Market Roundup
- Japan ChiefCabSec Suga – Not true govt considering helicopter money, BoJ to Consider monetary policy steps based on market moves, conditions - Reuters.
- Cleveland Fed Mester (in Sydney) – Heartened by US June job rebound, repeats gradual rate hikes appropriate, rate move on table each FOMC meet – Reuters.
- Minny Fed Kashkari – Fed coming up short on both employment and inflation goals, can be patient in raising rates – Reuters.
- US CBO – US debt to rise faster than previously expected – Reuters.
- US ABS issuance frenzy met by strong investor demand – IFR.
- Australia political woes put NZD-AUD parity in view - Reuters.
- Australia July Westpac/MI consumer confidence index -3% m/m to 99.1, June -1%, index still +7.4% y/y but back below 100, econ conditions outlook -6.1%.
- RBNZ AsstGov McDermott – Focus still on low inflation, constant review needed- Reuters.
- New Zealand June food prices +0.4% m/m, -0.5% y/y.
Economic Data Ahead
- (0245 ET/0645 GMT) France Jun HICP – final, +0.2% m/m, +0.3% y/y eyed; flash +0.5%, +0.1%.
- (0300 ET/0700 GMT) Spain Jun CPI, +0.5% m/m, -0.8% y/y eyed; last +0.5%, -1.0%.
- (0300 ET/0700 GMT) Spain Jun HICP, +0.4% m/m, -0.9% y/y eyed; last +0.5%, -0.9%.
- (0400 ET/0800 GMT) Italy Jun CPI - final, +0.1% m/m, -0.4% y/y eyed; flash +0.1%, -0.4%.
- (0400 ET/0800 GMT) Italy Jun HICP – final, +0.1% m/m, -0.3% y/y eyed; flash +0.1%, -0.3%.
- (0500 ET/0900 GMT) Eurozone May industrial output, -0.8% m/m, +1.4% y/y eyed; last +1.1%, +2.0%.
- (0830 ET/1230 GMT) United States Jun import/export prices, +0.5%, +0.4% m/m eyed; last +1.4%, +1.1%.
Key Events Ahead
- (0500 ET/0900 GMT) Economists for Brexit press conference in London.
- (0500 ET/0900 GMT) Italy E1.5-2/2-2.5 bln 0.1/0.95% 2019/23 BTP auctions.
- (0500 ET/0900 GMT) Italy E0.75-1.25/1.25-1.75 bln 1.65/2.25% 2032/36 BTP auctions.
- (0530 ET/0930 GMT) Germany E5 bln 0% 2026 Bund, UK GBP1.25 bln 0.125% 2026 linker auctions.
- (0530 ET/0930 GMT) Portugal E1-1.25 bln 2.2 and 2.875% 2022 and 2026 OLO auctions.
- (0900 ET/1300 GMT) Dallas Fed Kaplan speaks in Houston.
- (1000 ET/1400 GMT) BoC policy announcement, no change in 0.5% overnight rate eyed.
- (1030 ET/1430 GMT) ECB Angeloni, Buba Dombret speak on Brexit in Frankfurt.
- (1115 ET/1515 GMT) BoC Gov Poloz, DepGov Wilkins press conference.
- (1400 ET/1800 GMT) Fed Beige Book release.
- (1800 ET/2200 GMT) Philly Fed Harker speaks in Philadelphia.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent lower at 96.41, hovering towards a low of 96.07 touched in the previous session.
EUR/USD: The euro trades between a narrow range as it struggles to benefit from improving global risk sentiment. Yesterday, the major failed to close above 1.1100 level, weighed down by record highs for U.S. stocks, which strengthened treasury yields. The European currency trades around 1.1062, after having touched a 1-week high of 1.1126, in the previous session. Markets will closely watch Eurozone industrial production report and United States imports and exports price data for further cues. Immediate resistance is located at 1.1120, break above targets 1.1144/1.1186. On the lower side, support is seen at 1.1015, break below could drag the pair lower 1.1000.
USD/JPY: The greenback edged down after rising to a 2-1/2-week high as the prospects for more economic stimulus, strengthened risk sentiment. The weakness in the major came in after Chief Cabinet Secretary Yoshihide Suga stated that the BoJ will decide monetary policy steps based on market movements and the economic environment, and that the government was not considering helicopter money. The dollar trades 0.4 percent lower at 104.20 yen, after scaling to a peak of 104.98, its highest level since June 24. The movement in the pair will be largely driven by market sentiment, ahead of U.S imports and exports data and monthly budget statement. Minor resistance is located at 105.00, break above could take it to 105.42/ 106.00. On the lower side, support is seen at 103.40, break below targets 103.00/ 102.45.
