Market Roundup
- IMF Obstfeld - No need for G20 to tame FX markets after Brexit – Reuters.
- BoJ survey – Business loan demand down, index at +4, April +5, households up, index to +14, April +9 – Market News.
- PBOC yuan fix 6.6946 vs USD, last close 6.6970, state banks buy yesterday.
- Australia June Westpac/MI leading index 96.81, May 97.02, deviation from 6-month trend -0.14%, May -0.37%.
- Dairy prices unchanged, volumes off at latest Fonterra auction - Reuters.
Economic Data Ahead
- (0400 ET/0800 GMT) Eurozone May current account balance; last E34.0 bln nsa surplus, E36.2 bln sa.
- (0400 ET/0800 GMT) Eurozone May net investment flow; last E128.8 bln inflow.
- (0430 ET/0830 GMT) Great Britain Jun claimant count, 3.5k eyed; last -0.4k.
- (0430 ET/0830 GMT) Great Britain May ILO unemployment, 5.0% eyed; last 5.0%.
- (0430 ET/0830 GMT) Great Britain May average weekly earnings – 3-mo avge, +2.3% y/y eyed; last +2.0%.
- (0430 ET/0830 GMT) Great Britain May – ex-bonus, +2.3% y/y eyed; last +2.3%.
- (0500 ET/0900 GMT) Switzerland Jul ZEW investor sentiment index; last 19.4.
- (1000 ET/1400 GMT) Eurozone Jul consumer confidence index – flash, -8.0 eyed; last -7.3.
Key Events Ahead
- N/A US TsySec Lew in Greece.
- N/A Cyrus marketing 7-yr bond at @4%, via Barclays, JPM, MS, SGCIB, VTB.
- (0530 ET/0930 GMT) Germany E5 bln zero% 2021 Bobl, UK GBP1.5 bln 4.25% 2039 Gilt auctions.
- (0540 ET/0940 GMT) Portugal E1.5-1.75 bln 6 and 12-month bill auctions.
- N/A US Republican National Convention in Cleveland (till Thursday).
- (1700 ET/2100 GMT) RBNZ economic assessment update.
FX Beat
DXY: The dollar index, against a basket of currencies rose to 97.19, its highest level since March 10, on the back of better-than-expected U.S. housing report.
EUR/USD: The euro breached below the 1.1000 handle, slumping to a 3-week low of 1.0998 as markets expect European Central Bank to remain dovish on its policy outlook. The ECB is unlikely to take any additional easing steps at its policy meeting on Thursday, however, bond traders speculate the central bank would lower the threshold of bond purchases, as more than a half of German bonds are now ineligible for its asset purchase. Markets attention will now remain on Eurozone's current account figures and preliminary consumer confidence data for further cues on the major. The European currency trades flat at 1.1010, attempting to sustain gains above the 1.100 handle. Immediate support is seen at 1.0970 (Jun-27 Low), break below could take it near 1.0911. On the higher side, resistance is located at 1.1051 (5-DMA), break above targets 1.1100.
USD/JPY: The greenback edged up, having touched a high of 106.53 on Tuesday, its highest level since June 24 when markets were taken by surprise after Britain voted to exit the European Union. Investors are unwinding their safe-haven bids in the yen as they speculate an additional easing from the Bank of Japan at its July 28-29 meeting. The central bank is likely to deliver combination of fiscal and monetary expansion to battle deflation. The major trades flat at 106.17, hovering towards a 3-1/2 high touched in the previous session. The major will track broad market sentiment, amid lack of macro-fundamentals from the U.S. calendar. Immediate resistance is located at 106.50, break above targets 107 handle. On the lower side, support is seen at 105.42, break below could take it lower 105 level.
GBP/USD: Sterling hovers around 1.3100 handle, after declining 1 percent against the dollar on Tuesday, as investors still expect Bank of England to ease monetary policy as early as next month, despite better-than-expected British inflation figures. The major remains under pressure as the dollar continues to gain on the recent U.S. housing data release. Sterling trades lower at 1.3104, having retreated from a 2-week high of 1.3344 struck on Friday. Markets will closely watch Britain's labour market report for further momentum. Immediate support is located at 1.3000, break below could drag it near 1.2971/1.2875. On the upside, resistance is seen at 1.3195 (5-DMA), break above targets 1.3270/ 1.3320. Against the euro, the pound trades at 84.06 pence.
