Market Roundup
- GBP/USD +0.7%, USD/JPY +0.3%, EUR/USD +0.4%, AUD/USD +1.0%
- DXY -0.4%, DAX +2.15%, Brent +1.7%, Iron +4.36%
- UK Finmin, Osborne-absolutely going to have to cut spending/raise taxes
- Osborne not yet backing any candidate in Tory leadership campaign
- UK Jun CBI Distributive Trades +4 vs 7 previous
- Fitch-UK vote could have l/t implications for EU’s creditworthiness
- Preparing for Brexit, Britain may see new PM by early September
- UK’s Osborne rules himself out of race to succeed PM Cameron – Times
- Econ Advisor Hamada: Japan has right to smooth extreme FX moves
- Japan govt, BOJ meeting on market developments Wed (sources)
- Japan PM Abe – eyeing FX-stock markets closely, uncertainty remains
- Abe-Brexit effect on economy longer-term
- BoJ Gov Kuroda – Ready to assist proper market functioning-Rtrs/Nikkei
- ChiefCabSec Suga – No decision yet on size of economic stimulus
- Market sees two rounds of BoJ easing within a year – Nikkei
- Nikkei poll – Japanese firms see weaker European economy post-Brexit
- Australian consumers keep their nerve in face of Brexit turmoil
Economic Data Preview
- (0830 ET/1230 GMT) The Commerce Department releases the third estimate for first-quarter gross domestic product, which is likely to show that the economy grew at a 1 percent annualized rate compared to previously reported 0.8 percent pace.
- (0900 ET/1300 GMT) The S&P/Case Shiller is expected to report that U.S. composite home price index of 20 metropolitan areas remained steady at 5.4 percent in April.
- (0900 ET/1300 GMT) Mexico's statistics agency is likely to report that jobless rate rose 3.94 percent in May, compared with 3.8 percent in the previous month.
- (1000 ET/1400 GMT) The Conference Board is likely to show that U.S. consumer confidence rose to 93.3 in June from 92.6 in May.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae max $1.325 bln.
- (1200 ET/1600 GMT) SNB Governing Board member Fritz Zurbrugg's Speech.
- (1900 ET/2300 GMT) Fed Board Governor Jerome Powell speaks on “Recent Economic Developments, Monetary Policy Considerations, and Longer-term Prospects” before the Chicago Council on Global Affairs: Food, Fuel and Finance Series.
FX Beat
USD: The dollar index, against a basket of currencies declined to 96.00, having touched a low of 95.77 earlier in the session.
EUR/USD: The euro gained as improving global risk-appetite extended support to global risk-on rally. The major rose as high as 1.1111, but struggled to sustain gains above 1.1100 level. It last traded at 1.1072, 0.4 percent up. Markets attention remains over developments surrounding the referendum as the European parliament has called for a special session on Brexit and the European Council is holding a two-day meeting on Britain's vote to end its membership with the EU. Investors will also closely watch U.S final GDP figures and the Conference Board's Consumer Confidence Index for further momentum. Any break above 1.1122 (90 H EMA) will take the pair to next level till 1.1188 /1.1235 (61.8% retracement of 1.14278 and 1.109119). On the lower side any break below 1.0972 (Previous Session Low) will drag it down till 1.0900 (161.8% retracement of 1.14155 and 1.0971/1.0834 (61.8% retracement of 1.10852 and 1.09119).
USD/JPY: The Japanese yen declined against the dollar as risk aversion slightly eased. The greenback trades 0.4 percent higher at 102.33, sustaining gains above the 102 level. However, the upside was capped as the ongoing weakness in the U.S dollar against its major peers weighed the major lower from higher levels. The short term trend is slightly bearish as long as resistance 103.50 holds. The minor resistance is around 103.50 and any break above confirms minor trend reversal, a jump till 105/105.80 is possible. On the lower side minor support is around 101.40 and any break below 101.40 will drag the pair till 100/98.80/98.
GBP/USD: Sterling gained some ground against the dollar and euro after Brexit referendum triggered the currency's biggest 11-percent fall, to a 31-year low. However, the recovery is expected to remain capped as the economic implication of Brexit might continue to add uncertainty and negative sentiment surrounding the major. Sterling trades 0.9 percent higher at 1.3340, hovering away from a low of 1.3119, struck in the previous session. Against the euro, the pound trades 0.2 percent higher at 83.15 pence. The major will be driven by developments surrounding the referendum, as the UK PM Cameron will now meet EU leaders in a two-day European Council meeting in Brussels. On the higher side, major intraday resistance is around 1.3326 (7 4H EMA) and any break above 1.3260 will take the pair till 1.34455/1.3480/1.365. On the lower side, any break below 1.3220 will drag it till 1.3110/1.3020.
USD/CHF: The Swiss franc extended losses, as risk appetite returned to the market. The greenback rose to 0.9786, hovering towards a high of 0.9819 touched in the previous session. The major faces strong resistance around 0.9830 and any break above targets 0.9870/0.9900. On the lower side, major intraday support around 0.974 and any break below targets 0.9680/0.9630/0.9580. Overall bullish invalidation is only below 0.9500. Any break below this level will drag it down till 0.9445/0.9370.
