Market Roundup
• US GDP Advance Q2 2.6% , 2.6% forecast, 1.2% previous.
• US GDP Sales Advance Q2 2.6, 2.4 forecast, 2.7 previous.
• US Core PCE Prices Advance Q2 0.9, 0.8 forecast, 1.8 previous.
• US PCE Prices Advance 0.3%, 1.2% forecast, 2.2% previous.
• US Employment Costs Q2 0.5%, 0.6% forecast, 0.8% previous.
• U Mich Expectations Final Jul 80.5, 80.4 forecast, 80.2 previous.
• U Mich Sentiment Final Jul 93.4, 93.1 forecast, 93.1 previous.
• NY Fed leaves Q3 GDP growth view near 1.9%.
• Fed's Kashkari: Fed's balance sheet not boosting US economy much.
• Kashkari: Deficit-boosting tax cuts don't help in the long term; tax reform can.
• North Korea fires missile into sea off east coast, possibly an ICBM.
• Republican effort to gut Obamacare crashes in US Senate.
• Russia orders out US diplomats in sanctions retaliation.
• May growth puts Canada on track for solid Q2, lifts rate-hike bets.
• German inflation beats expectations, still short of ECB target.
• Brazil posts record budget deficit for June.
• IMF: US Dollar real effective exchange rate overvalued by 10-20 percent compared to US medium-term fundamentals.
• IMF: Euro is broadly in line with EZ fundamentals as a whole, ranging from undervaluation of 5% to overvaluation of 3%.
• IMF: Pound valuation is 0-15% above level consistent with fundamentals, uncertainty over Brexit is high.
• IMF: Mexican peso undervalued by 5-15% under scenario where protectionism risks don't fully materialize.
• IMF: S. Korean won undervalued by 5-15% vs fundamentals, current account surplus among highest of economies assessed.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Industrial Output Prelim MM Jun, 1.7 forecast, -3.0 previous (July 30)
• 22:45 New Zealand Building Consents MM Jun 7.00 previous (July 30)
• 23:30 Australia AIG Manufacturing Index, 55.0 previous (July 31)
• 01:00 China NBS Non-Mfg PMI Jul 54.90 previous (July 31)
• 01:00 China NBS Manufacturing PMI Jul 51.60 forecast, 51.70 previous (July 31)
• 01:30 Australia Private Sector Credit MM Jun 0.40 (July 31)
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.1668 levels and currently trading at 1.1746 levels. The pair has made session high at 1.1761 and hit lows at 1.1709 levels. The euro inched higher against US dollar in the US session on Friday as dollar dipped after a combination of underwhelming U.S. economic data and political uncertainty kept traders biased toward the euro and other world currencies. The euro hit a session high after the release of U.S. second-quarter gross domestic product estimates that largely met economists' expectations. Some analysts pointed to a smaller-than-expected increase in U.S. labor costs, but others suggested the data was just an excuse for traders to continue the weak dollar trade that has sent the U.S. currency lower for much of this year. U.S. gross domestic product growth picked up to 2.6 percent in the second quarter, matching expectations of economists polled, while growth in the first quarter was revised down to 1.2 percent. The euro moved higher against the dollar, and was last up 0.5 percent at $1.1740. On Thursday, the euro rose to its highest against the greenback in 2-1/2 years before retreating in later trading.
GBP/USD is supported in the range of 1.3062 levels and currently trading at 1.3128 levels. It reached session high at 1.3134 and dropped to session low at 1.3068 levels. Sterling rose against the dollar on Friday as sterling was boosted by hopes that Britain will exit the European Union under a transitional deal, and as the greenback fell broadly. Finance minister Philip Hammond said on Friday he wanted to avoid a "cliff-edge" scenario under which goods and people would stop being able to move across Britain's borders when it left the EU in March 2019. Hammond said EU nationals would continue to be able to work in Britain immediately after its exit from the EU, and changes to rules affecting relations with the bloc could be phased in gradually over the transition period, which should be completed by 2022 when Britain holds its next scheduled parliamentary election. Sterling was up 0.4 percent at $1.3138 by 1830 GMT, close to the high of $1.3159 touched the previous day, having been boosted in the afternoon against a dollar weakened by weak U.S. GDP data. Investors are now looking ahead to next Thursday when the Bank of England will make a policy decision and release its quarterly Inflation Report.
