- EUR/USD trading in tight range but heavy within 1.0989 to 1.0942 levels.
- USD/JPY bid, 123.88 to 124.34 and holding highs into NY.
- Switzerland July KOF vs 89.7 previous, 90.3 expected.
- Germany July Jobless rate vs 6.4% previous, 6.4% expected.
- Euro zone July Economic Sentiment vs 103.5 previous, 103.3 expected.
- Euro zone Consumer Confidence Final vs -5.6 previous, -7.1 expected.
- Germany July prelim CPI y/y vs 0.3% previous, -0.1% expected.
- Germany July prelim HICP y/y vs 0.1% previous, 0.1% expected.
- Greek PM before Syriza committee, talks of forced compromise.
- Tsipras proposes Sunday party referendum. Can't go on like this.
- Fed facing dilemma on rates amid inflation and jobs divergence.
- Second Fed rate hike seen colouring outlook on policy normalization path.
- Greek Official- Talks with creditors are progressing smoothly.
- BOJ's Ishida - Some concerns still over QQE systemic risks.
- Moody's - Japan corporate cash pile continues to grow, CAPEX to pick up.
- (0830 ET/1230 GMT) Continued Claims Jul 18 wk mkt 2.211mln, prev 2.207mln.
- (0830 ET/1230 GMT) US Q2 GDP advance, +2.6% AR eyed; last -0.2%.
- (0830 ET/1230 GMT) US Q2 PCE prices, +2.0% AR eyed; last -2.0%.
- (0830 ET/1230 GMT) US Q2 core PCE, +1.6% AR eyed; last +0.8%.
- (0830 ET/1230 GMT) US Q2 GDP deflator, +1.5% AR eyed; last -0.1%.
- (0830 ET/1230 GMT) US weekly initial jobless claims, 270k eyed; last 255k.
- (0930 ET/1330 GMT) Brazil's bank lending data for June, previous 0.7%.
- (1400 ET/1800 GMT) Mexico's central bank rate, previous 3.0%.
- (1400 ET/1800 GMT) Mexico's central bank trade balance, -59.11 bln (Pesos) in May.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade ops30yr Ginnie Mae max $900mln.
- (1430 ET/1830 GMT) FedTrade ops 15yr F.Mae/Fr.Mac max $475mln.
FX Recap
USD: The dollar hit its highest level this week on Thursday after the U.S. Fed moved towards raising interest rates later this year. The dollar index rose a further 0.4 percent from the U.S. close to 97.377. It was also 0.2 percent higher at 124.2 yen.
EUR/USD is supported below 1.1000 levels and currently trading at 1.0972 levels. It has made intraday high at 1.0942 and low at 1.0989 levels. Pair extended its post-FED decline down to 1.0941, from where its currently recovering after the Euro zone Economic Sentiment Indicator rose to 104.0 in July, beating 103.3 consensus forecast. Earlier in the day, news was less encouraging as German unemployment unexpectedly rose in July, posting its biggest increase since May last year. Unemployment rose by 9,000 against expectations of a 5,000 decline. Later on in the day, the US will release its second quarter advanced GDP figures, the main event of the day. The US is expected to have grown 2.6% compared to the final reading of the Q1 of -0.2%. Initial support is seen around at 1.0789 and resistance at 1.1195 levels. Option expiries are at 1.0950-60 (2.1BLN), 1.1000 (1.6BLN), 1.1090-1.1100 (1.1BLN).
USD/JPY is supported above 124.00 levels and posted a high of 124.31 levels. It has made intraday low at 123.88 and currently trading at 124.33 levels The US Fed concluded its two-day policy meeting on Wednesday, leaving the key interest rate unchanged with only a small impact on the pair and drag the pair above 124.00 levels. Moreover, the latest comments by Bank of Japan (BOJ) Ishida policymaker also added to the yen weakness, pushing USD/JPY higher. BOJ Ishida noted that the Japanese policymakers should watch out for accumulating risks from the prevailing easy policy while raising concerns over exports and production recovery during summer. Today Japan released prelim industrial production data with positive numbers at 0.8% mm. Next of relevance in the pair will be the first estimate of the US GDP during the second quarter, with the economy expected to have expanded at an annual rate of 2.6% between April and June. In the Japanese calendar, critical inflation figures are also due tomorrow. Initial resistance is seen at 124.57 and support is seen at 120.63 levels. Option expiries are at 123.7075 (960M), 124.00 (1BLN), 125.00 (502M).
