Market Roundup
- BoE - Agents survey shows need to focus on Brexit lags
- BoE real Brxt impact yet to come-no need to loosen money/fiscal policy now
- USD/JPY +0.44%, EUR/USD -0.15%, GBP/USD +0.6%
- TRY new low for current run: TRYTOM hits 3.0630 in Asia
- DXY +0.03%, DAX +1.4%, Brent +0.15%, Iron -1.17%
- UK May ILO Unemployment rate 4.9% vs 5.0% previous, 5.0% exp
- UK May Avg Earnings 3M/YY 2.3% vs 2.0% previous, 2.3% exp
- DE Jun Producer Prices -2.2% y/y vs -2.7% previous, -2.4% exp
- EZ May C/A S/Adj E30.8 bln vs revised 36.4 bln
- Turkey 5-yr CDS hits a near one-mth high of 283,up 10bp vs Tues
- Turkey-Certain individuals at universities believed in contact with military
- IMF Obstfeld - No need for G20 to tame FX markets after Brexit
- Dairy prices unchanged, volumes off at latest Fonterra auction
- Australia June Westpac/MI leading index 96.81, May 97.02
- BoJ survey – Business loan demand down, index at +4, April +5
Economic Data Ahead
- (1000 ET/1400 GMT) The European Commission release Eurozone's preliminary Consumer Confidence reading for the month of July. The index is expected to slump -8.0 percent after posting a final reading of -7.3 in the prior month.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending July 15.
- N/A The Brazilian central bank will meet to set its benchmark Celic rate, which is likely to stay unchanged at 14.25 percent.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade operation 30-yr Ginnie Mae max $1.275 bln.
- (1145 ET/1545 GMT) FedTrade operation 15-yr F.Mae/F.Mac max $625 mln.
FX Beat
DXY: The dollar index, against a basket of currencies rose to 97.14, having touched an early 4-month high of 97.32, after better-than-expected U.S. housing report renewed expectations of Fed interest rate hike this year.
EUR/USD: The euro regained the 1.1000 handle, slightly supported by better-than-expected Eurozone's current account readings. Eurozone's current account s.a. for the month of May stood at 30.8 bln euros, surpassing expectations of 24.9 bln euros. However, the major continues to trade lower, as investors remain cautious ahead of the ECB meeting due tomorrow. The European currency trades 0.1 percent lower at 1.1006, having touched an early low of 1.0981. Moreover, the major is likely to remain under pressure as strong U.S. housing market data renewed expectations of an imminent Fed rate-hike. The break below 1.0160 confirms minor trend reversal, a decline till 1.0910/1.0870 is possible. On the higher side, any break above 1.1061 will take it till 1.10900 (200 HAM) and it should close above 1.10900 for further bullishness.
USD/JPY: The Japanese yen declined against the dollar, as markets speculate the BoJ to provide additional easing at its July 28-29 meeting. The greenback rose 0.4 percent to 106.49 yen, having touched a high of 106.71, its highest level since June 24. The dollar strengthened on the back of strong U.S. data and growing expectations that the Federal Reserve might raise rates before the end of the year. The short term trend is slightly bullish as long as support 104.85 (7 day EMA) holds. The major resistance is around 106.80 and any break above confirms minor trend reversal, a jump till 107.25/108 is possible. On the lower side, minor support is around 105.50 and any break below 105.50 will drag the pair till 104.85/104.45.
GBP/USD: Sterling rose against the dollar and euro, reversing all of the day's losses after Bank of England survey showed limited signs of deceleration in the economic activity after last month's Brexit vote. Data released earlier showed that Britain's unemployment rate declined to 4.9 percent in the three months to May, down from 5.0 percent in April. Wages continued to rise with earning including bonuses increasing 2.3 percent in the three months to May, the biggest gain since October 2015. Sterling trades 0.6 percent higher at 1.3185, pulling away from a low of 1.3064 struck earlier in the session. The major intraday resistance 1.3260 and break above targets 1.3350/1.3480. On the lower side major support is around 1.3100 and any violation below targets 1.3050/1.3000 level. Against the euro, the pound traded 0.6 percent higher at 83.50 pence.
USD/CHF: The Swiss franc slumped after ZEW survey showed Switzerland's economic expectations deteriorating in the month of July. Swiss ZEW economic expectations declined to 5.9 from 19.4 in the previous month. The greenback trades 0.2 percent higher at 0.9870, having touched a 1-week high of 0.9890. The pair made a temporary top around 0.9894 on July 12 and declined till 0.9764 from that level. The short term trend is bullish as long as support 0.9845 holds. On the lower side, major support is around 0.9845 and any indicative break below 0.9845 targets 0.980/0.9760 (90 day MA)/0.9680 in the short term.
