Market Roundup
- DXY -0.5%, DAX -0.5%, Brent -1.0%, Iron -1.8%
- Sweden Jun Ind. Output -1.4% y/y vs +1.7% previous
- Sweden Mfg Orders -1.6% vs -0.5% previous
- Norway Jul Coe CPI 3.7% vs 3.0% previous, 3.1% expected
- Poll one-in-five U.S Republicans want Trump to drop out
- BoE will incorporate GBP52 mln short-fall from Tues reverse auction
- U.K Mar 2019 Gilt touches Neg yield of -0.01%
- S.Korea to take measures in case herd behaviour seen in FX market-Vice Finmin
- RBA Gov Stevens –Limits to monetary easing
- Stevens infl. tgt regime flexible, still useful, debt
- Stevens debt levels worrying, growth trend off touch
- Capital investment aside, Japan Inc spends big on acquisitions – Nikkei
Economic Data Ahead
- (1000 ET/1400 GMT) The U.S. Bureau of Labor Statistics is likely to report that JOLTS job openings have increased 5.52 million in June from 5.50 million in May.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending August 5.
- (1400 ET/1800 GMT) The U.S. government is expected to report a budget deficit of $113 billion for the month of July, as compared with a surplus of $6 billion in June.
- (1700 ET/2100 GMT) The Reserve Bank of New Zealand will announce its Interest Rate Decision.
- (1845 ET/2245 GMT) The Statistics New Zealand releases Food Price Index (FPI) for the month of July. The index stood at 0.4 percent in the previous month.
- (1901 ET/2301 GMT) The Royal Institution of Chartered Surveyors will report Britain's Housing Price Balance for the month July. The indicator is expected to have declined to 6 percent from 16 percent in the prior month.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade operation 30-year Ginnie Mae (max $1.375 bn).
- (1700 ET/2100 GMT) The Reserve Bank of New Zealand Governor releases the monetary policy statement and gives a press conference.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.6 percent lower at 95.51, hovering towards a low of 95.42 touched last week.
EUR/USD: The euro rose for the third consecutive session, as the greenback came under immense selling pressure across the broad. Weaker-than-expected U.S. economic data released yesterday forced the investors to re-evaluate whether the U.S. Federal Reserve will raise interest rates this year. The major trades 0.6 percent higher at 1.1186, attempting to regain the 1.1200 handle. The major resistance is around 1.1250 (100 SMA) and it should break above for further jump till 1.1300 level. On the lower side, any close below 1.1150 (resistance turned into support) will drag the pair down till 1.1100/1.1078 (200 DMA)/ 1.10457 (Aug 5 Low).
USD/JPY: The Japanese gained, dragging the dollar near the 101.00 handle. The greenback weakened across the broad after downbeat U.S economic data slashed expectations of Fed interest rate hike this year. The dollar trades 0.7 percent lower at 101.15, hovering towards a low of 100.87 touched last week. The short term trend is slightly bearish as long as resistance 102.65 holds. The major resistance is around 102.65 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: Sterling rose a day after hitting a 1-month low, however, the recovery mode ran-out of steam as the Bank of England fell short of its first round of new purchases of government debt. The Bank of England fell 52 million pounds ($68 million) short of its target to buy more than a billion pounds of long-dated government bonds on Tuesday, sending 10-year gilt yields to a record low. Sterling trades 0.5 percent higher at 1.3061, having touched an intra-day high of 1.3089. The short term trend is slightly weak as long as resistance 1.3135 (daily Kijun-Sen) holds. From the current levels, 1.3135 level will be acting as immediate resistance and any break above will take the pair to next level till 1.3200. On the lower side 1.2960 seems to be major support and any break below targets 1.2900/1.2850. Minor bullishness can be seen only above 1.3200. Against the euro, the pound trades 0.1 percent lower at 85.56 pence.
USD/CHF: The Swiss franc extended gains, as the dollar weakened across the broad. The greenback declined 0.4 percent to 0.9773, pulling away from a 2-week high of 0.9843 touched in the previous session. 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 0.9730 (100 DMA) will take the pair 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 extended gains above the 0.7700 handle, as investors ignored dovish comments from RBA Governor Glenn Stevens. The RBA governor stated that the inflation rate might remain low for a while, which may encourage the central bank to ease further. The Aussie trades 0.7 percent higher at 0.7725, having touched a high of 0.7728, a level last seen on April 27. On the higher side, resistance is located at 0.7740, jump till 0.7750/0.7800 is possible. The major support is around 0.7650 and break below will drag the pair till 0.7575/0.7535/0.7500.
