Market Roundup
- AUD/USD puts on 0.75% after RBA no change decision
- USD/JPY -0.1%, EUR/USD +0.13%, GBP/USD +0.22%
- DXY -0.15%, DAX +0.4%, Brent -1.10%, Iron +0.12%
- Switzerland Q2 GDP 2.0% y/y vs revised 1.1% previous, 0.9% expected
- Germany Jul Ind. Orders 0.2% m/m vs revised -0.3% previous, 0.4% expected
- Switzerland Aug CPI -0.1% y/y vs -0.2% previous, -0.1% expected
- Eurozone Q2 revised GDP 1.6% y/y vs 1.6% previous, 1.6% expected
- Carney's Brexit nemesis- BoE acted too early, Tory MP Rees-Mogg-Bbg
- German Finmin says interest rates are too low
- ECB’s Nouy- Low int. rates may eventually take toll on banks
- Ex-BoJ Momma: No 'bazooka' BOJ easing at Sept meeting
- Japan PM advisor Hamada – BoJ should wait for Fed – Bloomberg
- Japan govt FY ’17 budget requests tops Y100 trln for third year
- UK Aug BRC lfl retail sales -0.9% y/y, all sales -0.3%, July +1.1% +1.9%
- RBA leaves OCR as is at 1.5%, as expected
- RBA steady policy consistent with sustainable growth after August ease
- RBA rising AUD could complicate rebalancing bias still for ease
- Australia Q2 c/a deficit A$15.54 bln, A$19.75 bln expected
Economic Data Ahead
- (0900 ET/1300 GMT) Mexico releases its consumer confidence data for the month of August.
- (0945 ET/1345 GMT) Markit Economics reports final U.S. service PMI for August, which is expected to have increased to 51.2 from a final reading of 50.9 in July.
- (0945 ET/1345 GMT) Financial firm Markit releases final U.S. composite PMI for the month of August. The index posted a final reading of 51.5 in the prior month.
- (1000 ET/1400 GMT) The ISM is expected to report that U.S. non-manufacturing index was steady at 55.0 in August, after rising to 55.5 in July.
- (1845 ET/2245 GMT) The Statistics New Zealand will publish New Zealand's manufacturing sales report for the second quarter. The indicator posted a decline of 1.2 percent in the previous quarter.
- (1930 ET/ 2330 GMT) The Australian Industry Group (AiG) releases its Performance of Construction Index for the month of August. The index stood at 51.6 in the month of July.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae (max $1.275 bn).
- (1215 ET/1615 GMT) The Swiss National Bank Chairman of the Governing Board Thomas J. Jordan's speech.
- (1430 ET/1830 GMT) FedTrade operation 15-year Fannie Mae / Freddie Mac (max $525 mn).
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent lower at 95.67, having touched an intra-day low of 95.58.
EUR/USD: The euro gained, as the dollar weakened across the broad. Data released earlier in the day showed Eurozone's gross domestic product for the second quarter coming in line with consensus and previous 0.3 percent q/q and 1.6 percent y/y, helping the major to maintain its bid tone. The European currency trades 0.2 percent higher at 1.1164, having touched an intra-day high of 1.1169. In the daily chart the pair is facing strong resistance at 1.1260 and further bullishness can be seen only above that level. Any break above 1.1260 will take the pair till 1.1300/1.1370.The minor resistances are at 1.1206/1.123 (daily Kijun-Sen). On the lower side, minor support is around 1.11400 and any break below targets 1.112 (200- day MA)/1.1045.
USD/JPY: The Japanese yen extended gains, as the greenback came under renewed selling pressure amid rising uncertainty over the timing of next Fed rate-hike. The major was also weighed down by BoJ Gov Kuroda's comments, which did not provide any clarity over additional monetary stimulus. Markets attention will remain on U.S ISM non-manufacturing PMI data release, however, the monetary policy stance adopted by the Fed and BoJ would be the key determinants for the major's short-term path. The dollar trades 0.41 percent lower at 103.31, after rising to an early high of 103.80. The near- term trend is slightly bearish as long as resistance 104.89 (90- day EMA) holds. The major resistance is around 104.90 and break above targets 105.80/107. On the lower side, major support is around 102.45 (9- day EMA) and any break below 101.80 will drag the pair till 100.55/100.
GBP/USD: Sterling gained, hovering near a 7-week high against the dollar as recent upbeat PMI reports, strengthened expectations that Britain had likely managed to avoid a recession in coming months following the shock Brexit vote. Against the euro, the pound hit a 4-week peak as recent robust data reduced the prospects of further monetary easing by the Bank of England. Sterling trades 0.2 percent higher at 1.3332, within the sight of a peak of 1.3375 touched in the previous session. The euro was flat at 83.75 pence, having touched a low of 83.52 pence, it’s lowest since early August. Any break above 1.3375 confirms major trend reversal, a jump till 1.3400/1.3480 is possible. On the lower side major support is around 1.3290 (55- H EMA) and break below targets 1.3240/1.3175 (10- day MA).The major support is at 1.3192 (10 day-MA)
USD/CHF: The Swiss franc gained, as the greenback weakened on rising speculation that the Fed will not hike rates in September. The dollar trades 0.1 percent lower at 0.9786, within the range of 0.9738, it’s lowest since August 26. Data released earlier showed Switzerland’s consumer price index for August stood at -0.1 percent in line with estimates. Any break below 55- day EMA will take the pair to next level till 0.9710(daily Kijun-Sen)/0.9635. On the higher side, any break above 0.9835 will drag it till 0.9880/0.9960. The short-term weakness can be seen only below 0.9630.
