Market Roundup
- USD/JPY steels limelight from Sterling: +2.3% above Friday 99.99 low
- EUR/JPY mirror image as EUR treads water vs USD
- Abe Upper House win and talk of stimulus underpins JPY spot and cross
- GBP/USD -0.5%, USD/JPY +1.67%, EUR/USD -0.15%, AUD/USD -0.2%
- DXY +0.35%, DAX +1.35%, Brent -1.07%, Iron +1.3%, Nikkei +3.98%
- BoE considers curb on property funds – Telegraph
- SNB sight deposits rise again latest week but slowing vs previous week
- Norway Jun CPI stronger than expected: NOK rallies then retraces on oil fall
- Japan ruling LDP-Komeito coalition left with 2/3 majority after Upper Hse poll
- PM Abe – Must do what’s needed to beat deflation
- Abe to create new-powerful line-up in cabinet to promote econ policies
- Japan May core machinery orders -1.4% m/m, -11.7% y/y, +2.6%, -8.7% eyed
- SNB’s Jordan – CHF significantly o/v vs EUR, not tgt particular lvl – Le M.Dimanche
- China June CPI -0.1% m/m, +1.9% y/y, -0.3% and +1.8% eyed
Economic Data Ahead
- (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp is likely to report that housing starts for June increased at a seasonally adjusted annualized rate of 192,000 units, compared with 188,570 in May.
- (1000 ET/1400 GMT) The Fed releases its labor market conditions index for the month of June. The index came in at -4.8 in the prior month.
- (1901 ET/2301 GMT) The British Retail Consortium publishes Retail Sales Monitor for the month of June. The indicator stood at 0.5 percent in the previous month.
Key Events Ahead
- (1000 ET/1400 GMT) Kansas City Fed President Esther George speaks on the U.S. economy before the Mid-America Labor Management Conference, in Lake Ozark, Missouri.
- (1145 ET/1545 GMT) FedTrade op 30-yr Fannie Mae/Freddie Mac max $2.125 bln.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.3 percent higher at 96.55, having touched a 4-month high of 96.79 earlier in the session.
EUR/USD: The euro was flat amid subdued trade in absence of significant economic releases from the Eurozone. Investors now price in for an interest rates hike by the Federal Reserve before the year end of the, following Fridays’ strong U.S. jobs report, which eased concerns over the strength of the U.S. economy. Markets now await Fed’s Labor Market Conditions Index and Kansas City Fed President E. George speech for further cues on U.S. economy and monetary policy outlook. The major trades at 1.1054, having touched an early low of 1.1015. Immediate support is seen at 1.1000 level, while resistance is located at 1.1092 (10-DMA).
USD/JPY: The greenback rose above the 102 handle after Japanese Prime Minister Abe confirmed announcement of fresh stimulus on July 12. The major trades 1.8 percent higher at 102.40, strengthened by risk-on rally across the equity market, after U.S. non- farm payroll report provided some respite for the dollar bulls. The pair continues to be driven by risk sentiment surrounding equity markets. Markets attention will remain on Kansas City Fed President E. George speech for insight on further interest rate hikes. Immediate resistance is located at 102.80, break above targets 103.00/103.39. On the lower side minor support is around 100 and any break below will drag it till 98.80/98.
GBP/USD: Sterling nears $1.3000 level, hovering away from last week's 31-year low after UK conservative party said Theresa May could be the only remaining candidate to be PM . Earlier the major weakened after three surveys released showed that British consumer spending dropped in June, as the business outlook softened by the most in four years and economic activity slowed in London. Markets will closely watch British Retail Consortium's Retail Sales Monitor for further momentum. Sterling rose 0.3 percent to 1.2978, hovering away froma low of 1.2789 touched last week. Immediate support is located at 1.2800 break below could take the pair till 1.2790/1.2760. On the higher side, resistance is around 1.3047 and any break above targets 1.3126/ 1.3200. Against the euro, the pound trades at 0.5 percent lower at 85.74 pence.
USD/CHF: The Swiss franc extended losses as the greenback gained across the broad. The dollar trades 0.1 percent higher at 0.9827, having touched a 1-month high of 0.9865 on Friday, following upbeat U.S. employment report. On the higher side, major resistance is around 0.9865 and any indicative break above 0.9865 will take the pair till 0.9900/0.9960 in the short term. Any short term weakness can be seen only below 0.9705 (20 DMA) and any violation below targets 0.9630/0.9580/0.9520.
AUD/USD: The Australian dollar declined on the back of falling oil prices, despite fading political uncertainty in Australia. The Aussie dropped to a session low of 0.7533, however, it recovered to trade flat at 0.7561. The major rose to a high of 0.7575, but it failed to extended gains after oil prices fell below the $46 a barrel mark. Markets now await U.S. labor market condition index and Fed official speech ahead of National Australia Bank's business confidence index. Immediate resistance is located at 0.7575 (Session High), break above targets 0.7600. On the lower side, support is seen at 0.7517 (5-DMA), break below could drag the pair lower 0.7500 handle.
