Market Roundup
- GBP/USD -0.24%, USD/JPY +0.79%, EUR/USD +0.09%
- China stock wobble & FOMC risk underpin USD
- China's yuan firms on stronger midpoint, more gains expected
- Japan PM Abe to announce details of stimulus package today – Fuji TV
- Japan fiscal stimulus to amount to Y27tn – Fuji TV
- Japan considering issuing 50-year bonds as part of stimulus, MoF denies report – WSJ, Nikkei,
- Japan to up minimum wage by 3% to ignite consumer spending
- BoJ wary of easing but yen, politics may sway it to act
- Japanese megabanks' profit likely sank 30% on negative rates – Nikkei
- German Aug GfK Consumer Sentiment 10 vs 10.1 previous, 9.9 expected
- German Jun Import Prices MM 0.5% vs 0.9 previous, 0.6 expected
- German Jun Import Prices YY -4.6% vs -5.5 previous, -4.6 expected
- Switzerland Jun UBS consumption indicator 1.34 vs 1.35 previous,
- Euro zone Jun Money-M3 Annual Grwth 5% vs 4.9 previous, 5 expected
- Euro zone Jun Loans to Households 1.7% vs 1.6 previous
- Euro zone Jun Loans to Non-Fin 1.7% vs 1.4 previous
- UK Q2 GDP Prelim QQ 0.6% vs 0.4 previous, 0.4 expected
- UK Q2 GDP Prelim YY 2.2% vs 2 previous, 2 expected
- UK Jul CBI Distributive Trades -14 vs 4 previous, 1 expected
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department is expected to report that durable goods orders for June declined 1.1 percent after decreasing 2.3 percent in May, while core capital goods orders are likely to have risen 0.5 percent after declining 0.4 percent the prior month.
- (0830 ET/1230 GMT) The U.S non-defense capital goods orders are likely to have increased 0.3 percent in June after falling 0.4 percent in May.
- (1000 ET/1400 GMT) The National Association of Realtors is expected to report that U.S. pending home sales rose by 1.4 percent in June after having declining by 3.7 percent in May.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending July 22.
Key Events Ahead
- (1400 ET/1800 GMT) The Federal Open Market Committee releases their statement at the end of the 2-day meeting. The Federal Reserve is likely to keep interest rates unchanged, however, it might offer fresh hints about its next move on rate hike.
- (1430 ET/1830 GMT) Federal Reserve Chair Yellen press conference.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent higher at 97.31, hovering towards a 4-month peak of 97.57 touched earlier in the week, as traders await Fed policy outcome and Yellen’s presser.
EUR/USD: The euro consolidated below the 1.1000 handle, as markets remain cautious ahead of Federal Reserve monetary policy decision and Fed Chair Janet Yellen’s post-statement press conference, in an attempt to estimate the timing of next Fed rate-hike. The euro trades flat at 1.0992, having retreated from an early high of 1.1005. The major was supported by the upward momentum seen in the EUR/GBP and EUR/JPY cross, amid broad GBP and JPY weakness. The major support is at 1.0940 and any break below targets 1.0910/1.0870 in the short term. Technically on the higher side, major resistance is around 1.1061 (Jul 21-High) and any indicative break above will take the pair to next level at 1.1078 (200 DMA)/1.1100.
USD/JPY: The Japanese yen slumped against the dollar, after Prime Minister Shinzo Abe said his government would present a $265 billion stimulus package to reflate the Japanese economy. The greenback rose to an early high of 106.53, before easing to 105.78, still 1.1 percent up for the day. Investors now await Fed monetary policy decision, ahead of Bank of Japan meeting on Friday, with expectations it will take steps to ease monetary policy. The short term trend is slightly bullish as long as support 104 holds. The major resistance is around 106.50 and any break above confirms minor trend reversal, a jump till 107/107.50 is possible. On the lower side, minor support is around 105 and any break below 104 will drag the pair till 104.
GBP/USD: Sterling slumped below 1.3100 handle, despite Britain posting better-than-expected gross domestic product figures for the second-quarter. According to ONS, UK’s economy grew by 0.6 percent, up from 0.4 percent in the first three months of the year. On yearly basis it stood at 2.2 percent, surpassing consensus and previous 2.0 percent. The weakness in the major comes in after Britain's CBI Distributive Trades Survey for the month of July came in at -14, against market projects of 1 and prior 4. Sterling trades 0.2 percent lower at 1.3098, hovering towards a 2-week low of 1.3057 struck in previous session. Any break below 1.3060 confirms minor weakness, a decline till 1.3000 is possible. Any break above 1.31805 (200 HMA) will take the pair till 1.3290. Against the euro, the pound trades 0.3 percent lower at 83.90 pence, having touched a low of 84.12 pence earlier in the session.
USD/CHF: The Swiss franc declined to a near 2-month low against the dollar, as investors await Federal Reserve monetary policy decision and Yellen's presser, for further cues on interest rate hike in near term. The greenback trades 0.1 percent higher at 0.9935, hovering towards 0.9950, a level last seen since June 1. On the lower side, major support is around 0.9850 and any indicative break below 0.9850 targets 0.9800/0.9760 (90 DMA)/0.9680 in the short term. The major resistance is around 0.9950 and any break above targets 0.9980/1.000/1.0092.
AUD/USD: The Australian dollar retreated from session lows, but failed to regain 0.7500 handle. The recovery in the major was capped as markets speculate Reserve Bank of Australian to cut rate by 25 bps at its meeting next week, despite of a rise in inflation. The Aussie trades 0.3 percent lower at 0.7475, after rising as high as 0.7565 earlier in the session. On the higher side, resistance is seen at 0.7520, and break above targets 0.7580/0.7625 is possible. The major support is around 0.7440 and break below will drag the pair till 0.7380/0.7350.