AUD/USD: The Australian dollar rallied, after data on the economy’s government spending and current account deficit indicated to strong economic growth in the second quarter. Australia’s Q2 Current account came in at -$15.5bn versus -20bn expected, while government consumption stood 1.9 percent up at $75.96 bln. Moreover, the Reserve Bank of Australia left the cash rate unchanged at a record low of 1.5 percent, as expected. The Aussie trades 0.7 percent higher at 0.7635 after rising as high as 0.7653 earlier in the session. On the higher side any break above 0.7660 (61.8% retracement of 0.77597 and 0.7490) will take the pair till 0.7700/0.7760. The major support is around 0.7580 and break below will drag it till 0.7515/0.7490.
NZD/USD: The New Zealand dollar gained on the largely on the back of upbeat domestic data and broad-based weakness in the greenback. New Zealand's wholesale sales in the second quarter rose 1.7 percent q/q and 4.0 y/y, while August QV residential property price index increased 14.6 percent y/y, 47.8 percent above previous market high of 2007. The Kiwi trades 0.5 percent higher at 0.7344, hovering towards a peak of 0.7380, its highest since August 26. Markets now await NZ dairy auction and US data due later for further momentum on the major. Immediate resistance is located at 0.7360, break above targets 0.7400. On the downside, support is seen at 0.7292 (5-DMA), break below could drag it till 0.7280.
Equities Recap
European shares gained marginally, hovering near 3-months high as rise in crude oil prices boosted commodities-related stocks.
The pan-European STOXX 600 index added 0.09 percent at 350.94 points, while the FTSEurofirst 300 index edged up 0.05 percent at 1,380.72 points.
Britain's FTSE 100 trades 0.15 percent down at 6,869.23 points, while mid-cap FTSE 250 fell 0.18 percent at 18,059.19 points.
Germany's DAX rose 0.37 percent at 10,711.26 points; France's CAC 40 trades 0.23 percent higher at 4,551.63 points.
MSCI's broadest index of Asia-Pacific shares outside Japan extended gains to 0.6 percent.
Tokyo's Nikkei rose 0.26 pct at 17,081.98, Australia's S&P/ASX 200 index declined 0.37 pct at 5,409.60 points and South Korea's KOSPI advanced 0.3 percent at 2,066.53 points.
Shanghai composite index added 0.6 pct at 3,090.71 points, CSI300 index gained 0.7 pct at 3,342.63 points and Hong Kong's Hang Seng index climbed 0.6 pct at 23,787.68 points.
Commodities Recap
Crude oil prices declined, falling towards $47 a barrel mark, as top producers failed to take imminent action to restrain supply glut. Global benchmark Brent crude oil was 1.5 percent down at $47.32 a barrel by 1006 GMT, pulling further away from the previous session's 1-week high. U.S. West Texas Intermediate crude oil was at $44.88, down by 0.5 percent.
Gold prices extended gains, as the dollar weakened on rising expectations that the Federal Reserve will not hike rates as early as September, however, the gains in the metal were capped by stronger equity markets. Spot gold rose 0.3 percent at $1,331.52 per ounce by 1011 GMT, its highest since August 26. U.S. gold futures were up 0.4 percent at $1,331.40.
Treasuries Recap
The US Treasuries held relatively steady during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 1.60 percent mark, the yield on 5-year note remained steady at 1.190 percent and the yield on short-term 2-year note stood flat at 0.794 percent.
The UK gilts gained after reading lower-than-expected August retail sales, which registered the weakest growth since April. The yield on the benchmark 10-year gilts fell 3-1/2 basis points to 0.686 percent, the super-long 40-year bond yield dipped 4 basis points to 1.50 percent and the yield on short-term 2-year bond slid 2-1/2 basis points to 0.112 percent.
The Eurozone periphery bonds gained after recent data showed that the economic growth slowed in the second quarter of 2016, which increased possibilities of a further monetary policy easing. The French 10-year bonds yield fell 3 basis points to 0.148 percent, Irish 10-year bonds yield dipped 2-1/2 basis points to 0.395 percent, Italian equivalent inched 3-1/2 basis points lower to 1.119 percent, Netherlands 10-year bonds yield slid 2 basis points to 0.035 percent, Portuguese equivalents ticked 3 basis points lower to 3.022 percent, Spanish 10-year bonds yield tumbled 4-1/2 basis points to 0.961 percent.
The German bunds strengthened Tuesday as investors remained cautious ahead of the ECB monetary policy meeting, where there is a chance of another small deposit rate cut. The yield on the benchmark 10-year bond fell 2 basis points to -0.065 percent, the yield on long-term 30-year note also tumbled 2 basis points to 0.505 percent and the yield on short-term 2-year bond slid 1/2 basis point to -0.643 percent.
The Japanese government bond yields rose as investors continue to speculate that the Bank of Japan will try something new in its two-day monetary policy meeting scheduled to be held during September 20-21. On the other hand, the 30-year treasury yields dipped following solid demand for the long-dated securities. The benchmark 10-year bond yield rose 1 basis point to -0.012 percent, the super-long 30-year JGB yield fell 1 basis point to 0.516 percent and the short-term 2-year JGB yield increased 1/2 basis point to -0.183 percent.
The Australian government bonds continued to trade lower after the Reserve Bank of Australia in its September monetary policy meeting maintained its official cash rate at a record low of 1.50 percent, widely in line with expectations after having lowered it by 25 basis points in August. The yield on the benchmark 10-year Treasury note rose 1 basis point to 1.956 percent and the yield on short-term 2-year bounced 1-1/2 basis points to 1.518 percent.
The New Zealand government bonds slumped after data showed that the country’s housing prices rose at the fastest pace in ten months. The yield on the benchmark 10-year bond rose 2-1/2 basis points to 2.335 percent, the yield on 7-year note also jumped 2-1/2 basis points to 2.040 percent and the yield on 5-year note climbed 1 basis point to 1.905 percent.
