Market Roundup
• Trump to offer U.S. farmers billions to ease trade pain.
• Republican tax plans include making U.S. cuts permanent –documents.
• US Jul Markit Mfg PMI Flash, 55.5, 55.4 forecast, 55.4 previous.
• US Jul Markit Svcs PMI Flash, 56.2, 56.5 forecast, 56.5 previous.
• US Jul Rich Fed Comp Index, 20, 20 previous, 21 revised.
• US May Monthly Home Price YY, 6.4%, 6.4% previous.
• US May Monthly Home Price Index, 263.3, 262.5 previous, 262.6 revised.
• UK PM May says she will lead Brexit talks from now on.
• Bitcoin breaks above $8,300 to 2-month peak.
• IMF says dollar over-valued, Chinese yuan in line with fundamentals as of June 22.
• Mexico trade adviser sees NAFTA deal in next few months.
Looking Ahead - Economic Data (GMT)
• 24 Jul 22:45 New Zealand Jun Trade-Imports (NZD), 5.12 bln previous
• 24 Jul 22:45 New Zealand Jun Trade-Exports (NZD), 5.42 bln previous
• 24 Jul 22:45 New Zealand Jun Trade Balance (NZD), 294.0 mln previous
• 25 Jul 01:30 Australia Q2 CPI YY, 2.2% forecast, 1.9% previous
• 25 Jul 01:30 Australia Q2 CPI QQ, 0.5% forecast, 0.4% previous
• 25 Jul 01:30 Australia Q2 RBA Weighted Median CPI YY, 1.9% forecast, 2.0% previous
• 25 Jul 01:30 Australia Q2 RBA Weighted Median CPI QQ, 0.5% forecast, 0.5% previous
Looking Ahead - Events, Other Releases (GMT)
• 08:00 ECB releases monthly data on lending and money supply – Frankfurt
Currency Summaries
EUR/USD is likely to find support at 1.1600 levels and currently trading at 1.1685 levels. The pair has made session high at 1.1717 and hit lows at 1.1672 levels. The euro initially strengthened against the U.S. dollar on Tuesday after surveys showed eurozone business growth remained robust yet below forecasts, but fears of a trade war with the United States pushed the single currency lower against greenback. Euro zone business growth slowed more than expected this month as fears over a trade war with the United States and a weaker global expansion put another dent in optimism, a survey showed on Tuesday. But growth remained robust and as it was accompanied by rising prices the survey is unlikely to concern policymakers at the European Central Bank too much as they look to move away from their ultra-loose monetary policy. IHS Markit's Euro Zone Composite Flash Purchasing Managers' Index (PMI), seen as a good guide to economic health, dipped in July to 54.3 from June's 54.9, coming in below all forecasts in a poll with a median of 54.8. The U.S. dollar was 0.06 percent lower against five major currencies as comments last week from U.S. President Donald Trump that criticized the currency's strength continued to weigh on sentiment. The euro was trading 0.06 percent lower at $1.1684 after hitting an intraday high of $1.1717.
GBP/USD is supported in the range of 1.3067 levels and currently trading at 1.3146 levels. It reached session high at 1.3160 and dropped to session low at 1.3111 levels. Sterling jumped to hit five-days high against the dollar on Tuesday as the greenback lost momentum, but the outlook for the British currency was clouded by fresh angst over Brexit and doubts about the economy. Weak economic data and renewed political uncertainty over the government's Brexit position hammered sterling last week and sent it to 10-month lows. The currency has in recent sessions, however, clawed back some gains against the dollar and the euro despite weaker-than-expected retail sales and softer inflation data. On Tuesday, British Prime Minister Theresa May said she would now lead negotiations with the European Union and Brexit minister David Raab urged the EU to respond to a policy document in order to reach a deal on Britain's departure by October. That gave sterling a modest boost and the currency was up 0.4 percent against the dollar at $1.3145 and up 0.2 percent against the euro at 89 pence, a four-day high. Next week the Bank of England meets, and markets are giving an 80 percent chance that it will increase interest rates. Sterling looks set for more volatility, especially if there are signs that support for a "hard" Brexit crashing out of the European Union without a trade deal in place is gaining ground.
