Market Roundup
- USD/JPY +0.6%, EUR/USD -0.04%, GBP/USD -0.17%
- DXY +0.08%, DAX +0.85%, Brent +1.29%, Iron +3.4%
- Switzerland Jul CPI -0.2% y/y vs -0.4% previous, -0.3% expected
- EZ Aug Sentix Index 4.2 vs 1.7 previous, 3.0 expected
- Germany Jun Industrail Output 0.8% m/m vs -1.3% previous, +0.7% expected
- Swiss sight depos W/E Aug 5 rise from previous week
- Reuters poll – US primary dealers see one ’16 rate hike after strong data
- BoJ July 29 mins- Policy review to work out best way to hit price goal
- MoF June flow data – Japan investors still favor US Treasuries, corporate
- China July trade surplus $52.31 bln, $47.6 bln eyed
- UK Corbyn rules out reversing Brexit vote-Huffington Post
Economic Data Ahead
- (0830 ET/1230 GMT) The Statistics Canada is likely to report that building permits have increased by 1.5 percent in June after posting a 1.9 percent decline in May.
- (1000 ET/1400 GMT) The Fed releases its labor market conditions index for the month of July. The index came in at -1.9 in the prior month.
- (1845 ET/2245 GMT) The Statistics New Zealand will release its Electronic Card Retail Sales figures for the month of July. The index was at 6.8 percent in June.
- (1901 ET/2301 GMT) The British Retail Consortium publishes Retail Sales Monitor for the month of July. The indicator stood at -0.5 percent y/y in the previous month.
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade ops 30-yr Fannie May /Freddie Mac max $2.675 bln.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent higher at 96.36, hovering towards a 1-week high of 96.57, touched on Friday.
EUR/USD: The euro failed to sustain gains above the 1.1100 handle, trading around 1.1094, still up 0.1 percent for the day. The major was provided some support after Eurozone's August Sentix investor confidence came in at 4.2, surpassing consensus of 3.0 and previous 1.7. Investors now await Fed’s Labor Market Conditions Index for further momentum on the major. On the lower side, any close below 1.10770 confirms minor trend reversal, a decline till 1.1000/1.0950 likely. Technically it should break above 1.1156 (90 day EMA) for minor bullishness and break above targets 1.1200/1.1.230.
USD/JPY: The greenback extended gains above the 102 handle, as strong U.S. NPF numbers strengthened the prospects of a hike in U.S. interest rates this year. Moreover, the Japanese yen continues to remain under pressure after the economy posted a sluggish current account figures earlier in the day. The short term trend is slightly bullish as long as support 100 holds. The major resistance is around 102.60 and any break above confirms minor trend reversal, a jump till 103/104 is possible. On the lower side major support is around 100 and any break below 100 will drag the pair till 98.
GBP/USD: The sterling hovered near its 3-weeks low, weighed down by divergent monetary policy outlooks between the U.S. and Britain after strong jobs numbers bolstered speculation of a rate hike by the Fed. In contrast, the Bank of England started its QE programme on Monday, having lowered interest rates to record lows in order to cushion the economy from the Brexit fallout. Sterling trades flat at 1.3067, within the sight of a 3-week low of 1.3021 touched in the previous session. Any violation below 1.3000 will drag the pair down till 1.28500/1.2785 in the short term. On the higher side intraday bullishness can happen only above 1.3085. Any break above targets 1.3150/1.3200. Overall bearish invalidation is only above 1.3375. Against the euro, the pound was little changed at 84.80 pence.
USD/CHF: The Swiss franc extended losses, as stronger-than-expected U.S. payroll numbers spurred risk-on market sentiment across the broad. The greenback trades 0.2 percent higher at 0.9819, hovering towards a high of 0.9830 touched on Friday. Data released earlier in the day, showed Switzerland's July consumer price index at -0.2 percent y/y against projection of -0.3 percent, while on monthly basis it was at -0.4 percent versus forecast of -0.5 percent. The major should close above 0.9855 (200 DMA) for further bullishness. Any break above 0.9855 will take the pair to next level till 0.9960/1.000. On the lower side, any break below 0.9770 (90 day EMA) will take it to next level till 0.9705 (61.8% retracement of 0.9830 and 0.9633)/0.9630. Minor weakness can be seen below 0.9630 and any violation below 0.9630 targets 0.9575/0.9520. Overall bullish invalidation is only below 0.9500.
AUD/USD: The Australian dollar attempted a minor recovery, after slumping below the 0.7600 handle following a sharp decline in Chinese imports. However, the major strengthened on the back of rallying crude oil prices amid risk-on trade profile The Aussie trades 0.2 percent higher at 0.7632, within the sight of a 3-week high of 0.7664 touched in the previous session. On the higher side, any break above 0.7670 will take the pair to next level till 0.7725/0.7750. The major support is around 0.7580 and break below will drag the pair till 0.7535/ 0.7500.
