Market Roundup
- USD/JPY -1.16%, EUR/USD +0.75%, GBP/USD +0.7%
- DXY -0.85%, DAX -0.4%, Brent +0.35%, Iron +3.9%
- UK Jul Core CPI +1.3% y/y vs 1.4% previous, 1.3% expected
- UK Jul CPI +0.6% y/y vs 0.5% previous, 0.5% expected
- UK Jul Core Output prices +1.0% y/y vs 0.7% previous, 0.8% expected
- Germany Aug ZEW Econ Sent 0.5 vs -6.8 previous, 1.8 expected
- Germany Aug ZEW Curr Cond 57.6 vs 49.8 previous, 50.00 expected
- EZ Jun Trade Bal. E29.2 bln vs 24.6 bln previous, 25.8 bln expected
- RBA August 2 minutes – Ease to help growth, inflation prospects
- Billionaire investors turn bearish as US stocks hit record highs
- Soros slashes gold stake in Q2 – Reuters
Economic Data Preview
- (0830 ET/1230 GMT) The United States Labor Department releases its consumer price index data for the month of July. The consumer price index is expected to remain unchanged after rising 0.2 percent in June. Excluding food and energy, the CPI is likely to have increased 0.2 percent.
- (0830 ET/1230 GMT) The U.S. Department of Commerce is likely to report that housing starts declined to a 1.18 million-unit rate in July from a 1.19 million-unit pace in June, while building permits are likely to have increased to 1.160 million units.
- (0830 ET/1230 GMT) Statistics Canada releases manufacturing sales data for the month of June. Manufacturing sales are likely to have increased by 0.7 percent after declining 1.0 percent in May.
- (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production increased 0.3 percent in the month of July after rising 0.6 percent in June.
- (0915 ET/1315 GMT) The Federal Reserve Board is expected to report that capacity utilization edged up to 75.6 percent in the month of July, from 75.4 percent in June.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
- (1845 ET/2245 GMT) Statistics New Zealand will release producer price index- output for the second quarter. The index posted a decline of 0.2 percent in the previous quarter.
- (1845 ET/2245 GMT) The Statistics New Zealand is expected to report that unemployment rate nudged down to 5.3 percent in the second quarter from prior 5.7 percent.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade ops 15-yr Fannie Mae/Freddie Mac max $575 mln.
- (1230 ET/1630 GMT) Federal Reserve Bank of Atlanta President Dennis Lockhart speaks before the Rotary Club of Knoxville, in Knoxville, Tennessee.
- FX Beat
DXY: The dollar index, against a basket of currencies declined 1 percent to 94.63, it’s lowest since Brexit results.
EUR/USD: The euro rose as high as 1.1300 hitting a 7-week high, largely on the back of broad based U.S. dollar weakness and better-than-expected Eurozone's economic sentiment survey. Eurozone's Zew survey - economic sentiment for the month of August rose to 4.6, surpassing consensus of -6.3 and previous -14.7. Moreover, Euro zone's trade surplus increased to 29.2 billion euros in June, above the 25.8 billion forecast, with unadjusted exports declining 2 percent and imports falling 5 percent. The European currency trades 1 percent higher at 1.1301, attempting to sustain gains around 1.1300 handle. On the higher side, resistance stands at 1.1300 and any indicative break above targets 1.1380/1.1430. Support is located 1.1150 and any violation below that level will take the pair to next level 1.1100/1.1080/1.000.
USD/JPY: The Japanese yen rose to 7-week high of 99.81, touching its highest level since Brexit result. The greenback continues the downbeat momentum after last Friday’s weak U.S Retail Sales report limited the scope for a near-term U.S. Federal Reserve rate hike. It came under renewed selling pressure following a paper from San Francisco Fed President John Williams arguing that the Fed might have to raise inflation targets, highlighting on growth and looser fiscal policy in future. The dollar trades 1.4 percent lower at 99.81, well off from a peak of 102.71 touched last week. The short term trend is slightly bearish as long as resistance102 holds. The major resistance is around 102 and any break above confirms minor trend reversal, a jump till 103/104 is possible. On the lower side major support is around 99.50 and any break below will drag it till 98.
GBP/USD: Sterling strengthened, pulling away from 3-year lows against the euro and further away from a 5-week trough against the dollar, after better than expected inflation data release. Consumer prices rose by 0.6 percent in July compared with a year earlier, their biggest increase since the end of 2014. Producer prices were up by 0.3 percent from a year earlier, while input prices paid by manufacturers rose 4.3 percent, well above the 2 percent rise forecast, after posting a decline of 0.5 percent in June. Sterling rose as high as 1.2993, following the data release and was trading 0.8 percent higher at 1.2972, away from a 5-week low of 1.2866 touched on Monday. The short term trend is slightly weak as long as resistance 1.304 holds and any break above will take the pair to next level till 1.3100/1.3170/1.3200. On the lower side, 1.2850 seems to be major support and any break below targets 1.2800/1.2770. Minor bullishness can be seen only above 1.3200. Against the euro, the pound trades flat at 86.83 pence, hovering touched a 3-year low of 87.24 earlier in the session.