NZD/USD: The New Zealand dollar reversed most of its previous session gains after oil prices tumbled. The Kiwi trades 0.6 percent lower at 0.7249, hovering just below the 0.7300 handle. Investors continue to track broader market sentiment, ahead of Fed official George's speech. Immediate support is located at 0.7211 (5-DMA), break below could take the pair lower 0.7200 level. On the higher side, resistance is located at 0.7306 (Previous Session High).
Equities Recap
European shares rose after upbeat U.S. jobs data gave clear signs that the U.S. economy had regained momentum.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 1.9 percent to a 1-month high.
The pan-European FTSEurofirst 300 index rose 0.6 percent, while STOXX 600 index added 0.7 percent. Germany's DAX gained 1.4 pct and France's CAC rose 0.9 pct.
Britain's FTSE 100 gains 0.6 percent to a 11-month high, while Britain's mid-cap FTSE 250 advanced 1.1 percent.
Tokyo's Nikkei gained 3.98 pct at 15,708.82, Australia's S&P/ASX 200 index rose 1.89 pct at 5,329.60 points and South Korea's KOSPI 200 added 1.30 pct.
Shanghai composite index added 0.2 pct at 2,994.92 points, while CSI300 index climbed 0.3 pct at 3,203.33 points. Hong Kong's Hang Seng index soar 1.5 pct at 20,880.50 points.
Commodities Recap
Oil declined below $46 per barrel mark as investors wary over signs that U.S. shale drillers have decided to lower prices. Brent crude was trading at $46.19 per barrel at 1007GMT, having touched a low of $45.88 earlier in the session. U.S. West Texas Intermediate crude was down 46 cents at $44.95 a barrel.
Gold edged down as the dollar strengthened and equity markets rallied following upbeat U.S. jobs data last week. Spot gold was trading 0.5 percent lower at $1,358.99 an ounce at 1011 GMT, having hit a low of $1,335.33 an ounce following better-than-expected U.S. jobs data on Friday. U.S. gold was up 0.4 percent at $1,363.90 an ounce, after earlier hitting a high of $1,376.50.
Treasuries Recap
The US Treasuries plunged following the June employment report that posted the largest non-farm payrolls increase in the past eight months. The yield on the benchmark 10-year Treasury note rose 2 basis points to 1.386 percent and the yield on short-term 2-year note also jumped 2 basis points to 0.633 percent.
The Eurozone periphery bonds slumped as investors expect further policy easing from the European Central Bank (ECB) in its upcoming policy meeting, which trigged a worldwide selloff in lower-rated debt and a flight to haven investments such as German bunds. The 10-year Irish 10-year bonds yield rose 1 basis point to 0.499 percent, Italian sovereign bond inched higher 2-1/2 basis points to 1.210 percent, Portuguese 10-year bonds yield bounced 5-1/2 basis points to 3.106 percent, Spanish 10-year bonds yield climbed 2-1/2 basis points to 1.166 percent.
The UK gilts strengthened as investors were expecting a rate cut from the Bank of England in its Thursday’s monetary policy meet. The yield on the benchmark 10-year gilts fell nearly 2 basis points to 0.717 percent, the yield on super-long 40-year bonds dipped 1-1/2 basis points to 1.386 percent and the yield on short-term 3-year bonds slid 1 basis point to 0.203 percent.
The German bunds rallied on expectations that the ECB may be forced to ramp up its liquidity injections if the post-Brexit blow back accelerates. The yield on the benchmark 10-year bond fell more than 1 basis point to -0.197 percent, yield on super-long 30-year bonds tumbled more than 2 basis points to 0.338 percent and the yield on short-term 2-year note also dipped 2 basis points to -0.703 percent.
The Japanese government bonds traded modestly lower after Nikkei registered its biggest daily gain in three months, following a clear win by the government in upper house elections. The yield on the benchmark 10-year bonds rose 1/2 basis points to -0.273, short-term 2-year JGB yield rose nearly 1 basis point to -0.345 percent, super-long 40-year bonds rose ½ basis points to 0.121 percent and the yield on 20-year JGB also bounced nearly 1 basis point to 0.056 percent.
The Australian government bonds traded lower as data indicating a strengthening US economy offered a respite to weeks of market turmoil following the UK’s vote to leave the EU. The yield on the benchmark 10-year Treasury note rose nearly 3 basis points to 1.912 percent and the yield on short-term 2-year note also jumped 1-1/2 basis points to 1.612 percent.
