- PBOC cuts bank RRRs 50 bps, also cuts rates.
- USD/JPY up from Monday's 116.15 7 month low to 120.40.
- EUR/USD falls to 1.1456 from 7-month peak at 1.1715 Monday.
- GBP recovers, but investors cool BoE rate hike expectations.
- EUR/GBP traded to 0.7298 from a 0.7421 peak Monday.
- DAX up 1.9% to 9,976 high Tuesday. 9,338 was Monday's low.
- SSEC closed at lowest levels since Dec 2014, panic selling.
- Germany August IFO business climate 108.3 vs previous 108.0 . 107.7 expected.
- Germany August IFO current conditions 114.8 vs previous 113.9. 113.9 expected.
- Germany August IFO expectations 102.2 vs previous 102.3 revised. 102.0 expected.
- Japan Fin min Aso- Yen rises 'rough', undesirable for economy.
- Japan Econ min Amari- Up to BOJ to decide if to ease further.
- Switzerland Q2 Non-farm payrolls 4.244mln vs previous 4.225mln.
- Norway oil forum cut outlook for 2016 investments.
- (0900 ET/1300 GMT) US June CaseShiller 20, +0.1% m/m, +5.1% y/y sa eyed; last -0.2%, +4.9%.
- (0900 ET/1300 GMT) US June monthly home prices; last +0.4% m/m, +5.7% y/y, index 222.80.
- (0945 ET/1345 GMT) US August Markit PMI services flash, 56.0 eyed.
- (1000 ET/1400 GMT) US August consumer confidence index, 93.4 eyed; last 90.9.
- (1000 ET/1400 GMT) US July new home sales, 510k units AR, +5.8% m/m eyed; last 480k, -6.8%.
- (1000 ET/1400 GMT) US August Rich Fed manufacturing shipments/services/composite indices; last 16/32/13.
Key Events Ahead
- (1000 ET/1400 GMT) CBO releases updated budget and economic outlooks.
- (1000 ET/1400 GMT) NAR Commercial Real Estate Report/Forecast.
- (1145 ET/1545 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $2.025 bn).
FX Recap
EUR/USD is supported around 1.1500 levels and currently trading at 1.1504 levels. It has made intraday high at 1.1604 and low at 1.1456 levels. Risk assets rally, EUR drops, equities across Europe and US index futures and oil prices extended gains as the PBOC's move to cut rates. EUR/USD weakened to a fresh session low of 1.1456, below May 2015 highs. PBoC move could calm market nerves and sentiment may turn positive on Wall Street later today. Pair keeps losses as the euro was unimpressed by a set of upbeat German macro data released in the European morning. Economic growth in Germany was 0.4% in the second quarter, following the rise of 0.3% booked in the March quarter, confirming estimates. While the headline IFO Business Climate Index rose to 108.3 during the eighth month of the year, above the 108 booked in July. Moreover, the US dollar kept its recovery mode intact from Monday's heavy losses as risk-on sentiment seems to have resurfaced, diminishing the European currency's safe-haven appeal. Later in the session, services PMI, consumer confidence and new home sales from the US are due, but these figures are not expected to cause any significant moves as the whole focus now remains on the global risk aversion situation. Initial support is seen around at 1.1308 and resistance at 1.1714 levels.
USD/JPY is supported around 120.00 levels and posted a high of 120.39 levels. It has made intraday low at 118.25 and currently trading at 119.90 levels. PBOC move to cut rates calmed China worries which added to the prevailing risk-on sentiment. Greenback received fresh impetus from the Chinese central bank's latest effort to boost its dwindling economy. US dollar was unstoppable and jolted higher versus its Japanese counterpart, pushing USD/JPY nearly 1.5% higher at 120.20. The dollar was seen rising on Tuesday as traders were taking some profits from yesterday's waterfall and the global situation has calmed somewhat. The safety which is often associated with the Japanese yen was in low demand on Tuesday, prompting a partial rebound in the US dollar after the currency fell more than 2% on Monday. The US dollar rallied against the Japanese yen on Tuesday morning in Tokyo, signalling that investors have a renewed taste for risk after a sharp downturn in markets on Monday. Later in the session, services PMI, consumer confidence and new home sales are due, but these figures are not expected to cause any significant moves as the whole focus now remains on the global risk aversion situation. Initial resistance is seen at 123.20 and support is seen at 118.42 levels.