USD/CAD is supported at 1.3109 levels and is trading at 1.3158 levels. It has made session high at 1.3174 and lows at 1.3134 levels. The Canadian dollar edged higher against the greenback on Tuesday in step with higher oil prices, while domestic 10-year government yield reached a five-week peak, supported by the view of solid economic growth. The dollar index, which measures the greenback against a basket of six major currencies, fell 0.06 percent after touching a one-year high last week. News that China will adopt a more vigorous fiscal policy to combat slowing economic growth and to counter its current trade tension with the United States renewed appetite for commodities and related investment. Expectations the Bank of Canada would raise key interest rates later this year also buttressed demand for the loonie, and helped lift Canadian yields for a third straight session. U.S. crude futures were up more than 1 percent at $68.75 a barrel as the tension between the United States and Iran highlighted risks to supply and trade disputes raised the prospect of slower economic growth and weaker energy demand. The U.S. dollar was 0.2 percent lower against its Canadian counterpart at C$1.3124, reversing its gain on Monday.
USD/JPY is supported around 110.73 levels and currently trading at 111.17 levels. It peaked to hit session high at 111.32 and made session lows at 110.93 levels. The U.S. dollar dipped against the Japanese yen on Tuesday as Japanese exporters bought the yen while, traders awaited U.S. economic growth data on Friday. The dollar index, a measure of the currency against a basket of six rivals, traded a flinch lower at 94.57 on Tuesday compared to the previous day. It was firmly off a one-year high of 95.652 touched on Friday. A jump in benchmark 10-year U.S. Treasury yields to a five-week high had provided support to the dollar in U.S. trade on Monday. The surge in yields came despite criticism from President Donald Trump about the impact of the strength of the greenback and Federal Reserve interest rate rises on the economy. Market participants said the yen firmed against the dollar and the euro as Japanese exporters converted their foreign earnings into the local currency. Small exporting firms typically buy yen as the end of month approaches. The Japanese currency rose on Tuesday, crawling back to a two-week peak of 110.74 yen per dollar hit on Monday. The yen was up 0.1 percent, last changing hands at 111.20 yen per dollar. It had weakened to 111.515 per dollar before giving up those losses.
Equities Recap
Strong results from bank UBS, car company PSA and chipmaker AMS propelled European stocks higher on Tuesday, breaking a three-day slide as the earnings season delivered a boost to the market.
UK's benchmark FTSE 100 closed up by 0.9 percent, the pan-European FTSEurofirst 300 ended the day up by 1.02 percent, Germany's Dax ended up by 1.2 percent, France’s CAC finished the day up by 1.2 percent.
The S&P 500 on Tuesday closed at its highest level since Feb. 1 as Alphabet's blowout results bolstered expectations of a robust earnings season.
Dow Jones closed up by 1.78 percent, S&P 500 ended up by 0.78 percent, Nasdaq finished the day up by 0.46 percent.
Treasuries Recap
The highest short-term yields in a decade helped the government sell $35 billion in two-year notes on Tuesday, bringing the yield curve down from its steepest levels in three weeks.
The yield curve between two-year and 10-year notes flattened to 31 basis points after the auction, from 33 basis points earlier in the day, but above the 23 basis point area reached last week, which was the flattest level in a decade.
Commodities Recap
Gold inched higher on Tuesday as the U.S. dollar slipped and market watchers anticipated U.S. economic growth data on Friday.
Spot gold gained 0.13 percent at $1,225.70 per ounce by 1:36 p.m. EDT (1736 GMT), while U.S. gold futures for August delivery settled down 10 cents, or 0.01 percent, at $1,225.50 per ounce.
Oil prices rose on Tuesday as the market shifted focus to the possibility of increased Chinese demand, drawing attention away from trade tensions between that country and the United States.
Brent crude settled 38 cents higher at $73.44 a barrel, after it reached a session high of $74.U.S. West Texas Intermediate (WTI) was up 63 cents, or nearly 1 percent, to settle at $68.52. Earlier in the day, WTI reached a high of $69.05.