AUD/USD: The Australian dollar struggles to sustain gains above 0.7500 level, weighed down by RBA rate cut speculation amid persistent risk-off sentiment across the markets. The major came under renewed downward pressure after data showed Australia's Westpac Leading Index for the month of May declined 0.2 percent versus previous 0.21 percent gain. The Aussie trades 0.1 percent lower at 0.7496, hovering towards an 11-day low of 0.7476 touched in the previous session. The recovery in the pair remains fragile as copper prices weakened by 0.7 percent, Australia's top export. The movement in the pair will be driven broad based market sentiment ahead of U.S. crude inventories data, amid a lack of relevant economic data. Immediate support is seen at 0.7470 (Jul-8 Low), break below could take it till 0.7437. On the higher side, resistance is located at 0.7529, break above targets 0.7550 level.
NZD/USD: The New Zealand dollar attempted a minor recovery to regain 0.7050 level, as markets await Reserve Bank of New Zealand's economic assessment update, which could provide insights about a possible rate cut at a policy meeting on Aug. 11. The Kiwi edged up to 0.7056, after declining to an early low of 0.7020. The major was supported by a 1.9 percent rise in the whole milk powder prices at the GDT auction. Investors will continue to track market sentiment, ahead of the central bank's economic update release for further cues on the major. Immediate resistance is located at 0.7085, break above targets 0.7100. On the lower side, support is seen at 0.7010 (Previous Session Low), break below could take it lower 0.7000.
Equities Recap
Asian shares declined after a record run on Wall Street lost momentum following International Monetary Fund global growth forecasts cut for the next 2-years, citing uncertainty over Britain's exit from the European Union.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1 percent, hovering away from a 9-month high struck late last week.
Tokyo's Nikkei decline 0.25 pct at 16,681.89, Australia's S&P/ASX 200 index rose 0.63 pct at 5,485.60 points and Seoul shares edged down 0.16 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 drop 0.3 pct at 9,007.68 points.
Commodities Recap
Oil prices rose after U.S. crude stockpiles fell more than expected last week. American Petroleum Institute reported that U.S. crude stockpiles declined 2.3 million barrels last week, just above a 2.1 million-barrels draw forecast. Brent crude was up 0.3 percents at $46.76 a barrel at 0620 GMT, after closing down 0.6 percent, at $46.66 barrel on Tuesday. U.S. West Texas Intermediate crude gained more than 2 percent to $45.58 a barrel. It fell 1.3 percent, to settle at $44.65 in the previous session.
Gold edged down, as the dollar rose to a 4-month high on the back of better than expected U.S. housing data. Spot gold declined 0.1 percent at $1,329.37 an ounce at 0621 GMT, having touched an early high of $1337.73.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5543 percent down by 0.004 bps, while 5-year was 0.003 bps higher at 1.1168 percent.
The Australian government bonds traded modestly firmer as investors speculate that the Reserve Bank of Australia will lower its official cash rate from prevailing record low in August’s monetary policy meeting. The yield on the benchmark 10-year Treasury note fell 1 basis point to 1.935 percent and the yield on short-term 2-year note also dipped 2 basis points to 1.571 percent.
The New Zealand government bonds closed mixed as investors await assessment of the economy from the Reserve Bank of New Zealand. The yield on benchmark 10-year bond, rose 2 basis points to 2.305 percent, the yield on 7-year note remained flat at 2.045 percent and the yield on short-term 2-year note ended steady at 1.935 percent.
Canadian government bond prices rose marginally across the maturity curve, with the 2-year price up 1 Canadian cent to yield 0.574 percent and the benchmark 10-year rose 22 Canadian cents to yield 1.077 percent. Earlier in the session the 10-year yield touched its highest level since June 27 at 1.150 percent, extending its rebound from a five-month low on July 11 at 0.935 percent.
