Market Roundup
- Helicopter money talk takes flight as BoJ runs out of runway – Reuters.
- NY Fed Dudley – Urges caution on rate hikes, flatter tightening path appropriate, risks to US growth skewed to downside, USD rising – Reuters.
- BoE expected to slash growth forecast – Financial Times.
- CFTC IMM CTA data – Specs up USD net longs to highest since February, EUR net shorts to 112.6k contracts, JPY net longs off to 34.9k.
- Japan July mfg PMI 49.3, still contracting, flash 49.0, June final 48.1.
- China July Caixin mfg PMI 50.6, 17-month high, 48.7 forecast, last 48.6.
- China July official mfg PMI 49.9, 50.0 forecast, last 50.0, factory output and new export orders down but industrial profit best in three months.
- China July official services PMI 53.9, June 53.7.
- Australia July AIG PMI +4.6 points to 56.4, 13-month expansion, low AUD good.
- Australia June HIA new home sales +8.2% m/m, May -4.4%.
- New Zealand's Fonterra – Farmgate milk prices to remain as is, global supply-demand to come into balance, price does reflect continuing global uncertainty –Reuters.
Economic Data Ahead
- (0300 ET/0700 GMT) Norway Jul PMI mfg, 51.5 forecast; last 53.5.
- (0315 ET/0715 GMT) Spain Jul PMI mfg; last 52.2.
- (0345 ET/0745 GMT) Italy Jul PMI mfg, 52.0 forecast; last 53.5.
- (0350 ET/0750 GMT) France Jul PMI mfg, 48.6 forecast; flash 48.6.
- (0355 ET/0755 GMT) Germany Jul PMI mfg, 53.7 forecast; flash 53.7.
- (0400 ET/0800 GMT) Eurozone Jul PMI mfg, 51.9 forecast; flash 51.9.
- (0430 ET/0830 GMT) Great Britain Jul PMI mfg, 49.1 forecast; last 49.1.
- (0945 ET/1345 GMT) United States Jul Markit PMI mfg – final; flash 52.9.
- (1000 ET/1400 GMT) United States Jul ISM PMI mfg, 53.0 forecast; last 53.2.
- (1000 ET/1400 GMT) United States Jun construction spending, +0.5% m/m forecast; last -0.8%.
Key Events Ahead
- (0540 ET/0940 GMT) Netherlands E1-2 bln 3 and 6-month DTC auctions.
- (0850 ET/1250 GMT) France E3-3.4/0.5-0.9/0.7-1.1 bln 3/6/12-month BTF note auctions.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent up at 95.60, pulling away from its Friday low of 95.38, it’s lowest since July 5.
EUR/USD: The euro extended gains, after rising as high as 1.1197 on Friday following disappointing U.S. growth figures. U.S. gross domestic product increased at a 1.2 percent annual rate in the April-June period, falling short of a 2.6 percent growth rate forecast. Investors now expect the Fed to raise interest rate in December after downbeat growth numbers and FOMC statement last week reduced September hike prospects. The major trades 0.1 percent higher at 1.1177, hovering towards previous session high. Markets now await PMI data from Eurozone economies, ahead of U.S. PMI and construction spending report. Immediate resistance is located at 1.1200, break above targets 1.1242. On the downside, support is seen at 1.1100, break below could drag it till 1.1050.
USD/JPY: The greenback edged up, having declined from a high of 105.60 to 101.97 on Friday, after the BoJ disappointed market expectations, coupled with downbeat U.S. growth figures. The central bank refrained itself from expanding its JGBs program and take already negative interest rates lower. Instead, it increased its purchase of exchange-traded funds to 6 trillion yen and kept interest rates at minus 0.1 percent. The dollar attempted a minor recovery on the back of strong risk-on sentiment, supported by better-than expected Chinese manufacturing PMI and comments from Fed official Dudley. The major trades 0.3 percent higher at 102.35 yen, pulling away from Friday's low. Investors will continue to track broad market sentiment ahead of series of economic data from the U.S. Immediate resistance is located at 103.00, break above could take it till 103.39. On the lower side, support is seen at 102.00 (Session Low), break below targets 101.45.
