Market Briefs
- USD/JPY +0.3%, EUR/USD -0.3%, GBP/USD -0.3%.
- DXY +0.20%, DAX -0.7%, Brent -0.3%, Iron +2.9%.
- Germany Jul Producer Prices -2.0% y/y vs -2.2% previous, -2.1% expected.
- UK Jul PSNB Ex. Banks -GBP977 mln vs +8.001 bln previous, -1.629 bln expected.
- UK Jul PSNB –GBP1.472 bln vs 7.506 bln previous, -1.2 bln expected.
- UK Jul PSNCR –GBP2.098 bln vs 13.5 bln previous.
- Fed's Williams (non-voter) says September rate hike makes sense - Reuters News.
- Moody's lowers outlook on Australia banks to negative - Reuters News.
- Japan manufacturers' mood at lowest since 2013 -Reuters Tankan.
- Reuters Tankan: Japan manufacturers Index +1 In Aug Vs +3 In July.
- Reuters Tankan: Japan non-manufacturers index +18 in Aug vs +15 in July.
Economic Data Preview
- (0830 ET/1230 GMT) Canada's inflation rate is likely to have cooled to 1.3 percent in July, nearing to the low end of the Bank of Canada's 1-3 percent target range. As the inflation is being influenced by temporary factors, the bank is unlikely to change the path of monetary policy.
- (0830 ET/1230 GMT) Canada's retail sales likely rose by 0.5 percent in June, maintaining a relatively robust pace. The economy likely shrank in the second quarter but analysts will be watching retail sales figures for a hint of how the hand-off to the third quarter held up.
- (1300 ET/1700 GMT) Baker Hughes US Oil Rig Count
Key Events
- (1145 ET/ 1545 GMT) FedTrade operation 30-year Ginnie Mae max $1.325 bln.
Equities Recap
European stocks were on track to post their biggest weekly loss since the mid-June on Friday and crude oil inched higher to 8-week highs on the back of a weaker dollar and hopes of a production cut. Markets focus is back on the U.S. Fed and its decision to raise interest rates. European shares dropped 0.6 percent on the day and are off 1 percent for the week. The index is down 6.7 percent this year, but has rebounded 11 percent from its post-Brexit vote low.
Britain's FTSE 100 was down 0.23 percent at 6853.30 by 0948 GMT, taking its total fall for the week to 0.9 percent, its biggest weekly decline since mid-June, before Britain voted to leave the European Union. France’s CAC 40 fell 0.87 pct, Spain’s IBEX slid above 1 pct, while Germany's DAX was down 0.70 pct and Italy’s FTSE MIB dropped more than 2 pct by 0947 GMT.
In Asia, Tokyo's Nikkei closed up 0.36 pct at 16,545.82, China's CSI300 Index ended flat at 3,365.02 points, but was up 2.1 pct for the week, while Shanghai Composite Index closed up 0.1 pct at 3,108.10 points on the day and was up 1.9 pct for the week. HK’s Hang Seng Index finished down 0.4 pct at 22,937.22 points, but rose 0.7 pct for the week.
Commodities Recap
Oil prices dropped on Friday after touching an eight-week high, as weak fundamentals countered a lift in sentiment over talks next month on a possible output freeze, though futures remained on track to rise for a third consecutive week. International benchmark Brent futures were trading at $50.50 per barrel at 0840 GMT, down 39 cents from their last close. Brent earlier hit $51.22, its highest since June 22. U.S. West Texas Intermediate (WTI) crude futures were down 20 cents at $48.02 a barrel after reaching $48.75, their highest since July 5.
Gold fell on Friday for the first time this week as hawkish comments from U.S. Fed officials renewed bets on a U.S. rate hike this year, but was still on track to end the week with modest gains. Spot gold was down 0.50 percent at $1,344.10 per ounce at 1000 GMT, but up 0.1 percent for the week. U.S. gold dropped 0.38 percent to $1,352.10 an ounce.
Treasuries Recap
The US Treasuries gains stalled by modest improvement in both initial jobless and Philadelphia Fed manufacturing activity data. The yield on the benchmark 10-year Treasury note rose 1 basis point to 1.544 percent, the yield on 5-year note climbed 1-1/2 basis points at 1.127 percent and the yield on short-term 2-year note also bounced 1-1/2 basis points at 0.722 percent.
The Japanese government bonds traded modestly firmer as trading activity remained quiet with no major economic data or reports expected throughout the day. The benchmark 10-year bond yield fell nearly 1 basis point to -0.086 percent, the super-long 30-year JGB yield dipped 2 basis points to 0.337 percent, the 5-year JGB yield tumbled 1 basis point to -0.176 percent and the short-term 2-year JGB yield slid nearly 1 basis point to -0.203 percent.
The UK gilts traded modestly lower after data showed that country’s retail sales jumped higher than expected in July. Also, firmer crude oil prices drove out investors from safe-haven buying. The yield on the benchmark 10-year gilts rose 1 basis point to 0.560 percent, the super-long 40-year bond yield also climbed 1 basis point to 1.117 percent and the yield on short-long 2-year bond bounced 1 basis point to 0.152 percent.