AUD/USD: The Australian dollar slumped below the 0.7500 handle, on growing speculation that the Reserve Bank Australia would ease interest rate in the near future, combined with weak reading from Melbourne Institute's leading index. The Aussie trades 0.1 percent lower at 0.7494, having touched a 2-week low of 0.7468 earlier in the session. On the higher side, resistance is around 0.7550 and any break above targets 0.7600/0.7680. The major support is around 0.7470 and break below will drag it below 0.7450.
NZD/USD: The New Zealand dollar tumbled for a sixth consecutive session as investors speculation a rate cut as early as August before the Reserve Bank of New Zealand issues an economic update. The Kiwi trades 0.3 percent lower at 0.7030, hovering towards a 3-week low of 0.7010 touched in the previous session. Markets now await RBNZ's economic assessment update, which might provide further clues on Aug. 11 policy meeting. Immediate support is seen at 0.7010 (Previous Session Low), break below targets 0.7000. On the higher side, resistance is located at 0.7085 (Jun-28 High), break above targets 0.7100.
Equities Recap
European shares advanced, as Europe's largest software company posted an unexpected strong growth, leading the technology sector higher in the market.
The pan-European STOXX 600 rose 0.9 pct, while FTSEurofirst 300 added 0.8 pct. Germany's DAX advanced 1.4 pct, France's CAC 40 added 1.1 pct and Britain's FTSE 100 gained 0.3 pct.
Tokyo's Nikkei declined 0.25 pct at 16,681.89, Australia's S&P/ASX 200 index gained 0.63 pct at 5,485.60 points and South Korea's KOSPI 200 edged down 0.16 pct.
Shanghai composite index and CSI300 index both lost 0.3 pct at 3,027.90 points and 3,237.61 points, respectively. Hong Kong's Hang Seng index rose 1.0 pct at 21,882.48 points.
Commodities Recap
Oil prices edged up as investors await weekly U.S. crude inventory data, which could provide clear picture whether a glut was easing in the world's largest oil-consuming nation. Global benchmark Brent crude prices were up 0.2 percent to $46.77 a barrel at 0946 GMT. On Tuesday, while U.S. West Texas Intermediate crude was down 0.9 percent at $45.46 a barrel. The front-month August contract will expire at the end of Wednesday's session.
Gold prices declined as the dollar index rose to a 4-month high on the back of strong U.S. housing data, spurring expectations of Fed rate hike before end 2016. Spot gold dropped 0.4 percent to $1,325.96 an ounce at 0954 GMT, while U.S. gold was down 0.5 percent at $1,325.60 an ounce.
Treasuries Recap
The US Treasuries witnessed selling across the curve as demand for safe haven assets waned in the wake of geopolitical tensions and post-Brexit instability. The yield on the benchmark 10-year Treasury note rose more than 1 basis point to 1.571 percent and the yield on short-term 2-year note also bounced more than 1 basis point to 0.706 percent.
The UK gilts slumped after data showed that the country’s labour market strengthened in June. The yield on the benchmark 10-year gilts rose more than 1 basis point to 0.811 percent, the yield on super-long 30-year bond jumped nearly 2 basis points to 1.688 percent and the yield on short-term 2-year bonds bounced nearly 1 basis point to 0.184 percent.
The German bunds traded nearly flat as investors kept a close eye on the upcoming European Central Bank (ECB) policy meeting and its consequences on markets. The yield on the benchmark 10-year bond hovered around -0.03 percent mark, the yield on long-term 30-year note remained steady at 0.513 percent and the yield on short-term 2-year note rose 1/2 basis point to -0.632 percent.
The Japanese government bonds traded narrowly mixed on Wednesday, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. The yield on the benchmark 10-year bonds fell ½ basis points to -0.234 percent, the yield on long-term 30-year note rose nearly 1 basis points to 0.209 percent, the yield on 7-year note dipped 1 basis point to -0.337 percent and the short-term 2-year JGB yield climbed 1/2 basis points to -0.318 percent.
The New Zealand government bonds closed mixed as investors await an unscheduled assessment of the economy from the Reserve bank of New Zealand, which is scheduled to take place on July 21. 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.
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.