GBP/USD: Sterling consolidated between a narrow range, as investors remain cautious ahead of Bank of England policy meeting later in the week, which is expected to cut interest rate to cushion its economy. The BoE is likely to cut rates by a quarter point from the current record low of 0.5 percent at the end of 2-day meeting, which concludes on Thursday. The major trades 0.2 percent up at 1.3252, attempting to sustain gains above the 1.3200 handle. Markets will closely watch Britain's July Markit manufacturing PMI for further cues on the pair. Immediate resistance is located at 1.3300, break above targets 1.3340/ 1.3400. On the lower side, support seen at 1.3135 (20-DMA), break below could take it till 1.3100.
AUD/USD: The Australian dollar extended gains above the 0.7600 handle following better-than expected Chinese Caixin manufacturing PMI report and downbeat U.S. economic data, which reduced expectations of a rate hike by the Federal Reserve. The Australian dollar trades 0.2 percent higher at 0.7607, having hit a 3-week high of 0.7615. It gained nearly 1.3 percent on Friday after disappointing U.S. growth figures forced Aussie bears to cover short positions. Markets now await the Reserve Bank of Australia's monthly policy meeting due on Tuesday, where markets expect the central bank to cut interest rate to a new low of 1.5 percent. Immediate resistance is located at 0.7638 (July-13 High), break above targets 0.7676/ 0.7700. On the downside, support is seen at 0.7539 (5-DMA), break below could take it lower 0.7500.
NZD/USD: The New Zealand dollar rose, supported by upbeat China Caixin PMI figures and recovery in oil prices. However, the gains were capped as markets are wagering heavily on a rate cut at the Reserve Bank of New Zealand policy review meeting on August 11. The Kiwi trades 0.3 percent up at 0.7227, attempting to sustain gains above the 0.7200 handle. The movements in the major will be driven by broad based market sentiment, ahead of series of U.S. economic data and RBNZ Inflation Expectations report. Immediate resistance is located at 0.7254, break above targets 0.7294/ 0.7300. On the lower side, support is seen at 0.7175, break below could drag it till 0.7140/ 0.7115.
Equities Recap
Asian shares rose to a 1-year high after disappointing U.S. economic growth figures slashed expectations of U.S. Federal Reserve interest rates hike in the near term.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.1 percent, touching its highest level in about a year.
Tokyo's Nikkei gained 0.40 pct at 16,635.77, Australia's S&P/ASX 200 index rose 0.37 pct at 5,582.90 points and South Korea's KOSPI soared 0.7 percent at 2,028.88 points.
Shanghai composite index trades 0.9 percent lower at 2,951.97 points, while CSI300 index trades 0.7 percent down at 3,178.62 points.
Hong Kong’s Hang Seng was trading 1.4 percent higher at 22,198.47 points. Taiwan shares added 1.0 pct at 9,080.71 points.
Commodities Recap
Crude oil prices extended gains, pulling away from a near 3-month low of $42.49 a barrel touched last week, despite several reports showing a rise in U.S. drilling and increasing output from OPEC. Brent crude oil was trading 0.7 percent higher at $43.61 per barrel at 0630 GMT, having lost 12 percent over the last month. U.S. West Texas intermediate crude was trading 0.8 percent higher at 41.74 per barrel, after it shed 13 percent of value in July.
Gold nudged down slightly, after gaining more than 1 percent to a near 3-week high in the previous session, as equities rose and the dollar recovered from lows following last week's disappointing U.S. growth figures. Spot gold trades 0.2 percent lower at $1,346.94 an ounce by 0631 GMT, after hitting a high of $1,354.84 on Friday, its highest level since July 12. U.S. gold was down 0.3 percent at $1,354 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.4803 percent up by 0.022 bps, while 5-year was 0.02 bps higher at 1.0525 percent.
The Australian government bonds rallied as investors are pricing a 25 basis points rate cut from the Reserve Bank of Australia in the wake of subdued second-quarter inflation figure and sluggish economic growth. The yield on the benchmark 10-year Treasury note fell 7 basis points to 1.835 percent and the yield on short-term 2-year note dipped 6-1/2 basis points to 1.474 percent.
The New Zealand government bonds gained after reading weaker than expected United States second-quarter gross domestic product figure. The yield on the benchmark 10-year bond slid 5 basis points to 2.165 percent (fresh record low), the yield on 7-year note also dipped 5-1/2 basis points to 1.920 percent (new record low) and the yield on short-term 2-year note ended 5 basis points lower at 1.795 percent (fresh record low).
