Market Briefs
- Sterling boosted by sales data surprise; EUR/GBP below 0.8600.
- GBP/USD +0.95%, EUR/USD +0.2%, USD/JPY +0.04%.
- DXY -0.2%, DAX +0.45%, Brent -0.15%, Iron +0.1%.
- Renzi willing to back Merkel in giving UK more exit time- Times.
- POLL- CNY sentiment turns bullish, first since mid-April.
- EZ Jun Current Account NSA E37.6 bln vs revised 16.54 bln previous.
- EZ Jun Current Account SA E28.2 bln vs revised 31.8 bln previous.
- UK Jul Retail Sales +5.9% y/y vs 4.3% previous, 4.2% expected.
- UK Jul Retail Sales +1.4% m/m vs -0.9% previous, +0.2% expected.
- EZ Jul Infl. 0.2% y/y vs 0.2% previous, 0.2% expected.
- MoF’s Asakawa – Reiterates to act appropriately on excessive FX moves.
- Asakawa says eyeing markets closely.
- Blackrock’s largest mutual fund ups bet on Japan.
- Japan looks to simplify foreign investment procedures – Nikkei.
- UK to avoid recession, world econ to stabilize as Brexit shock passes – Telegraph.
- NZ Aug ANZ/RM consumer confidence index 117.7, July 118.2.
Economic Data Preview
- (0830 ET/1230 GMT) The initial claims for U.S. jobless benefits are expected to slip by 1,000 to a seasonally adjusted 265,000 for the week. While the continuing claims for the week ending August 5 likely fell to 2.140 mln from 2.155 mln previous week.
- (0830 ET/1230 GMT) A report from the Philadelphia Fed will likely show its measure of manufacturing activity in the mid-Atlantic region rebounded to a reading of 2.0 in August from -2.9 in July.
- (0830 ET/1230 GMT) The Statistics Canada releases data on the foreign portfolio investments in Canadian securities and Canadian portfolio investments in foreign securities for the month of June.
- (1000 ET/1400 GMT) The conference board releases its leading indicator for July, which is expected to stay flat at 0.3 pct.
- (1030 ET/1430 GMT) EIA reports natural gas storage change for the week ending August 12.
Key Events
- (1000 ET/1400 GMT) Federal Reserve Bank of New York President William Dudley will speak on employment in his district and in the United States generally, and is expected to discuss his cautious approach to raising rates for the second time in this very gradual policy tightening cycle, when he speaks with reporters in New York.
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae (max $1.325 bn).
- (1600 ET/2000 GMT) San Francisco Federal Reserve Bank President John Williams is scheduled to speak on economy in Anchorage, Alaska. He has been emphasizing on interest-rate hikes more intensively than many of his banking peers, citing an improved labor market and his expectation that inflation will soon head back up toward the Fed's 2-percent target.
- (2000 ET/0000 GMT) Federal Reserve Bank of Dallas President Robert Kaplan speaks before a joint meeting of Dallas and Fort Worth chapters of Association for Financial Professionals.
Equities Recap
World stocks jumped and the dollar plunged to a 7-week low on Thursday after minutes of the latest U.S. Fed's meeting pointed policymakers were divided over whether to raise interest rates soon.
European stocks followed Asian stocks higher, climbing 0.3-0.7 percent to break off from a losing streak suffered at the start of the week. The bluechip FTSE 100 rose 0.2 percent to 6874.03 points by 0858 GMT, in line with the broader risk-on mood across European markets. Germany's DAX and Spain's IBEX both rose 0.7 pct, while France's CAC edged higher 0.5 pct. The MSCI's 46-country All World index climbed 0.2 percent to head back towards a one-year high, hauled up by a 0.7 percent rise in Asian shares, its biggest rise since August 8.
Japan's Nikkei fell 1.5 percent after data showed exports from the country falling at their fastest pace since the financial crisis. China's CSI300 Index closed down 0.3 pct at 3,364.49 points, while Shanghai Composite Index ended down 0.2 pct at 3,104.11 points. HK’s Hang Seng Index finished up 1.0 pct at 23,023.16 points.
Commodities Recap
Oil prices climbed on Thursday, with Brent trading above $50 a barrel for the first time in six weeks, as traders continued to talk up the potential for an output cut agreement at a meeting of OPEC and non-OPEC producers next month. Brent hit a high of $50.05 a barrel, up 20 cents on the day, before easing back to around $49.70, down 15 cents, by 0850 GMT. U.S. light crude oil was up 20 cents at $46.99.
Gold steadied on Thursday, strengthened by a weaker dollar after minutes from the U.S. Fed's July meeting showed policymakers were divided over whether to raise interest rates soon. Spot gold was up 0.1 percent at $1,349.12 an ounce at 0956 GMT, on track for a fourth straight day of gains. U.S. gold climbed 0.5 percent to $1,356.00 an ounce.
Treasuries Recap
The US Treasuries saw continued upward pressure across much of the curve following the release of dovish July Federal Reserve meeting minutes, highlighting that a rate hike in September would be highly unlikely. Markets now look ahead for jobless claims, Philadelphia Fed manufacturing and leading indicators data on Thursday, followed by a 5-year TIPS auction later in the session. The yield on the benchmark 10-year Treasury note fell 1 basis point to 1.551 percent, the yield on 5-year note dipped 1-1/2 basis points at 1.133 percent and the yield on short-term 2-year note also slid 1 basis point at 0.726 percent.