NZD/USD: The New Zealand dollar rose as high as 0.7240 on the back of broad based U.S. dollar weakness amid declining treasury yields. Investors await Reserve Bank of New Zealand monetary policy decision due tomorrow, where it’s widely expected to cut interest rate by 25bps and signal further easing in the statement, in order to combat rising deflationary pressure. The Kiwi trades 1.0 percent higher at 0.7241, hovering towards a high of 0.7256 touched last week. Immediate resistance is located at 0.7256, break above targets 0.7294. On the lower side, support is seen at 0.7116 (20-DMA), break below could take it till 0.7100.
Equities Recap
World stocks rose to fresh 1-year high and the European shares steadied, recovering nearly all the losses seen since Brexit shock vote.
MSCI's world stock index covering 46 markets rose to its highest level seen in a year, while MSCI's broadest index of Asia-Pacific shares excluding Japan rose 0.3 percent to the highest level since August 2015.
The pan-European STOXX 600 index lost 0.2 percent, while the FTSEurofirst 300 index dropped 0.3 percent to 1,353.55 points.
Germany's DAX declined 0.5 pct at 10,640.77 points; France's CAC 40 shed 0.4 pct at 4,449.61 points.
Britain's FTSE 100 trades 0.2 pct lower at 6,837.72 points, while mid-cap FTSE 250 index was flat at 17,679.77 points.
Tokyo's Nikkei nudged down 0.18 pct at 16,735.12, Australia's S&P/ASX 200 index declined 0.25 pct at 5,538.60 points and South Korea's KOSPI ended flat at 2,044.64 points.
Shanghai composite index lost 0.2 pct at 3,018.75 points and CSI300 index declined 0.4 pct at 3,243.34 points. Hong Kong’s Hang Seng index rose 0.1 pct at 22,492.43 points.
Commodities Recap
Crude oil prices declined, hovering away from a 2-week high, as oversupply in refined products continued to weigh on the market. International benchmark Brent crude oil was 1 percent down at $44.52 per barrel at 0959 GMT, while U.S. West Texas Intermediate crude oil was trading at $42.21 per barrel, down 1.2 percent from its last settlement.
Gold advanced more than 1 percent, as the dollar dropped on lower expectations for a Fed rate hike following soft economic data. Spot gold gained 1.1 percent to $1,353.44 an ounce by 1000 GMT, having gained 0.4 percent in the previous session. U.S. gold was up 1 percent at $1,360.60 an ounce.
Treasuries Recap
The US Treasuries saw continued upward pressure across much of the curve following the release of weaker than expected 2Q16 productivity data. The yield on the benchmark 10-year Treasury note fell 1 basis point to 1.54 percent mark and the yield on short-term 2-year note dipped ½ basis point to 0.71 percent.
The UK gilts continued to rally as the BoE failed to buy its entire quota of gilts in its second purchase operation in the new quantitative easing round (the first uncovered operation ever). The 10-year bond yields broke to new lows below the 0.60 percent mark, and 0.50 percent is possibly on the cards. The yield on the benchmark 10-year gilts fell more than 6 basis points to 0.529 percent, the yield on super-long 40-year bond dipped 9-1/2 basis points to 1.165 percent and the yield on short-long 2-year bond slid 1-1/2 basis points to 0.095 percent.
The German bunds gained Wednesday as investors remained cautious ahead of 10-year debt auction. Also, investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil. The yield on the benchmark 10-year bond fell 1-1/2 basis points to -0.093 percent, the yield on short-term 30-year note dipped 2-1/2 basis points to 0.401 percent and the yield on short-term 2-year bond slid 1 basis point to -0.625 percent by 09:10 GMT.
The Japanese government bonds strengthened following a rally in the global debt market. The central bank bonds-buying under its massive JGB purchase program boosted investor sentiments. The benchmark 10-year bond yield fell 2 basis points to -0.100 percent, the super-long 30-year JGB yield also dipped 2 basis points to 0.408 percent and the short-term 2-year JGB yield slid 1-1/2 basis points to -0.198 percent.
The New Zealand 10-year bond yields closed flat after falling two basis points in wake of RBNZ policy easing hopes. Also, investors are anticipating 25 basis points interest rate cut from the central bank against a backdrop of rising deflationary pressure. The yield on the benchmark 10-year bond fell 1/2 basis point to 2.230 percent, the yield on 7-year note also dipped 1/2 basis point to 1.930 percent and the yield on short-term 2-year note ended 1-1/2 basis points lower at 1.780 percent.
The Australian government bonds gained after the Reserve Bank of Australia Governor Glenn Stevens, in his last speech, urged a slower path of rate cuts and pointed for fiscal action, like most other central bankers. He also hinted at a slower rate of growth in the Australian economy ahead. The benchmark 10-year Treasury note's yield fell 6 basis points to 1.885 percent and the yield on short-term 2-year note dipped 2 basis points to 1.456 percent