AUD/USD: The Australian dollar rose as improving risk environment calmed Brexit concerns. The Aussie gained 0.9 percent to 0.7395, hovering away from a low of 0.7303 touched last week. The major was also strengthened by a solid rebound in oil prices, which rose above $48 a barrel after following a 2-day slide. On the higher side, resistance is located at 0.7450 and any break above major resistance will take the pair till 0.7510/0.7580. The major support is around 0.7320 and break below will drag it till 0.7280/0.7250.
NZD/USD: The New Zealand dollar reversed most of previous session losses as markets sentiment surrounding riskier assets improved. The Kiwi rose 0.9 percent at 0.7059, having gone as high as 0.7085 earlier in the session. Markets sentiment on developments surrounding Brexit and global equities will continue to drive the major's price-action. Immediate resistance is located 0.7093 (10-DMA), break above targets 0.7100 level. On the lower side, support is seen at 0.6980 (Previous Session Low).
Equities Recap
European shares rebounded higher as risk appetite was beginning to resurface, amid broad based USD weakness.
World stocks rose for the first time in three days, while MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.5 percent.
Europe's FTSEurofirst 300 advanced 2.4 percent in early trading having plunged over 10 percent since Friday, Germany's DAX gained 2 pct, France's CAC climbed 2.7 pct and Britain's FTSE 100 rose 2.4 percent.
Tokyo's Nikkei nudged up 0.09 pct at 15,323.14, Australia's S&P/ASX 200 index dropped 0.50 pct at 5,111.60 points and South Korea's Kospi 200 added 0.52 pct.
Shanghai composite index gained 0.6 pct at 2,912.56 points, while CSI300 index rose 0.5 pct at 3,136.40 points. HK’S Hang Seng index declined 0.3 pct at 20,172.46 points.
Commodities Recap
Oil prices rose above $48 a barrel as investors took advantage of a two-day slide in crude following Britain's vote to leave the European Union. Brent crude price was 1.9 percent higher at $48.41 per barrel at 1022 GMT, while U.S. West Texas Intermediate futures were 2.3 percent higher, up $1.06 at $47.39 a barrel.
Gold declined 1 percent as buyers cashed in gains from it's biggest 2-day rally, after Britain's vote to quit the European Union last week, triggered financial market turmoil. Spot gold was down 1 percent at $1,309.57 an ounce at 1024 GMT, while U.S. gold futures for August delivery were down $9.20 an ounce at $1,315.50.
Treasuries Recap
The U.S. Treasuries slumped as investors expect modest improvement in the final 1Q16 GDP scheduled to take place on Tuesday at 12:30 GMT. The yield on the benchmark 10-year Treasury note rose 1 basis point to 1.470 percent and the yield on short-term 2-year note climbed 2 basis points to 0.625 percent by 11:10 GMT.
The UK gilt yields recovered as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. The yield on the benchmark 10-year gilts rose more than 5-1/2 basis points to 0.991 percent, yield on super-long 30-year bonds jumped 3 basis points to 1.839 percent and the yield on short-term 2-year note bounced nearly 6 basis points to 0.208 percent by 10:50 GMT.
The German bunds snapped two days rally as investors paused to digest the implications of Britain’s decision last week to leave the European Union. Also, traders cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. The yield on the benchmark 10-year bonds rose more than 2 basis points to -0.080 percent, yield on super-long 30-year bonds jumped more than 4 basis points to 0.339 percent and the yield on short-term 2-year note climbed more than 1/2 basis points to -0.642 percent by 09:40 GMT.
The Japanese government bonds gained on Tuesday, following global debt prices as investors remain uncertain after UK’s decision to leave the European Union threatened to slow growth and keep the Federal Reserve from raising interest rates. Also, rising possibilities for further monetary and quantitative easing from the Bank of Japan boosted demand for fixed income securities. The yield on the benchmark 10-year bonds fell 1-1/2 basis points to -0.205 percent, yield on 15-year bonds dipped 2-1/2 basis points to -0.073 percent, super-long 40-year bonds tumbled more than 3 basis points to 0.090 percent and the yield on 30-year JGB slid 3 basis points to 0.076 percent and 20-year bond yield ticked down 3-1/2 basis points to 0.055 percent by 05:55 GMT.
The New Zealand government bonds closed higher after as two top rating agencies downgraded its sovereign credit score, judging last week's vote to leave the European Union would hurt its economy. The yield on benchmark 10-year bond fell 1 basis point to 2.345 percent, yield on 7-year note also dipped 1 basis point to 2.055 percent and the yield on short-term 2-year note tumbled 1 basis point to 2.015 percent.
The Australian government bonds rallied after S&P announced that it has cut the UK’s sovereign credit rating to AA, from previous AAA. The yield on the benchmark 10-year Treasury note fell more than 6 basis points to 1.995 percent and the yield on short-term 2-year note dipped more than 1 basis point to 1.575 percent by 05:00 GMT.
The material has been provided by InstaForex Company – www.instaforex.com