The Japanese government bonds gained Thursday, following the weak closing of Nikkei as investors preferred safe-haven assets after Fed July meeting minutes increased doubts over the next possible rate hike. Also, the steady demand for 5-year bond at an auction boosted safe-haven buying. The benchmark 10-year bond yield fell nearly 1 basis point to -0.082 percent, the super-long 30-year JGB yield dipped more than 1/2 basis point to 0.356 percent, the 5-year JGB yield tumbled more than 1-1/2 basis points to -0.170 percent and the short-term 2-year JGB yield slid 1 basis point to -0.193 percent.
The UK gilts gained as July Federal Reserve meeting minutes revealed a more dovish tone. On the contrary, higher retail sales limited the fall in bond yields. The yield on the benchmark 10-year gilts increased 2 basis points to 0.608 percent, the super-long 40-year bond yield jumped 3 basis points to 1.235 percent and the yield on short-long 2-year bond climbed 2 basis points to 0.190 percent.
The Eurozone periphery bonds gained as investors’ expectations for upcoming rate hike waned after Federal Reserve July meeting minutes increased doubts over rate hike this year. The French 10-year bund yield dipped 2 basis points to 0.152 percent, Irish 10-year bonds yield dipped 1-1/2 basis points to 0.396 percent, Italian sovereign bond inched lower 2 basis points to 1.097 percent, Netherlands 10-year bonds yield tumbled 2 basis points to 0.031 percent, Spanish 10-year bonds yield slid 2 basis points to 0.949 percent.
The German bunds strengthened as investors’ expectations for December rate hike faded after the Federal Reserve July meeting minutes showed that policymakers were split over the timing of the rate hike. On the other hand, strong crude oil prices limited the fall in bond yields. The yield on the benchmark 10-year bond fell 1-1/2 basis points to -0.062 percent, the yield on long-term 30-year note dipped 2-1/2 basis points to 0.437 percent and the yield on short-term 2-year bond remained steady at -0.61 percent.
The Australian government bonds gained as FOMC July meeting minutes indicated that FOMC officials were split on whether a rate hike was needed soon that dampened prospects for a rate hike this year. The yield on the benchmark 10-year Treasury note fell 3-1/2 basis points to 1.934 percent and the yield on short-term 3-year note dipped nearly 2 basis points to 1.403 percent.
The New Zealand bonds closed higher as Federal Reserve July meeting minutes increase doubts over rate hike this year. The yield on the benchmark 10-year bond fell 1-1/2 basis points to 2.160 percent and the yield on 7-year note ended 1-1/2 basis points lower at 1.885 percent and the yield on short-term 2-year note slid 1/2 basis point to 1.765 percent.
FX Beat
USD: The dollar's index against a basket of six major currencies fell to 94.385, after minutes from the U.S. Fed's July meeting showed policymakers were divided on raising interest rates in the near term and its weakest since June 24 when the results of Britain's shock vote to leave the EU dealt a fresh blow to the outlook for the global economy.
EUR/USD: The euro was 0.3 percent higher at $1.1320, having hit a 7-week high of $1.13285. It was trading around 1.13178 and the short term trend is slightly bullish as long as support 1.12270 holds. On the higher side any break above 1.1350 will take the pair to next level till 1.1400/1.14300, it should close above 1.14300 for further bullishness.
Technically major support is at 1.12270 and break below targets 1.1150/1.1085 (200 day MA).
USD/JPY: The pair has once again recovered after making a low of 99.64. Short term trend is slightly bearish as long as resistance101.50 (9 day EMA) holds. Its major resistance is around 101.50 and any break above confirms minor trend reversal, a jump till 102.65/103.80is possible. It is currently trading around 100.71. On the lower side major support is around 99.50 and any break below 99.50 will drag the pair till 98.
GBP/USD: The sterling rose full cent to a 2-week high against the dollar on Thursday after UK retail sales for July beat forecasts, apparently unaffected by Brexit. The retail spending rose 5.9 percent for the year and 1.4 percent for the month, compared with forecasts of 4.2 percent and 0.2 percent. That drove the pound 0.9 percent higher on the day against dollar, trading at $1.3150. It also gained 0.5 percent to 86.1 pence per euro. The cable has broken major resistance 1.3100 (21- day MA) and jumped till 1.31713 at the time of writing. The short term trend is still weak as long as resistance 1.3175 (Kijun-Sen) holds. On the higher side, any break above1.3101 (21-day MA) will take the pair to next level till 1.3175 (daily Tenkan-Sen)/1.3250/1.3300. Technically the immediate support is around 1.3000 and any break below will it to next level till 1.2950/1.2860. Further weakness can be seen below 1.2850.
USD/CHF: The pair has broken major support 0.9600 and declined till 0.95715 at the time of writing. It is currently trading around 0.95828. On the lower side, major support is around 0.9580 and any violation below 0.9580 will drag the pair down till 0.9530/0.9500. The minor resistance is around 0.9680 and any break above targets 0.9730/0.9770/0.9800. It should close above 0.9850 for further bullishness.
AUD/USD: The Australian dollar traded higher on Thursday after better-than-expected domestic jobs figures supported expectations that interest rates are likely to stay on hold for a couple of months at least. It rallied around half a U.S. cent to $0.7709, pulling closer to a 3-month peak of $0.7760 touched last week. It was trading around 0.76904, 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 the pair till 0.7535/0.7480. The Aussie came off one-month lows against a broadly firm yen to stand at 77.03 yen.
NZD/USD: The New Zealand dollar also rose on speculation the U.S. Federal Reserve is in no rush to raise rates. It was dragged higher to $0.7290, from $0.7242 in early trade, after the stronger-than expected Australian jobs data.