USD/CAD is supported at 1.2400 levels and is trading at 1.2439 levels. It has made session high at 1.2565 and lows at 1.2417 levels. The Canadian dollar strengthened against its U.S. counterpart on Friday as stronger-than-expected growth in the domestic economy supported expectations for another interest rate hike from the Bank of Canada in the coming months. Canada’s gross domestic product expanded 0.6 percent in May on growth in the energy, manufacturing and retail trade sectors, Statistics Canada said, exceeding economists' forecasts for a 0.2 percent rise. The central bank raised rates to 0.75 percent earlier this for the first time in nearly seven years. Chances of another rate hike as soon as September have doubled since last week to 40 percent, while there is nearly a four-in-five chance of a hike by October, data from the overnight index swaps market showed. Adding to support for the loonie, prices of oil, one of Canada's major exports, reached fresh two-month highs as investors digested signs of an easing oversupply picture. The Canadian dollar was last trading at C$1.2438 to the greenback, or 80.30 U.S. cents, up 0.8 percent. The currency traded in a range of C$1.2420 to C$1.2567. It touched on Thursday its strongest in more than two years at C$1.2414.
AUD/USD is supported around 0.7931 levels and currently trading at 0.7981 levels. It hit session high at 0.8007 and made session lows at 0.7961 levels. The Australian dollar held near two-year peak against the dollar on Friday as data on U.S. second quarter gross domestic product (GDP) and labor costs pushed the dollar lower. The Employment Cost Index, the broadest measure of labor costs, increased 0.5 percent in the April-June period after accelerating 0.8 percent in the first quarter, the Labor Department said on Friday. U.S. gross domestic product growth picked up to 2.6 percent in the second quarter, matching expectations of economists polled by Reuters, while growth in the first quarter was revised down to 1.2 percent. The news came after the Federal Reserve on Wednesday noted that both overall inflation and a measure of underlying price gains had declined and said it would "carefully monitor" price trends. The Australian dollar stood at $0.7985, having reached $0.8066 on Thursday, its highest since May 2015.It is up 0.6 percent for the week so far and 3.6 percent for all of July, its best monthly gain since January.
Equities Recap
Drops among tech stocks, tobacco firms and banks led European shares lower on Friday as company results failed to provide support for the market.
UK's benchmark FTSE 100 closed down by 1.1 percent, the pan-European FTSEurofirst 300 ended the day down by 1.07 percent, Germany's Dax ended down by 0.5 percent, France’s CAC finished the day down by 1.2 percent.
The S&P 500 slipped on Friday on negative reactions to earnings reports from high-profile names such as Amazon, Exxon and Starbucks and a drop in shares of tobacco companies.
Dow Jones closed up by 0.16 percent, S&P 500 ended down 0.14 percent, Nasdaq finished the day down by 0.13 percent.
Treasuries Recap
U.S. Treasury yields fell on Friday after data showed that U.S. labor costs rose less than expected in the second quarter, adding to concerns that inflation will remain low.
Benchmark 10-year notes rose 5/32 in price to yield 2.29 percent, down from 2.31 percent on Thursday.
Commodities Recap
Gold prices rose to a six-week high on Friday after weaker than expected U.S. inflation dampened expectations that the U.S. Federal Reserve will aggressively raise interest rates and North Korea fired a ballistic missile, triggering safe-haven buying.
Spot gold was up 0.8 percent at $1,268.84 an ounce by 1:50 p.m. EDT (1750 GMT), after touching $1,270.38, the highest since June 14. It was on track to rise for a third week in a row.U.S. gold futures for August delivery settled up 0.7 percent at $1,268.40.
Oil prices rose to two-month highs on Friday, putting crude benchmarks on track for their strongest weekly percentage gains this year as investors continued to digest signs of easing oversupply.
Brent crude futures were up 86 cents at $52.35 a barrel at 1:27 p.m. EDT (1727 GMT) after reaching a two-month high of $52.68 a barrel.
U.S. West Texas Intermediate (WTI) crude futures were up 57 cents at $49.61 a barrel, after also touching a two-month peak of $49.78 a barrel.
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