Market Roundup
- Japan EconMin Ishihara urges BoJ to help support growth - Reuters.
- Ex-BoJ ChiefEcon Hayakawa – Eyes BoJ ease, for flexible CPI goal – MNI.
- MoF flow data week-ended July 23 – Japanese buy net Y175.3 bln foreign stocks, Y679.3 bln bonds, Y25.9 bln bills; foreign investors sell net Y271.5 bln Japanese stocks, buy Y304.6 bln bonds, Y632.5 bln bills.
- Australia Q2 import prices -1.0% q/q, export prices +1.4%.
Economic Data Ahead
- (0300 ET/0700 GMT) Spain Q2 unemployment, 20.4% forecast; last 21.0%.
- (0330 ET/0730 GMT) Sweden Jun retail sales, +0.1% m/m forecast; last +1.7% m/m, +4.6% y/y.
- (0330 ET/0730 GMT) Sweden Jun unemployment, 7.9% nsa forecast; last 7.6% nsa, 7.2% sa.
- (0355 ET/0755 GMT) Germany Jul unemployment, -3k, 6.1% sa forecast; last -6k, 6.1%.
- (0355 ET/0755 GMT) Germany Jul unemployment, 2.67 mln nsa forecast; last 2.61 mln nsa, 2.69 mln sa.
- (0400 ET/0800 GMT) Italy Jun wage inflation; last unch m/m, +0.6% y/y.
- (0500 ET/0900 GMT) Eurozone Jul business climate index, 0.17 forecast; last 0.22.
- (0500 ET/0900 GMT) Eurozone Jul economic sentiment index, 103.7 forecast; last 104.4.
- (0500 ET/0900 GMT) Eurozone Jul industrial sentiment index, -3.4 forecast; last -2.8.
- (0500 ET/0900 GMT) Eurozone Jul services sentiment index, 10.4 forecast; last 10.8.
- (0500 ET/0900 GMT) Eurozone Jul consumer confidence index – final, -7.9 forecast; last -7.3.
- (0530 ET/0930 GMT) Belgium Jul CPI; last +0.11% m/m, +2.16% y/y.
- (0800 ET/1200 GMT) Germany Jul HICP – flash, +0.3% m/m, +0.3% y/y forecast; last +0.1%, +0.2%.
- (0830 ET/1230 GMT) United States Jun goods trade balance – advance; last $60.59 bln deficit.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 260k forecast; last 253k.
- (1100 ET/1500 GMT) United States Jul KC Fed manufacturing, composite indices; last 12.0, 2.0.
Key Events Ahead
- N/A BoJ Policy Board begins two-day meeting.
- (0500 ET/0900 GMT) Italy E1.5-2 and 4-4.5 bln 0.45% and 1.25% 2021 and 2026 BTP auctions.
- (0500 ET/0900 GMT) Italy E1.5-2 bln 2023 CCTeu auction.
- N/A US Democratic Party national convention in Philadelphia (final day).
- (1400 ET/1800 GMT) ECB Coeure speaks at Yale University forum.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent lower at 96.61, below an overnight high of 97.53, its highest level since March.
EUR/USD: The euro extended gains above the 1.1050 handle, as markets continue to digest a less dovish statement from the Federal Reserve. On Wednesday, the Fed kept its interest rates on hold and provided a positive assessment of the U.S economy. The central bank stated that the near term risks to the economic outlook have diminished and the economy is growing at a moderate pace, which increased market expectation of a rate hike at the next meeting or later. Investors now await German unemployment data, followed by Eurozone sentiment indices, ahead of U.S. goods trade balance data and weekly initial jobless claims for further momentum on the major. The European currency trades 0.1 percent higher at 1.1071, pulling away from a low of 1.0961 touched in the previous session. Immediate resistance is located at 1.1100, break above targets 1.1126/1.1164. On the lower side, support is seen at 1.1024 (10-DMA), break below could drag it till 1.1000.
USD/JPY: The Japanese yen gained on rising expectations the Bank of Japan won't deliver the stimulus markets initially anticipated for the week. The weakness in the greenback also came in after the Fed did not provide any clear clues on near-term rate hike. According to Japanese government sources, the Japanese PM Abe's stimulus package is expected to include 7 trln yen of its 28 trln yen in spending. The dollar trades 0.6 percent lower at 104.73, hovering away from a high of 106.53 touched in the previous session. Markets attention now remains on BoJ's policy outcome due tomorrow, which is expected to cut rates and expand its QQE program. Immediate support is seen at 104.14 (20-DMA), break below could take it lower 104 handle. On the higher side, resistance is located at 105.81, break above targets 106.40/ 106.75.