GBP/USD is supported above $1.5600 levels. It made an intraday high at 1.5626 and low at 1.5588 levels. Pair is currently trading at 1.5622 levels. Sterling defied a broad dollar rally on Thursday on expectations that the Bank of England is likely to follow the U.S. Federal Reserve in raising interest rates in coming months. Sterling rose 0.1 percent at $1.5607, having hit a 4-week high of $1.5691 on Wednesday. The euro was down 0.4 percent at 70.21 pence, having hit a one-week low of 70.16 pence. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels. Option expiries are at 1.5500 (547M), 1.56000-5 (670M).
NZDUSD is supported below 0.6700 levels and trading at 0.6615 levels and made intraday low at 0.6613 and high at 0.6667 levels. The NZ dollar underperformed in the overnight session as the US Federal reserve remains on track for hiking rates this year. Changes to the FOMC statement were fairly minimal, with no clear new signal on when exactly the policy normalization process will begin, but September is still live for "lift-off" if the data comes in strong. The market reaction to the statement was relatively muted. The NZD/USD left the $0.67 area and gradually retraced below $0.6650. Initial support is seen at 0.6465 and resistance at 0.6789 levels. Option expiries are at 0.6565 (278M), 0.6600 (301M).
AUD/USD is supported below 0.7300 levels and trading at 0.7287 levels. It has made intraday high at 0.7322 levels and low at 0.7285 levels. The Aussie remained under pressure today, trading in negative territory against the US dollar after the Federal Reserve decided to keep the main interest rate unchanged at a record low after its two-day meeting. Today Australia released major economic update of Building approvals, came in negative numbers at -8.2% mm vs 2.3% mm previous release. Initial support is seen at 0.7225 and resistance at 0.7647 levels. Option expiries are at 0.7250 (408M), 0.7280 (201M), 0.7300 (211M).
Equities Recap
Global stocks subdued on U.S. rate hike caution. Europe's FTSEurofirst 300 climbed 0.5 pct, UK's FTSE 100 rose 0.5 pct and France's CAC 40 surged 0.7 pct in early trading.
Japan's Nikkei closed 1 percent and Australian shares added 0.8 percent. But South Korean shares dropped 0.7 percent while Chinese stocks took another near 3 percent tumble. Chinese equities were down over 30 percent from their June highs.
Commodities Recap
Oil prices were steady after a larger-than-expected draw in U.S. crude and gasoline stocks was balanced by a stronger dollar, making fuel more expensive for holders of other currencies. Benchmark Brent crude oil was up 30 cents a barrel at $53.68 at early trading, after settling 8 cents higher in the previous session. U.S. crude was down 1 cent at $48.78.
Gold was at a 5-1/2 year low at $1,093.40 an ounce as its appeal ahead of potentially higher global interest rates remained in question. Gold dropped more than 1 percent to near its weakest level since early 2010, as the dollar jumped ahead of U.S. economic data from expectations for an interest rate hike by the US Fed in September. Spot gold dropped 1 percent to $1,084.46 an ounce by noon, after hitting a low of $1,081.85. U.S. gold for August delivery slipped 0.8 percent to $1,084 an ounce.
Treasuries Recap
The Fed's message had lifted U.S. bond yields overnight. The more sensitive two-year yields had hit their highest since early June but there was little impact on German Bunds and Europe's other core bond markets ahead of the region's data deluge.
UK Gilts opened 15 ticks lower than the settlement of 116.44 as core fixed income markets adjusted positions against the more upbeat tone note with regard to the economy noted from last night's FOMC meeting. Sellers have made a break higher from yesterday's high on 10-year cash at 1.985%.
JGB prices ended the day softer, sending yields up by 0.5bp to 1.5bp from yesterday's final close in the 2-yr and longer zone. JGBs remained softer on the back of weaker German Bunds and US TSY overnight after the FOMC decision in addition to a relatively sharp rebound in Tokyo stocks and USD/JPY today. The current 5-yr JGBs saw relatively good two-way flow among domestic real money accounts. But other domestic investors stayed largely sidelined ahead of tomorrow's monthly JPY2.4tn 10-yr JGB auction.
Australian government bond futures dropped with the three-year bond contract off 6 ticks at 98.040. The 10-year contract was also down 6 ticks to 97.1100. NZ government bonds sold off in line with U.S. Treasuries, with yields as much as 8.5 basis points higher at the long end of the curve.
