions +11, Q1 +4, +10.
- RBNZ – NZD decline needed, inflation outlook lower, policy to remain accommodative, further easing likely required - Reuters.
- NZ June net migration up, short-term visitors too – Reuters.
- Moody’s - Emerging market debt triples since ’05, poses threat.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Jun retail sales, -0.6% m/m, +5.0% y/y eyed; last +0.9%, +6.0%.
- (0430 ET/0830 GMT) Great Britain Jun - ex-fuel, -0.6% m/m, +4.8% y/y eyed; last +1.0%, +5.7%.
- (0430 ET/0830 GMT) Great Britain Jun PSNB, GBP9.2 bln eyed; last GBP9.14 bln, PSNCR GBP3.42 bln.
- (0430 ET/0830 GMT) Great Britain Jun – ex-banks, GBP9.24 bln eyed; last GBP9.75 bln.
- (0830 ET/1230 GMT) United States Jul Philly Fed business sentiment index, 5.0 eyed; last 4.7.
- (0830 ET/1230 GMT) United States Jun Chicago Fed national activity index; last -0.51.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 265k eyed; last 254k.
- (0900 ET/1300 GMT) United States May FHFA monthly home price; last +0.2% m/m, +5.9% y/y, index 233.8.
- (1000 ET/1400 GMT) United States Jun exist home sales, 5.48mln AR, -0.5% m/m eyed; last 5.53mln, +1.8%.
- (1000 ET/1400 GMT) United States Jun leading indicators index, +0.2% m/m eyed; last -0.2%.
Key Events Ahead
- (0430 ET/0830 GMT) Spain E2.5-3.5 bln 0.25/0.75/2.9% 2019/21/46 Bono auctions.
- (0450 ET/0850 GMT) France E6-7 bln zero/zero/4.25% 2019/21/23 BTan auctions.
- (0550 ET/0950 GMT) France E1-1.5 bln 0.1/0.7/1.8% 2025/30/40 index-linked OAT auctions.
- (0745 ET/1145 GMT) ECB policy announcement, no change in zero% refi, -0.4% depo rates eyed.
- (0830 ET/1230 GMT) ECB Pres Draghi press conference.
FX Beat
DXY: The dollar index, against a basket of currencies edged down 0.1 percent to 97.00. It touched a 4-month high of 97.32 on Wednesday, supported by renewed expectations that the Federal Reserve could raise interest rates at least once this year.
EUR/USD: The euro recovered after declining 0.5 percent overnight, nearing a 1-month low of 1.0970. European Central Bank's policy meeting is due later in the day, which is likely to stand pat on policy, however, markets expect hints of future monetary policy easing, pricing as early as September. The major trades 0.2 percent higher at 1.1033, pulling away from a low of 1.0981 touched in the previous session. Apart from ECB meeting, the markets will also eye U.S. unemployment benefits and housing price index data, which could strengthen the case of imminent Federal Reserve interest rate hike this year. Immediate resistance is located at 1.1073 (20-DMA), break above targets 1.1100 handle. On the lower side, support is seen at 1.0970, break below could take it near 1.0950.
USD/JPY: The greenback rose above 107.00 handle, strengthened by rising expectations that the Federal Reserve could raise interest rates as early as September. The major trades 0.2 percent higher at 107.12, having touched an early high of 107.49, its highest since June 7 and returning to levels seen before the Brexit referendum result. Data released earlier showed Japan's all industry activity index for the month of May declining 1.0 percent, in line with consensus and against previous 1.3 percent gain. Markets will track broader market sentiment ahead of the ECB decision and series of macro-fundamentals from the U.S. Immediate resistance is located at 107.90, break above could take it over 108 handle. On the lower side, support is seen at 106.20 (5-DMA), break below targets 106.
GBP/USD: Sterling extended gains above 1.3200, after Bank of England survey released on Wednesday showed no clear evidence of economic activity slowdown following Britain's vote to exit European Union. The major continues to rise on the back of upbeat U.K employment report-led momentum amid persistent risk-on sentiment. Sterling trades 0.2 percent higher at 1.3233, hovering away from a low of 1.3064, struck in the previous session. Markets now await Britain's retail sales release, ahead of ECB decision for further impetus. Immediate resistance is located at 1.3337 (Jul-13 High), break above could take it over 1.3400 handle. On the lower side, support is seen at 1.3073, break below targets 1.3000. Against the euro, the pound trades at 83.33 pence, after rising to a high of 83.01 pence earlier in the session.