USD/CHF: The Swiss franc rose to an 8-week high, as the dollar weakened across the broad, amid prevalent risk-off sentiment. The greenback trades 1.1 percent lower at 0.9623, well off from a high of 0.9733 touched earlier in the session. On the lower side, major support is around 0.9635 and any violation below 0.9635 will drag the pair down till 0.9575/0.9530/0.9500. The minor resistance is around 0.9735 and any break above targets 0.9770/0.9800. The major should close above 0.9850 for further bullishness.
AUD/USD: The Australian dollar extended gains above the 0.7700 handle, amid broad-based selling tone in the US dollar. The major declined to a low of 0.7653, following RBA minutes which suggested the recent cut was necessary to improve growth and inflation prospects. However, it retreated from its lows amid ongoing US dollar weakness. The Aussie trades 0.7 percent higher at 0.7728, hovering towards a 3-month high of 0.7759 touched last week. On the higher side, any break above 0.7760 will take the pair till 0.7800/0.7840. The major support is around 0.7630 and break below will drag the pair till 0.7630/0.7575/0.7535.
NZD/USD: The New Zealand dollar rose as high as 0.7298 from 0.7199, hitting 3-day high on the back of broad based sell-off in the US dollar. The Kiwi trades 1.2 percent higher at 0.7294, attempting to re-gain the 0.7300 handle. The on-going recovery in the crude oil prices also strengthened the bid tone around the Kiwi. Immediate resistance is located at 0.7300, break above would take it till 0.7338. On the lower side, support is seen at 0.7184 (10-DMA), break below targets 0.7150.
Equities Recap
World shares edged down, hovering away from 1-year peaks, while European shares pulled away from 7-week highs, dragged down by industrial stocks.
The MSCI world equity index nudged down from 1-year high, while MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 percent, bringing its gains to 9.8 percent so far this year.
The pan-European STOXX 600 index declined 0.2 percent at 345.47 points, while the FTSEurofirst 300 index slipped 0.1 percent at 1,360.74 points.
Britain's FTSE 100 trades flat at 6,937.59 points, while mid-cap FTSE 250 index added 0.2 pct at 17,962.93 points.
Germany's DAX edged down 0.1 percent at 10,724.51 points; France's CAC 40 trades 0.1 percent up lower 4,492.57 points.
Tokyo's Nikkei slumped 1.62 pct at 16,596.51, Australia's S&P/ASX 200 index dropped 0.13 pct at 5,532.80 points and South Korea's KOSPI lost 0.1 pct at 2,047.76 points.
Shanghai composite index declined 0.5 pct at 3,110.04 points, while CSI300 index shed 0.4 pct at 3,378.25 points. Hong Kong’s Hang Seng index edged down 0.1 pct at 22,910.84 points.
Commodities Recap
Crude oil prices touched fresh 5-week highs, strengthened by talk of producers taking action to reduce oversupply, however, gains were limited as some investors cashed in on the 16 percent rally since early August. International Brent crude oil was trading 0.6 percent higher at $48.55 per barrel at 0946 GMT, having touched a high of $48.64, a level last seen since July 2. U.S. West Texas Intermediate crude was trading at $46.01 a barrel, up 0.7 percent from its previous close.
Gold advanced for a second straight day as the dollar weakened across the broad on lower expectations of a Federal Reserve interest rate hike this year. Spot gold was up about 0.9 percent at $1,350.76 an ounce at 00949 GMT, pulling away from a low of $1329.79 touched last week. U.S. gold rose 0.5 percent to $1,354.70 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5304 percent down by 0.022 bps, while 5-year was 0.028 bps lower at 1.1022 percent.
Eurozone government bond yields fell ahead of the Bank of England's second attempt to buy long-dated debt under its re-launched quantitative easing programme. Eurozone bond yields were flat to slightly lower on the day, with benchmark 10-year German bond yields down 2 basis point at minus 0.08 percent.
The Japanese Government Bond prices remain mixed, with 20yr and 30yr JGBs extending their earlier losses moderately. The yield on the current 5 year JGBs was down 1bp at -0.17 percent, while the 10 year yield was down 1bp at -0.095 percent, vs -0.08 percent (+0.5bp) earlier.
Australian government bond futures eased, with the 3-year bond contract down 1 tick at 98.62 and the 10-year contract fell 1 tick to 98.105.
New Zealand government bonds fell slightly, sending yields 1 basis point higher across the curve.
