Market Roundup
- GBP/USD 0.06%, USD/JPY 0.02%, EUR/USD -0.13%
- Japan’s Ishihara: USD/JPY below 100.00 to have psychological impact - MNI
- BoJ Dep Gov Iwata: Eased recently to deal with increased overseas risks
- Iwata: USD funding needs, JPY gains slowing price rises but infl to eventually turn up
- Iwata: Optimistic on growth, ready to ease again if needed
- Iwata: Policy review focusing on mechanism, obstacles to QQE
- Bearish bets on CNY fell to 3mth in last fortnight – Reuters poll
- China Q2 preliminary current account surplus at $59.4 billion
- China says it “regrets” EU duties on Chinese cold-rolled steel
- KRW & IDR views most optimistic in over 2 yrs – Reuters poll
- THB, TWD bullish bets largest since 2013 – Reuters poll
- Switzerland Q3 Consumer Confidence -15 vs -15 previous
- Buba’s Weidmann: Possibilities to adjust QE but must not alter design-Die Zeit
- Smith: Labour on edge of split that would finish party - Guardian
Economic Data Ahead
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have decreased by 1,000 to a seasonally adjusted 265,000 for the week ending July 30, while continuing claims for the week ending July 22 is expected to have declined to 2.130 m from 2.139 m.
- (1000 ET/1400 GMT) The U.S. Commerce Department is likely to report that factory orders declined 1.8 percent in the month of June, after dropping 1.0 percent in May.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Natural Gas Storage for the week ending July 29.
- (1930 ET/2330 GMT) Australian Industry Group will report its performance of construction index for the month of July. The index was at 53.2 in the prior month.
Key Events Ahead
- (0545 ET/0945 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac, max $2.675.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent higher at 95.71, hovering away from a 6-week low of 95.00 touched earlier in the week.
EUR/USD: The euro extended losses, as the dollar strengthened across the broad. The European currency trades 0.2 percent lower at 1.1120, hovering away from a high of 1.1233 touched on Tuesday. It came under renewed selling pressure following the European Central Bank latest monthly economic bulletin. The central bank noted that the increasing uncertainty over global economic outlook, supported investors for safe-haven buying. The major should break below 200 day SMA for further weakness. Any break below 1.1075 will drag the pair to next level till 1.1000. Technically on the higher side, break above 1.1160 (90 day EMA) will take the pair up till 1.1235.
USD/JPY: The greenback trimmed its gains following BoJ Deputy Governor Kikuo Iwata comments. BoJ’s Iwata reiterated that the central bank will ease policy again if needed and would conduct comprehensive policy assessment of the economy at its next meeting in September. The Japanese yen trades flat at 101.18, having touched a low of 101.66 earlier in the session. The short term trend is slightly weak as long as resistance 102 holds. The major resistance is around 102 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 slumped below the 1.3200 handle after Bank of England cut interest rates for the first time since 2009 and stated that it would buy 60 billion pounds of government debt to ease the Brexit fallout shock. The central bank lowered its main lending rate to a record-low 0.25 percent from 0.5 percent, in line with market consensus and raised the target for QE government bond purchases to 435 billion pounds from the 375 billion. Sterling trades 1.1 percent lower at 1.3169, having traded above 1.3300 before the BoE decision. Any violation below 1.3200 will drag the pair down till 1.3100/ 1.3060/ 1.3000 in the short term. On the higher side trend reversal happens only above 1.3375.The minor resistance is around 1.3300. Against the euro, the pound trades 0.9 percent lower at 84.42 pence.
USD/CHF: The Swiss franc extended losses, as the dollar strengthened following upbeat U.S. employment figures. The greenback trades higher at 0.9737, hovering towards a peak of 2-month high touched last week. However, the gains in the major were capped as Switzerland’s SECO consumer climate index for the third quarter came in slightly better than expected at -15, against consensus of -16. On the higher side, any break above 0.9740 will take the pair to next level till 0.9790/0.9850 in the short term. The major should close above 0.9860 (200 DMA) for further bullishness. Any break below 0.9630 will drag the pair down till 0.9580/0.9525.Further weakness can be seen only below 0.9500.
AUD/USD: The Australian dollar extended gains above the 0.7600 handle, as investors ignored Australia's downbeat retail sales figures. The Aussie trades 0.5 percent higher at 0.7623, hovering towards a 2-week high of 0.7637 touched earlier in the week. On the higher side, any break above 0.7650 will take the pair to next level till 0.7680/0.7725. The major support is around 0.7480 and break below will drag the pair till 0.7420/0.7380.