AUD/USD: The Australian dollar regained some ground, after declining for straight four sessions. The upside in the major remains capped as National Australia Bank's (NAB) survey showed business confidence weakening in the economy. NAB's June quarter business confidence figures came in at 2 against 4 previous, while business conditions edged up to 11 versus 10. Moreover, the recovery is likely to remain fragile as speculations of a RBA rate cut as early as next month continues to weigh on the pair. Investors will closely watch ECB presser and U.S. economic releases for further cues. Immediate resistance is located at 0.7508 (20-DMA), break above targets 0.7538/0.7550. On the lower side, support is seen at 0.7437 (Jul-1 Low), break below could take it lower 0.7400.
NZD/USD: The New Zealand dollar declined below the 0.7000 handle after Reserve Bank of New Zealand issued a dovish outlook on the economy, signaling further easing of policy. The central bank in its economic assessment report stated that the currency needed to depreciate in-order to revive inflation. The Kiwi trades 0.4 percent lower at 0.6991, attempting to recover from a low of 0.6951, its lowest level in more than 6-weeks. Immediate support is seen at 0.6951 (Session Low), break below could drag it till 0.6900. On the higher side, resistance is located at 0.7021 (Session High), break above targets 0.7059/0.7085.
Equities Recap
Asian shares touched a 9-month high, largely facilitated by rising capital inflows and a recovery in global oil prices, while the dollar strengthened on the back of growing expectations of a U.S. rate increase as early as September.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 percent, its highest level since October 2015. It has gained 10 percent over the last month.
Tokyo's Nikkei gained 0.77 pct at 16,810.22, Australia's S&P/ASX 200 index added 0.44 pct at 5,513.10 points and Seoul shares edged down 0.22 pct.
Shanghai composite index trades 0.2 percent lower at 3,030.46 points, while CSI300 index also lost 0.2 percent at 3,240.30 points.
Hong Kong’s Hang Seng was trading 0.8 percent higher at 21,858.96 points. Taiwan shares rose 0.5 pct at 9,056.56 points.
Commodities Recap
Crude oil prices gained after the U.S. Energy Department reported the economy's crude inventories declining 2.3 million barrels in the week ending July 15, recording a ninth consecutive weekly drawdown of crude stocks. Brent crude oil was up 0.8 percents at $47.49 a barrel at 0626 GMT, having declined to a low of $45.88 a barrel in the previous day. U.S. West Texas Intermediate crude was also rose 0.6 cents at $45.92 a barrel. The August contract expired on Wednesday after rising 0.7 percent, to settle at $44.94 a barrel.
Gold touched a 3-week low, after declining more than 1 percent in the previous session, as investors await European Central Bank policy meeting amid growing expectations of a U.S. interest rate hike. Spot gold edged up 0.1 percent at $1,317.48 an ounce at 0627 GMT, after declining to an early low of $1310.75. U.S. gold slumped 0.6 percent at $1,311.70 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5818 percent up by 0.002 bps, while 5-year was 0.002 bps lower at 1.1364 percent.
The Australian government bonds traded narrowly mixed , succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. The yield on the benchmark 10-year Treasury note rose 1/2 basis point to 1.929 percent, the yield on short-term 15-year note climbed more than ½ basis points to 2.118 percent and the yield on short-term 2-year note also dipped 2 basis points to 1.540 percent.
New Zealand government bonds gained, sending yields on 2-year government paper lower at 1.90 percent, with yields on 10-year bonds were not far behind at 2.30 percent.
Canadian government bond prices were lower across the maturity curve, with the 2-year price declining 7 Canadian cents to yield 0.607 percent, while the 10-year fell 43 Canadian cents to yield 1.123 percent. The 2-year yield touched its highest since June 24 at 0.609 percent as the market digested new supply.