NZD/USD: The New Zealand dollar recovered after declining to 0.7004, and now consolidates below 0.7050 handle. The major was weighed down by growing expectations that the RBNZ will ease at its next meeting. The Kiwi trades 0.2 percent lower at 0.7038, having touched an early high of 0.7075. Immediate support is seen at 0.7000 level, break below could take it lower 0.6974 (Jul-22 Low). On the higher side, resistance is located at 0.7086 handle, break above targets 0.7100/0.7120.
Equities Recap
European shares were led higher by the auto and luxury sectors, as investors remained cautious ahead of Fed monetary policy decision.
The pan-European STOXX 600 index gained 0.5 percent to 342.83 points, while the FTSEurofirst 300 index added 0.4 percent to 1,353.06 points. STOXX Europe 600 automobiles and parts index rose 2.5 pct, its highest level since early June.
Germany's DAX index advanced 0.8 percent, reversing all of its losses since Brexit vote. France’s CAC climbed 1.5 pct.
Britain's FTSE 100 index gained 0.4 percent, while mid-cap FTSE 250 index added 1.1 pct.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent, having previously climb advanced to its highest level since Aug. 11, 2015.
Tokyo's Nikkei gained 1.72 pct at 16,664.82 and Australia's S&P/ASX 200 index closed flat at 5,537.20 points.
South Korea's KOSPI 200 shed 0.08 pct and Hong Kong's Hang Seng index added 0.4 pct at 22,218.99 points.
Shanghai composite index declined 1.9 pct at 2,992.00 points, while CSI300 index dropped 1.6 pct at 3,218.24 points, recording their worst day in 6-weeks on worries about new regulatory restrictions.
Commodities Recap
Oil prices declined for the fifth consecutive session, hovering near a close to 3-month lows, as markets continue to wary on over persistent oversupply after U.S. industry report showed that weekly oil stocks dropped by less than expected. Global benchmark Brent crude oil was trading 0.4 percent at $42.33 a barrel, close to a 3-month low of $44.11 reached on Tuesday and on track for the first monthly loss since January and the largest of 2016. U.S. West Texas Intermediate crude trades 0.1 percent up at $42.66 a barrel.
Gold edged lower as the dollar and equities strengthened ahead of the Federal Reserve's policy decision due later in the day, when it is likely to keep interest rates unchanged, however, it might offer fresh hints about its next move on rate hike. Spot gold trades flat at $1,320.47 an ounce by 1022 GMT, having gained 0.4 percent on Tuesday. U.S. gold fell 0.2 percent to $1,317.90 an ounce.
Treasuries Recap
The US Treasuries were little changed as markets look ahead to the July FOMC statement on Wednesday. The yield on the benchmark 10-year Treasury note rose 1/2 basis point to 1.566 percent and the yield on short-term 2-year note hovered around 0.762 percent.
The Eurozone periphery bonds gained as investors sought refuge in the safe-haven instruments ahead of the Federal Reserve monetary policy decision. The French 10-year bond yield fell nearly 2 basis points to 0.182 percent, The 10-year Irish 10-year bonds yield dipped nearly 3 basis points to 0.494 percent, Italian equivalents inched lower 1 basis point to 1.248 percent, Netherlands 10-year bonds yield tumbled more than 1 basis point to 0.076 percent, Portuguese 10-year bonds yield slid 1/2 basis points to 3.039 percent and the Spanish 10-year bonds yield inched lower ½ basis point to 1.110 percent.
The UK gilts continued to rally as investors preferred safe-haven assets after Bank of England MPC member Martin Weale signalled that he is in favour of providing fresh stimulus for the economy. The yield on the benchmark 10-year gilts fell 3 basis points to 0.792 percent, the yield on super-long 30-year bond dipped nearly 3 basis points to 1.680 percent and the yield on short-term 2-year bonds slid nearly 2 basis points to 0.153 percent.
The German bunds strengthened as investors awaited the Federal Reserve monetary policy decision and Fed Chair Janet Yellen’s post-statement press conference, in an attempt to estimate the Fed's most likely step. The yield on the benchmark 10-year bond fell 1-1/2 basis points to -0.041 percent, the yield on long-term 30-year note dipped 1 basis point to 0.452 percent and the yield on short-term 3-year note also slid nearly 1 basis point to -0.635 percent.
The Japanese government bonds gained as investors speculate that the Bank of Japan will lower its key interest rate further into negative territory with higher asset purchase programme. The yield on the benchmark 10-year bonds, which moves inversely to its price, fell more than 3 basis points to -0.281 percent, the yield on 5-year note dipped nearly 3 basis points to -0.366 percent (hits record low) and the short-term 2-year JGB yield also dipped 3 basis points to -0.357 percent (touched record low).
The New Zealand government bonds closed marginally firmer as investors remained cautious ahead of the Federal Reserve monetary policy decision and Fed Chair Yellen’s post-statement press conference, in an attempt to estimate the Fed's most likely step. The yield on benchmark 10-year bond slid 1/2 basis point to 2.290 percent, the yield on 7-year note also dipped 1/2 basis point to 2.035 percent and the yield on short-term 2-year note ended 1 basis point lower at 1.910 percent.
The Australian government bonds slumped as investors poured into safe-haven assets following upbeat second quarter consumer inflation data, in line with market expectations. This indicated that the Reserve Bank of Australia would not consider easing its key policy rate immediately. The yield on the benchmark 10-year Treasury note rose 4 basis points to 1.965 percent and the yield on short-term 2-year note jumped nearly 3 basis points to 1.589 percent.
