Market Roundup
- China cuts rates, reserve ratio after stocks plummet again.
- Reversal Tuesday in FX: USD, EM recoup some Monday losses, but Latin America rebound fizzles.
- Wall St recovers, but biggest rally of the year fades in strength by NY afternoon.
- China Premier Li says no basis for continued yuan depreciation.
- U.S. new home sales rise but just miss forecast, consumer confidence beats with 7-month high.
- Bridgewater’s Dalio: Next big Fed move will be to ease, not tighten.
- Swiss parliament panel grills SNB’s Jordan on negative rates impact.
- South Africa’s economy contracts, risk of recession grows.
Looking Ahead – Economic Data (GMT)
- 22:45 New Zealand July Trade Balance y/y -2.66b expected, -2.85b prior
- 22:45 New Zealand July Trade Balance m/m -0.750b expected, -0.60b prior
Looking Ahead – Events, Other Releases (GMT)
- Japan Monthly Govt Economic Report
Currency Summaries
EUR/USD is likely to find support at 1.1390 levels and currently trading at 1.1517 levels. The pair has made session high at 1.1533 and hit lows at 1.1386 levels. The dollar jumped against euro on Tuesday, to recover some lost ground from yesterday’s losses as riskier assets got a boost from an interest rate cut by the Chinese central bank. The People’s Bank of China (PBOC) said it was cutting the one-year benchmark bank lending rate by 25 basis points to 4.6 percent, cutting one-year benchmark deposit rates by the same amount, and reducing reserve requirements by 50 basis points to 18 percent for most big banks. The euro slipped to $1.1392 against dollar in the late New York trading hours, the single currency had set a seven-month peak of $1.1715 on Monday, when it had shot up from a low of at $1.1370, as dollar came under pressure against major currencies such as the euro and the yen as fears about Chinese growth and a huge selloff in global stock markets had thrown a doubt whether the Fed will raise interest rates this year. To the upside, immediate resistance can be seen at 1.1582. To the downside, immediate support level is located at 1.1460 levels.
GBP/USD is supported in the range of 1.5670 levels and currently trading at 1.5685 levels. It reached session high at 1.5713 and dropped to session low at 1.5680 levels. Sterling slipped from a one-month high against greenback on Tuesday, it underperformed the dollar as investors grew unsure about the timing of an expected rate rise by the Bank of England. Fears of a slowdown has intensified in recent days after China devalued its currency and data pointed to further signs of weakness. These factors have deepened a sell-off in Chinese stocks and triggered volatility in global stock markets. Against the dollar, sterling was flat at $1.5775 while against a trade-weighted basket it was up 0.6 percent at 93.3. Meanwhile, The US Conference Board’s Consumer Confidence Index rose higher to 101.5 in August, against forecast 93.4, it was the highest reading since January. New Home Sales printed slightly lower figures at 507k against 510k. To the upside, immediate resistance can be seen at 1.5730. To the downside, immediate support level is located at 1.5670 levels.
USD/JPY is supported around 118.00 levels and currently trading at 118.95 levels. It has hit session high at 120.01and made session lows at 118.14 levels. The Japanese Yen declined against dollar, on Tuesday, as Investors partially removed there investments from safe heaven currencies ,as the US dollar started to gain strength in the back drop of rate cut by China’s central bank. The dollar rose more than 1 percent against the yen and pulled away from seven-month lows as investor risk aversion showed signs of easing, but the outlook remained clouded by worries about slowing Chinese growth. The Yen was trading around 120.20 levels in the early New York session, it slipped to hit session lows at 118.14 levels by shedding almost 200pips against the greenback before recovering some lost ground to trade around 119.10 levels. To the upside, immediate resistance can be seen at 119.80. To the downside, immediate support level is located at 118.47 levels.
USD/CAD is supported at 1.3300nlevels and is trading at 1.3340 levels. It has made session high at 1.3352 and lows at 1.3196 levels. The Canadian dollar slipped against its U.S. counterpart on Tuesday, as the greenback rallied back from Monday’s lows following an interest rate cut by China’s central bank. The 25 basis point interest rate cut for the one-year benchmark lending rate by the People’s Bank of China helped global markets rebound, with the price of crude, a key Canadian export, bouncing from hefty losses on Monday and the U.S. dollar jumping some 1 percent. Investors on Monday who fretted over out the global impact of slower Chinese growth sparked panic selling around the world. The loonie traded between C$1.3184 and C$1.3330 in the session US session against the US dollar. To the upside, immediate resistance can be seen at 1.3290. To the downside, immediate support level is located at 1.3350 levels.
Equities Recap
European stock markets edged higher on Tuesday, after China’s central bank swung into action by cutting the interest rate.
UK’s benchmark FTSE 100 closed up by 3.2 percent, the pan-European FTSEurofirst 300 ended the day up by 5.3 percent, Germany’s Dax ended up by 5.3 percent, France’s CAC finished the day up by 4.4 percent.
U.S. stocks slipped lower in the late hours of trading by erasing the earlier gains on Tuesday, dashing the recovery sentiments.
Dow Jones closed down by 1.30 percent, S&P 500 ended down by 1.32 percent, Nasdaq finished the day down by 0.39 percent.
Treasuries Recap
U.S. Treasuries prices sagged on Tuesday as China’s lowering of interest rates and required bank reserves reduced investor anxiety and sparked selling of U.S. government bonds and other safe-haven assets.
The benchmark 10-year yield recorded its sharpest one-day rise in six weeks. It had been on track for its biggest one-day jump in two years but retreated from its session peak as Wall Street swung into the red in late trading.
On the open market, benchmark 10-year Treasuries notes fell 26/32 point in price for a yield of 2.091 percent, up 9 basis points from late Monday, while the 30-year bond shed 2-4/32 points in price with its yield at 2.822 percent, up 10 basis points for its largest one-day jump in six weeks.
Commodities Recap
Gold fell more than 1 percent on Tuesday after an interest rate cut from China helped global markets rebound from the previous day’s rout, with stocks rallying and the dollar also gaining, while palladium sank more than 7 percent to a five-year low.
Spot gold was down 1.3 percent at $1,139.85 an ounce at 13:05 p.m. (1905 GMT), while U.S. gold futures for December delivery settled down 1.3 percent at $1,138.30.
Oil rose as much as 3 percent on Tuesday as oversold conditions brought some buyers back to the market, but a lingering supply glut and worries about the slowing economy in top commodities consumer China kept crude prices near 6-1/2-year lows.
Brent settled up 52 cents at $43.21 a barrel, after hitting $42.23 on Monday, its lowest since March 2009.
U.S. crude ended the session $1.07 higher at $39.31, advancing from $37.75, its lowest since February 2009 set in the previous session.
The material has been provided by InstaForex Company – www.instaforex.com