- PBOC sets USD/CNY mid-point sharply higher at 6.2298, +1136 pips, close yesterday 6.2097, decision on mid-point to be based on market maker quotes, REER deviates from market expectations, firm CNY stance effectively abandoned.
- China July money supply M2 +13.3% y/y, CNY lending +15.5%, +11.7% and +13.6% eyed, new loans at trln, CNY738 bln eyed, loans to non-bank financials +CNY886.4 bln.
- Fewer bet on weaker JPY even as Fed gears up for rate increase.
- Japan July money supply M2 +4.1% y/y, M3 +3.3%, broadest liquidity +4.3%, June rev +3.9%, rev +3.2%, rev +4.4%.
- UK July BRC like-for-like retail sales +1.2% y/y, +1.0% eyed, June +1.8%, total sales +2.2%, near long-term average, June +2.9%.
- Greece and lenders agree on primary budget targets.
- Australia July NAB business conditions index +6, confidence +4, June rev +10, rev +8, mining and construction more cautious.
- NZ July electronic card retail sales +0.4% m/m, +5.6% y/y, apparel, cars hot.
- (0400 ET/0800 GMT) Italy July CPI, -0.1% m/m, +0.2% y/y eyed; flash -0.1%, +0.2%.
- (0400 ET/0800 GMT) Italy July HICP, -1.9% m/m, +0.4% y/y eyed; flash -1.9%, +0.4%.
- (0500 ET/0900 GMT) Germany August ZEW economic sentiment index, 32.0 eyed; last 29.7.
- (0500 ET/0900 GMT) Germany August ZEW current conditions index, 64.3 eyed; last 63.9.
- (0600 ET/1000 GMT) US July NFIB small business optimism index, 97 eyed; last 94.1.
- (0830 ET/1230 GMT) US Q2 unit labour costs, +0.1% q/q eyed; last +6.7%.
- (0830 ET/1230 GMT) US Q2 productivity, +1.6% q/q eyed; last -3.1%.
- (1000 ET/1400 GMT) US June wholesale inventories, +0.4% m/m eyed; last +0.8%.
- (1000 ET/1400 GMT) US Jun wholesale sales, +0.4% m/m eyed; last +0.3%.
Key Events Ahead
- N/A Belgium E1.7-2.1 bln each 3/12-month treasury certificate auctions.
- (0530 ET/0930 GMT) UK DMO GBP650 mln 0.125% 2058 index-linked Gilt auction.
- (0530 ET/0930 GMT) ECB 7-day refit at fixed 0.05%, E70 bln allotment eyed, last bln.
FX Recap
EUR/USD is supported above 1.0900 levels and currently trading at 1.0975 levels. It has made intraday high at 1.1032 and low at 1.0969 levels. The President of the Atlanta district of the Federal Reserve Dennis Lockhart reiterated his appetite for higher short-term interest rates that in his view would better match the improved economic picture. "I think the point of lift-off is close," Lockhart said in a speech on Monday. Today in European session Germany ZEW economic sentiment data will be in focus for the further directions. Initial support is seen around at 1.0789 and resistance at 1.1195 levels.
USD/JPY is supported above 124.00 levels and posted a high of 124.88 levels. It has made intraday low at 124.52 and currently trading at 124.72 levels. The dollar-yen pair struggles to regain lost ground, although remains better bid as the US dollar poses a solid recovery from the Fed Fischer's and Lockhart's less hawkish comments-led drop. Moreover, the latest Yuan depreciation by the PBOC is widely expected to pressure USD/Asia currencies up, which also lent a helping hand to USD/JPY, driving the major to highs just shy f 125 handle earlier this session. Looking ahead, markets now shift focus to a set of US macro data lined up release later today ahead of BOJ monetary policy minutes and Japan's industrial production data due tomorrow. Initial resistance is seen at 125.68 and support is seen at 120.63 levels.
GBP/USD is supported above $1.5500 levels. It made an intraday high at 1.5602 and low at 1.5559 levels. Pair is currently trading at 1.5569 levels. Pair touched 1.56 levels in the Asian session but didn't find support above it. Today is data free session for GBP. UK labour data is the major event scheduled for Wednesday. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.
NZDUSD is supported below 0.6600 levels and trading at 0.6548 levels and made intraday low at 0.6538 and high at 0.6633 levels. The New Zealand dollar halted its recovery and dropped sharply versus its US counterpart in mid-Asia, knocking-off NZD/USD to fresh three-day lows on 0.65 handle, as the Kiwi was badly hit by latest currency moves by PBOC while heavy losses in the Aussie also dragged its OZ neighbour lower. Pair snapped its minor recovery seen in early moves and plunged nearly 100 pips in reaction to the shocking move by the People's Bank of China, allowing Yuan to depreciate almost 2% against the greenback. Initial support is seen at 0.6465 and resistance at 0.6789 levels.
AUD/USD is supported below 0.7400 levels and trading at 0.7321 levels. It has made intraday high at 0.7439 levels and low at 0.7307 levels. The unexpected decision on Tuesday by the People's Bank of China to lower the Renminbi rate by the most on record had a negative effect on antipodean currencies. China remains Australia's biggest trading partner. With the devaluation of the Chinese currency, Chinese companies will have less purchasing power to purchase products from Australia or New Zealand. Markets are also concerned, as they see a warning message in the latest PBOC move, suggesting that the Chinese economy continues to struggle to maintain its desired growth. Initial support is seen at 0.7225 and resistance at 0.7647 levels.
Equity Recap
Japan's benchmark Nikkei 225 index rose 0.46% to 20,904.88 points within the first hour of trade, while Tokyo's broader Topix gauge also gained 0.46%, to trade at 1,699.08 points.
Hong Kong's benchmark Hang Seng index rallied 1.13% to 24,797.02 points at the opening bell, but mainland China's benchmark Shanghai Composite fell 0.37% to 3,913.94 points at the same time.
Korea's benchmark Kospi index jumped 0.51% to 2,013.46 points this morning in Seoul.
The benchmark Australian S&P/ASX 200 index was 0.13% higher at 5,516.50 points in Sydney, with most resource stocks trading with solid gains.
New Zealand's benchmark S&P/NZX 50 index slipped 0.05% lower to 5,862.14 points this afternoon in Wellington.
Australia's S&P/ASX 200 index closes down 0.57 pct at 5,478.00 points.
Tokyo's Nikkei average closes down 0.42 pct at 20,720.75.
Treasury Recap
BOJ offers to lend Y158.6 bln of JGBs on spot basis through 8/12 as a secondary source of JGBs.
Thai 6 bln baht, 13.87-year government bond average accepted yield 3.1930 pct.
New Zealand government bond yields were as much as 2.5 basis points higher.
Australian government bond futures fell, with the three-year bond contract off 1 tick at 98.010.
The 10-year contract was down 3.5 ticks to 97.1550 leading to a bearish steepening of the curve.
Commodity Recap
Gold miners joined in the rally after gold prices rose above $1,100 overnight, with Evolution Mining rising more than 8%, Sandfire Resources and Newcrest Mining each gaining 4%, and Regis Resources climbing 3%.
WTI futures slid 0.73% to trade at $44.63 per barrel, while Brent futures lost 0.60% to $50.11 per barrel. Later in the day, the attention will shift to the weekly report on US stockpiles, released by the American Petroleum Institute. Following Monday's steep gains, oil is once again trading in the red, pressured by a firmer greenback while waiting for the latest US stockpiles figures.