The German bunds traded nearly flat Friday, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year bond hovered around -0.085 percent mark, the yield on long-term 30-year note dipped 1/2 basis point to 0.405 percent and the yield on short-term 2-year bond remained steady at -0.618 percent.
The Portuguese government bonds plunged as investors awaited the country's outlook from Fitch ratings agency later today. The yield on the benchmark 10-year bond rose 6 basis points to 2.969 percent and the yield on short-term 3-year bond jumped 2 basis points to 0.572 percent.
The Australian government bonds traded nearly flat on Friday, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1/2 basis point to 1.928 percent and the yield on short-term 2-year note remained steady at 1.431 percent.
The New Zealand bonds closed narrowly mixed in the absence of major economic data or events and with subdued trading on the last day of the week. The yield on the benchmark 10-year bond rose 1 basis point to 2.230 percent and the yield on 7-year note remained steady at 1.93 percent mark and the yield on short-term 2-year note slid 1 basis point to 1.785 percent.
FX Beat
USD: The uncertainty around Fed rate hikes has weakened the U.S. dollar which was poised for a weekly loss against its major counterparts and remained near 8-week lows against the euro. The dollar index was down 1.4 percent for the week, though it rose 0.3 percent on Friday to 94.439. It had fallen as low as 94.077 on Thursday, its weakest since June 23. A break below 94.07 confirms minor weakness a decline till 93.00 is possible. On the higher side, minor resistance is around 95.10 (100 day MA) and any break above will take the index to next level till 95.80/96.50. The overall bearish invalidation is only above 97.60.
EUR/USD: The euro slipped 0.2 percent to $1.1335, but still within sight of its overnight high of $1.1366, its loftiest peak since June 24. It was on track to gain 1.6 percent for the week. The pair has formed bearish Bat pattern in 4-hour chart, the major resistance is around 1.1370 and any minor bullishness is only above that level. It was trading around 1.13206 at the time of writing. Any violation above PRZ will take the pair to next immediate resistance at 1.14300/1.14500 in the short term. On the lower side minor support is around 1.1300 and any break below targets 1.1260 (4H Kijun-Sen)/1.1200.
USD/JPY: The Japanese yen traded at 100.15, half a yen off an eight-week high of 99.55 yen hit on Tuesday. the short term trend is slightly bearish as long as resistance100.97 (9 day EMA) holds. The major resistance is around 101 and any break above confirms minor trend reversal, a jump till 102/102.65/103.80is possible. It was trading around 100.20 at the time of writing, on the lower side major support is around 99.50 and any break below 99.50 will drag the pair till 98.
GBP/USD: Sterling weakened against a firm dollar on Friday, but was on track for to record its best weekly performance in a month after a set of strong data drove speculators to trim record high bets against the pound. It was down 0.35 percent at $1.3118, having hit a 2-week high of $1.3186 on Thursday. The euro was down 0.1 percent at 86.30 pence, having struck a 3-year high of 87.245 earlier this week. The pair has formed bullish MA crossover in the daily chart 5 –day MA and 10- day MA cross over. It was trading around 1.3275 at the time of writing and should close below 1.3100 (21 –day MA) for intraday weakness. Any break below 1.3100 will drag it till 1.3010 (10-day MA)/1.2960. On the higher side, the pair should break above 1.3185 and any comfortable break above that level will take it to next level till 1.3310 (23.6% retracement of 1.51086 and 1.27893).
USD/CHF: The pair has recovered after making a low of 0.95372 yesterday. It was trading around 0.9575, on the lower side, major support is around 0.9520 and any violation below 0.9520 will drag it down till 0.9500/0.94450. The minor resistance is around 0.9650 and any break above targets 0.9680/0.9730/0.9770. The pair should close above 0.9845 (200 day MA) for further bullishness.
AUD/USD: The Australian dollar traded lower on Friday after ratings agency Moody's cut the outlook on Australian banks to negative, providing investors an impetus to sell both currencies. The Aussie dropped 0.7 percent to $0.7632, pulling away from a recent 3-week peak of $0.7760. The support was found at $0.7608. The Aussie was on track for a loss of 0.7 percent for the week, having erased earlier gains made on speculation the U.S. Fe is in no rush to raise interest rates. On the higher side any break above 0.7760 will take the pair till 0.7800/0.7840 is possible. The major support is around 0.7575 and break below will drag it till 0.7535/0.7480. Against the kiwi, it shed nearly 1 pct for the week to be at NZ$1.0522.
NZD/USD: Aussie weakness reverberated around the New Zealand dollar which came under pressure as New Zealand's banks are owned by Australian financial institutions. The Kiwi shed half a U.S. cent to $0.7255, having touched a 14-month peak of $0.7351 last week. It has met strong resistance around the $0.7300 level and was up 0.7 percent for the week.