GBP/USD: Sterling rose above 1.3300 handle, as Theresa May's PM appointment helped to calm investors concerns over Brexit and political turmoil. On Tuesday, it extended gains after BoE Governor Mark Carney stated that he wanted to give a clear picture to households and firms that credit was available. Sterling trades 0.4 percent higher at 1.3302, attempting to regain 1.3400 level. The main economic event for the pound is Bank of England policy meeting on Thursday, which is likely to cut interest rate in order to safe-guard the economy from the immediate impact of the Brexit vote. Immediate resistance is located at 1.3495, break above targets 1.3600. On the down side, support is seen at 1.3076 (5-DMA), break below could take the pair lower 1.3000 handle. Against the euro, the pound strengthened 0.4 percent to 83.13 pence, hitting a near 2 week high.
AUD/USD: The Australian dollar declined below the 0.7600 handle on the back of downbeat Westpac consumer confidence report and falling crude oil prices. Australia Westpac consumer confidence index in July declined to 99.1 from previous month’s reading of 102.2. The major was also weighed down by political uncertainty and the possibility of losing its coveted triple A rating. However, it managed to recover some ground to trade at 0.7602, supported by rising copper prices and risk on-sentiment across the market. Markets attention will remain on series of U.S. economic data, ahead of Australia's employment report. Immediate support is seen at 0.7560 (5-DMA), break below could take the pair till 0.7530/0.7500. On the higher side, resistance is located at 0.7657 (Previous Session High), break above targets 0.7671/0.7700.
NZD/USD: The New Zealand dollar slumped after touching its 2016 highs in the previous session. The major failed to sustain gains above the 0.7300 level, as oil prices dropped on profit-taking following an overnight rally. The Kiwi trades 0.5 percent lower at 0.7255, within the sight of 0.7324 (2016 High), touched on Tuesday. The downside in the pair was capped as data released earlier showed that New Zealand's food price index for June rose 0.4 percent from previous -0.5 percent. Investors focus remains on U.S. economic data and New Zealand's Business PMI data for further momentum. Immediate support is seen at 0.7210 (10-DMA), break below could take it lower 0.7200 handle. On the higher side, resistance is seen at 0.7324, break above targets 0.7345/0.7395.
Equities Recap
Asian shares nears 2016 high as prospects of solid U.S. growth and accommodative economic policy in major markets boosted investors' risk appetite.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent to 427.83, just below its year-to-date high of 428.22 touched on April 21.
Tokyo's Nikkei gained 0.84 pct at 16,231.43, Australia's S&P/ASX 200 index rose 0.70 pct at 5,390.80 points and Seoul shares edged up 0.64 pct,
Shanghai composite index gained 0.4 percent at 3,061.99 points, while CSI300 index added 0.5 percent at 3,288.40 points.
Hong Kong’s Hang Seng was trading 0.5 percent higher at 21,337.40 points. Taiwan shares rose 0.2 pct at 8,857.75 points.
Commodities Recap
Crude oil prices declined on profit-taking after it gained nearly 5 percent in the previous session, partially due a forecast increase in demand next year. Brent crude oil dropped 0.5 percent to $47.97 a barrel at 0350 GMT after rising to $48.54 from $46.03 in the prior session. U.S. crude fell 45 cents to $46.35 a barrel after ending the previous session up $2.06, or 4.6 percent.
Gold edged up after touching a near-2 week low. It declined to $1330.29 from a high of $1357.58 in the previous session, recording its biggest fall since May 24, as global equities rallied on easing political uncertainty in Britain. Spot gold nudged up 0.2 percent to $1,335.50 per ounce by 0358 GMT, after declining to a near two-week low of $1,327.45 earlier in the session. U.S. gold inched down 0.1 percent to $1,334.10, an ounce, after falling 1.5 percent in the previous session.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.4896 percent down by 0.023 bps, while 5-year was 0.015 bps lower at 1.0683 percent.
The Australian government bonds continue to trade lower on renewed risk appetite in global markets. Also, investors were optimistic over last week’s US employment report, which showed robust growth in June. The yield on the benchmark 10-year Treasury note rose 4 basis points to 1.996 percent and the yield on short-term 2-year note jumped more than 1 basis point to 1.657 percent.
The New Zealand government bond yields ended lower after the data showed that country’s food prices rose in June. The yield on benchmark 10-year bond rose 1 basis point to 2.355 percent in the end session, the yield on 7-year note jumped 1 basis point to 2.100 percent and the yield on short-term 2-year note ended 1/2 basis point higher at 2.075 percent.
Canadian government bond prices were lower across the maturity curve, with the 2-year price down 6.5 Canadian cents to yield 0.505 percent and the benchmark 10-year slumping 72 Canadian cents to yield 1.057 percent. The Canada-U.S. two-year bond spread was -18.4 basis points, while the 10-year spread was -44.8 basis points.