GBP/USD is supported above $1.5750 levels. It made an intraday high at 1.5819 and low at 1.5747 levels. Pair is currently trading at 1.5795 levels. The pair is advancing for the third consecutive week so far, propped up by expectations of a BoE rate hike sooner than market expectations, while on the other hand, investors continue to push back the timing of a rate hike by the Federal Reserve. Ahead in the session, US New Home Sales, Markit's Services PMI and Consumer Confidence will dictate the USD's dynamics, while the most relevant release in the UK economy will come on Thursday with the flash Q2 GDP figures. Sterling is sensitive to the events in China, as it impacts commodity prices and could potentially hurt the UK's mining and energy sector. Initial support is seen at 1.5413 and resistance is seen around 1.5845 levels.
NZDUSD is supported above 0.6500 levels and trading at 0.6554 levels and made intraday low at 0.6440 and high at 0.6561 levels. The so-called kiwi crumbled further on Tuesday after 'black' Monday left the commodity-based currency trading at its weakest in six years, when markets panicked over the deteriorating situation in China, New Zealand's biggest export market. New Zealand's economy has been shaken by China over the last two years as weaker Chinese demand for dairy products has sent global dairy prices into free-fall, making dairy production - New Zealand's biggest commodity export earner - unprofitable for many farmers. Initial support is seen at 0.6435 and resistance at 0.6789 levels.
AUD/USD is supported below 0.7300 levels and trading at 0.7244 levels. It has made intraday high at 0.7250 levels and low at 0.7133 levels. The commodity-based Aussie rebounded from a 2009-low on Tuesday, with gains in oil prices and a return of risk sentiment helping to support the currency. Brent crude futures rose 0.68% to $42.73 per barrel on Tuesday as oil markets opened for the day, while WTI futures gained 0.60% to $38.29 per barrel. However, equity markets remained in the doldrums on Tuesday, with the benchmark Australian S&P/ASX200 sliding 0.37% to 4,982.70 points. Initial support is seen at 0.7110 and resistance at 0.7385 levels.
USDCNY is supported above 6.0000 levels and trading around 6.4115 levels. Pair made intraday high at 6.4170 and low at 6.3938 levels. The People's Bank of China (PBoC), the country's central bank, reduced benchmark interest rates by 0.25% on Tuesday, reacting to massive turbulence in local Chinese as well as global stock markets. The PBoC reduced the one-year lending rate to 4.6%, and the one-year deposit rate to 1.75%. The central bank also lowered the Reserve Requirement Ratio (RRR) by 0.5%. Markets across the world reacted positively, with stock markets climbing higher and pushing the main European indices up over 3%. Initial resistance is seen around 6.4377 and support at 6.3816 levels.
Equity Recap
European shares, oil and the dollar extended gains in midsession trade on Tuesday as a market rebound gathered pace after PBoC cut interest rates and RRR. The pan-European FTSEurofirst 300 index rose 4.2 percent, recouping the bulk of the 5 percent-plus it lost the previous day.
China, was however smashed again. China's main equity markets saw another huge 8 percent drop overnight and Japan's Nikkei had slumped 4 percent, but the rest of Asia had been calmer overall.
The MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.1 percent after an initial dip to three-year lows, paring about a quarter of Monday's losses. Japan's Nikkei, which saw extremely volatile trading, ended 4 percent down.
Commodity Recap
Oil bounced back from heavy losses on Tuesday but kept near 6-1/2-year lows. China interest rates cut barely moved prices, oil held on to gains. U.S. crude, was up $1.15 at $39.39 a barrel by 1100 GMT, while Brent was up $1.30 at $43.99.
Spot gold was down 0.4 percent at $1,150.40 an ounce at 0954 GMT. U.S. gold futures for December delivery were down $3.70 an ounce at $1,149.90.
Treasuries Recap
German Bund and other euro zone government bond yields rose along with U.S.Ts as the previous day's rush for safety eased. Bund futures hit day's low at 154.38, down more than a point on day after China cuts rates, German 10-year Bund yields up 9 bps on day at 0.67 percent.
U.S. 10-year bond yields rise to day's high of 2.08 percent, UK 10-year gilt yield hits session high of 1.887 pct JGB's saw limited positive impact from continued plunge in Chinese and Japanese stocks as some pension funds had to sell JGBs across curve to rebalance their asset allocation. JGB prices ended the day lower, sending yields up 1.5bp to 2bp in the 7-yr and longer zone. Today, the 2-yr and 10-yr gaps were mostly unchanged, while the 20-yr and 30-yr gaps narrowed due to the smaller rise in swap rates.
New Zealand government bonds eased, nudging yields 2 basis points higher at the long end of the curve.
Australian government bond futures retreated from four-month highs, with the three-year bond contract off 5 ticks at 98.240. The 10-year contract was down 10 ticks to 97.3750, leading to a bearish steepening of the curve.