GBP/USD: Sterling failed to sustain gains above the 1.3200 handle, as market speculate the Bank of England to cut rates and deliver an unspecified package of measures next week in order to strengthen the economy. On Wednesday, the major rose to a high of 1.3234, as the dollar weakened across the broad following Fed's policy statement release. Sterling trades 0.3 percent lower at 1.3179, hovering below the 1.3200 level. Investors will closely watch Britain's housing price data for further cues on the major. Immediate support is seen at 1.3095 (Jul-25 Low), break below could drag it till 1.3000. On the higher side, resistance is located at 1.3289, break above targets 1.3314/ 1.3400. Against the euro, the pound trades 0.4 percent lower at 83.99 pence.
AUD/USD: The Australian dollar extended gains above the 0.7500 handle, after data showed Australia's import and export price index increased for the second quarter, combined with weakness in the U.S. dollar. The economy's import price index rose to -1 percent q/q from previous -3 percent, while export price index gained 1.4 percent versus prior -4.7 percent. The Aussie trades 0.5 percent higher at 0.7526, after declining as low as 0.7420 on Wednesday. Traders will continue to track broad based market sentiment, ahead of U.S. goods trade balance and weekly initial jobless claims data. Immediate resistance is located at 0.7565 (Previous Session High), break above targets 0.7580/ 0.7600. On the lower side, support is seen at 0.7462 (Jul-26 Low), break below could take it near 0.7420.
NZD/USD: The New Zealand dollar regained 0.7100 handle on the back of improving risk-sentiment and broad based U.S. dollar weakness. The Kiwi trades 0.4 percent higher at 0.7107, having touched an early high of 0.7118. The movements in the major will be driven by market sentiments ahead of series of economic data from the U.S and New Zealand’s building permit report. Immediate resistance is located at 0.7136 (20-DMA), break above targets 0.7153/ 0.7197. On the lower side, support is seen at 0.7050, break below could take it till 0.7004.
Equities Recap
Asian shares gained after the Federal Reserve provided an upbeat assessment of the U.S economy, which boosted risk sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 percent after briefly advancing to its highest level since August 2015.
Tokyo's Nikkei declined 1.13 pct at 16,476.84, Australia's S&P/ASX 200 index gained 0.32 pct at 5,557.50 points and Seoul shares lost 0.20 pct.
Shanghai composite index trades 2.6 percent down at 2,971.24 points, while CSI300 index trades 2.4 percent lower at 3,188.15 points.
Hong Kong’s Hang Seng was trading 0.1 percent lower at 22,101.97 points. Taiwan shares added 0.2 pct at 9,076.64 points.
Commodities Recap
Oil prices retreated slightly from a near 3-month low, however, the outlook for the industry remained weak as crude producers and fuel refiners continue to oversupply the markets. International Brent crude oil trades flat at $43.41 at 0633 GMT. U.S. West Texas Intermediate crude was also flat at $41.87.
Gold edged down after rising 1.5 percent to a 2-week high in the previous session, as the dollar weakened after the U.S. Federal Reserve left interest rates unchanged. Spot gold trades at $1,339.58 an ounce by 0635 GMT, having touched a high of $1,342.22 on Wednesday, its best since July 14. U.S. gold rose 0.9 percent to $1,338.7 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5010 percent down by 0.014 bps, while 5-year was 0.011 bps lower at 1.0896 percent.
The Australian government bonds rallied as investors remain cautious ahead of the Reserve Bank of Australia’s (RBA) monetary policy meeting, which is scheduled to take place on August 2. The yield on the benchmark 10-year Treasury note fell 8 basis points to 1.886 percent and the yield on short-term 2-year note dipped nearly 5 basis points to 1.539 percent.
The New Zealand government bonds closed firmer after crude oil futures fell to its lowest levels in more than three months as the U.S Energy Information Administration inventories data revealed a surprise rise in stockpiles. The yield on the benchmark 10-year bond slid 1 basis point to 2.245 percent, the yield on 7-year note also dipped 1 basis point to 2.00 percent and the yield on short-term 2-year note ended 1/2 basis point lower at 1.865 percent.
Canadian government bond prices were higher across the maturity curve, with the 2-year price up 3.5 Canadian cents to yield 0.578 percent and the benchmark 10-year rising 44 Canadian cents to yield 1.077 percent. The Canada-U.S. 2-year bond spread narrowed to -14 basis points, while the 10-year spread came in to -42.2 basis points.