NZD/USD: The New Zealand dollar gained, recovering some of its previous session losses. However, the bid tone around the Kiwi was weak as oil prices slumped back towards its 4-month lows. The major trades 0.5 percent up at 0.7190, attempting to regain the 0.7200 handle. Markets now await U.S. unemployment claims and factory orders data for further cues. Immediate resistance is located at 0.7230, break above targets 0.7256. On the downside, support is seen at 0.7116 (10-DMA), break below could take it lower 0.7100.
Equities Recap
European shares rose, led higher by gains in financial stocks and after Bank of England cut its interest rates to a record-low.
The pan-European STOXX 600 index gained 0.4 percent, while the FTSEurofirst 300 index also added 0.4 percent to 1,327.9 points.
Germany's DAX rose 0.6 pct at 10,237.97 points, France's CAC 40 gained 0.2 pct, Britain's FTSE 100 was down 0.1 pct, while mid-cap FTSE 250 index added 0.3 pct.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, led by gains in resource shares.
Tokyo's Nikkei gained 1.07 pct at 16,254.89, Australia's S&P/Asx 200 index added 0.27 pct at 5,480.40 points and South Korea's KOSPI edged up 0.3 pct at 2,000.03 points.
Shanghai composite index nudged up 0.1 pct at 2,982.43 points, while CSI300 index rose 0.2 pct at 3,201.29 points. Hong Kong’s Hang Seng index jumped 0.4 pct at 21,832.23 points.
Commodities Recap
Crude oil prices declined, reversing previous session gains as overproduction and large volumes of refined products weighed on markets sentiments. Brent crude oil was 0.2 percent lower at $42.58 a barrel at 1037 GMT, down from an intra-day high of $43.63 a barrel. U.S. West Texas Intermediate crude was trading at $40.49 per barrel, down 1.6 percents, after rising 3.3 percent in the previous session.
Gold declined for the second consecutive session as better-than-expected U.S. employment figures strengthened the dollar, which increased the prospects of near term U.S. interest arte hike. Spot gold was down 0.2 percent at $1,352.92 an ounce at 1042 GMT, while U.S. gold futures for December delivery were lower at $1,357.50.
Treasuries Recap
The US Treasuries rebounded after the Bank of England lowered its bank rate to 0.25 percent with additional quantitative easing. However, clear focus remains on the July employment report on Friday. The yield on the benchmark 10-year Treasury note fell 1-1/2 basis points to 1.525 percent and the yield on short-term 2-year note remained steady at 0.67 percent mark.
The UK gilts rallied as the Bank of England, in its monetary policy meeting, lowered its key interest rate by 25 basis points to 0.25 percent. It has also announced to increase the quantitative easing by an additional 70 billion pounds and signalled of near-zero rates ahead. The yield on the benchmark 10-year gilts fell 15 basis points to 0.659 percent (new record low), the yield on super-long 40-year bond also dipped 14 basis points to 1.341 percent (fresh record low) and the yield on short-long 2-year bond slid 10 basis points to 0.097 percent (new record low). The 10-year Gilt/T-note yield spread of -84 basis points is at a 16-year low.
The European bonds gained after the Bundesbank President Jens Weidmann signalled at additional bonds buying programme. The French 10-year bond yield dipped 1 basis points to 0.184 percent, Irish 10-year bonds yield moved down 1 basis point to 0.474 percent, Italian equivalents inched lower 2 basis points to 1.197 percent, Netherlands 10-year bonds yield tumbled 1/2 basis point to 0.058 percent, Portuguese 10-year bonds yield dipped nearly 3 basis points to 2.913 percent and the Spanish 10-year bond yield slid more than 1-1/2 basis points to 1.072 percent.
The German 10-year bund yields fell 4 basis points to -0.075 percent and the yield on short-term 2-year note slid 1-1/2 basis points to -0.611 percent.
The Japanese government bonds remained narrowly mixed on Thursday, succumbing to thin trading activity during a relatively quiet session that saw data of little significance. The yield on the benchmark 10-year bonds fell nearly 1 basis point to -0.089 percent, the yield on long-term 30-year note jumped 3 basis points to 0.387 percent and the short-term 2-year JGB yield remained steady at -0.170 percent.
New Zealand bonds plunged after the benchmark S&P/NZX 50 stocks index rose 0.3 percent, following modest gains on Wall Street. The yield on the benchmark 10-year bond rose 2 basis points to 2.235 percent, the yield on 7-year note also climbed 2 basis points to 1.960 percent and the yield on short-term 2-year note ended 1/2 basis points higher at 1.825 percent.
The Australian government bonds slumped after data showed that the country’s retail sales increased for five consecutive months in June. However, gains were much weaker than expected, which limited the growth in bond yields. The yield on the benchmark 10-year Treasury note rose 2 basis points to 1.968 percent and the yield on short-term 3-year note climbed 1/2 basis point to 1.456 percent.