NZD/USD: The New Zealand dollar reversed most of its session losses and now trades around 0.7131 region. The Kiwi declined as low as 0.7087 earlier in the session, as widening rate differentials between the Federal Reserve and RBNZ weighed on the major. Investors await monetary policy meeting of the Reserve Bank of New Zealand on August 11, where market participants are anticipating a 25 basis points interest rate cut from the central bank in the wake of rising deflationary pressure. Immediate resistance is located at 0.7168 (5-DMA), break above targets 0.7200. On the lower side, support is seen at 0.7062, break below could take it near 0.7000.
Equities Recap
European shares rose, as risk appetite revived after stronger-than-expected U.S. payroll numbers, strengthened expectations of faster growth and near-term Fed interest rate hike.
The MSCI All-Country World index rose 0.4 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, hovering just below a 1-year high hit last week.
The pan-European STOXX 600 index added 0.2 percent, while the FTSEurofirst 300 index gained 0.2 percent to 1,347.05 points.
Germany's DAX rose 0.9 pct at 10,457.14 points, France's CAC 40 gained 0.4 pct, Britain's FTSE 100 trades flat, while mid-cap FTSE 250 index advanced 0.8 pct.
Tokyo's Nikkei advanced 2.44 pct at 16,650.57, Australia's S&P/ASX 200 index rose 0.70 pct at 5,536.10 points and South Korea's KOSPI 200 climbed 0.55 pct at 2,031.12 points.
Shanghai composite index and CSI300 index both added 0.9 pct at 3,004.28 points and 3,234.18 points, respectively. Hong Kong’s Hang Seng index gained 1.6 pct at 22,494.76 points.
Commodities Recap
Crude oil prices rose, nearing 2-weeks high, strengthened by reports of renewed output controlling talks by members of the Organization of the Petroleum Exporting Countries (OPEC). International Brent crude oil was trading 1.1 percent higher at $44.58 per barrel by 1031, hovering towards $45 per barrel mark, a level last seen on July 26. U.S. West Texas Intermediate crude was at $42.36 per barrel at 1031 GMT, up 1percent, from its last close.
Gold declined to a 1-week low, extending its near 2 percent loss sustained in the previous session on speculation of a U.S. interest rate hike following better-than-expected payrolls data. Spot gold was down 0.4 percent at $1,331.66 an ounce at 1034 GMT, after dropping to $1,329.79, the lowest since July 29. U.S. gold for December delivery inched 0.7 percent lower to $1,335.70 an ounce.
Treasuries Recap
The US Treasuries little changed on Monday, succumbing to thin trading activity during a relatively quiet session that saw data of little significance. The yield on the benchmark 10-year Treasury note hovered around 1.580 percent, the yield on 5-year note jumped 1/2 basis point to 1.135 percent and the yield on short-term 2-year note also bounced 1/2 basis point to 0.730 percent.
The UK gilts continued to rally after the Bank of England lowered its key interest rate by 25 basis points to 0.25 percent in its monetary policy meeting, concluded last week on August 4. The yield on the benchmark 10-year gilts fell 3 basis points to 0.644 percent, the yield on super-long 40-year bond also dipped 2 basis points to 1.325 percent and the yield on short-long 2-year bond slid 3 basis points to 0.123 percent.
The German bunds declined as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil. The yield on the benchmark 10-year bond rose 1 basis point to -0.062 percent and the yield on short-term 30-year note jumped 1-1/2 basis points to 0.447 percent.
The Japanese government bonds plunged Monday as the Japan’s benchmark Nikkei 225 index hit a one-week high following Friday’s upbeat United States non-farm payrolls report. The yield on the benchmark 10-year bonds rose 4-1/2 basis points to -0.046 percent, the super-long 40-year JGB yield climbed 2-1/2 basis points to 0.506 percent and the short-term 2-year JGB yield jumped 2 basis points to -0.167 percent.
The New Zealand government bond closed marginally lower after the United States posted strong payroll data on Friday amid renewed hope among investors for a Federal Reserve rate hike in 2016. The yield on the benchmark 10-year bond rose 1-1/2 basis points to 2.230 percent, the yield on 7-year note climbed 1 basis point to 1.945 percent and the yield on short-term 2-year note ended flat at 1.805 percent.
The Australian government bonds slumped after data showed that the United Sates non-farm payroll increased higher than expected in July, reinvigorating expectations of Fed tightening this year. The yield on the benchmark 10-year Treasury note rose 6-1/2 basis points to 1.955 percent and the yield on short-term 2-year note jumped 1 basis point to 1.495 percent.
