Market Roundup
• Brexit worries hit pound, cable falls to 31-yr low by 1.3000.
• BoE takes steps to meet Brexit challenge, lowers amount of capital banks must reserve freeing GBP 150billion for lending.
• US factory orders fall -1% vs -0.9 forecast, but rising backlogs hint at stabilization.
• UK property funds suspend trading (M&G, Aviva’s property fund & UK property trust).
• US 30/10-yr bond yields fall to record lows.
• Fed’s Dudley: Brexit and other uncertainties mean Fed can be patient.
• Fed's Williams: Brexit effect as expected, no big deal.
• FBI ending Clinton email probe, will not recommend prosecution.
• Brazil central bank nominees support free-floating exchange rate.
• Prime Minister can trigger formal exit procedure from EU, says UK minister.
• Theresa May leads first round of voting to succeed UK PM Cameron, Liam Fox eliminated.
Looking Ahead – Economic Data (GMT)
• No Significant Data
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1000 levels and currently trading at 1.1068 levels. The pair has made session high at 1.1166 and hit lows at 1.1065 levels. Euro edged lower against US dollar on Tuesday as demand for European currencies faded as currency markets priced in more signs of economic stress stemming from Britain's vote to leave the European Union. Brexit has increased the chances for more policy easing from major central banks to prevent another global downturn, the same force that may thwart the Fed from raising rates this year. Britain’s shock vote on June 23 led to a deep global market sell-off, sending sterling to a 31-year low, with funds pouring into safe-haven gold, other currencies – the dollar, yen and the Swiss franc – and government bonds. Tepid U.S. data added to overall growth worries. Data showed U.S. factory goods fell in May on weak demand for transportation and defense capital goods, but growing order backlogs and lean inventories suggested the worst of the manufacturing downturn was probably over. Manufactured goods declined 1.0 percent after two straight months of increases. May's drop was in line with economists' expectations and followed a 1.8 percent increase in April.
GBP/USD is supported in the range of 1.3000 currently trading at 1.3005 levels. It reached session high at 1.3168 and hit low at 1.3000 levels. Sterling declined 2 percent to hit a 31-year low against the dollar on Tuesday as investors worried about the economic and financial fallout of Britain's vote to leave the European Union. The Sterling, which is constantly declining against US dollar, fell to $1.3000, its lowest since September 1985. That left it 13 percent below its levels before the June 23 referendum. Sterling also fell against the euro to 85.48 pence per euro, its lowest level since late 2013. And against the Bank of England's trade-weighted basket of currencies, sterling fell to its weakest in more than three years. The pound's losses accelerated after Aviva Investors, the fund arm of insurer Aviva , suspended its UK Property Trust with immediate effect. M&G, the fund management arm of insurer Prudential, also suspended trading in its 4.4 billion pound UK property portfolio and feeder fund. Meanwhile, Bank of England Governor Mark Carney only marginally cooled expectations of further aggressive easing of monetary policy to combat the shock to the economy in the months ahead.
USD/CAD is supported at 1.2918 levels and is trading at 1.3001 levels. It has made session high at 1.3005 and lows at 1.2934 levels. The Canadian dollar declined against its U.S. dollar on Tuesday as uncertainty about the resiliency of economic growth in the face of a slower China and falling oil prices weighted on the risk-sensitive loonie. Prices for oil, a major Canadian export, fell on concerns that demand could be dented by slower economic growth. Risk aversion swept through markets as data showing China's manufacturing growth stalled last month coupled with warnings from the Bank of England that the UK's vote to leave the European Union was already having an economic impact. Prices for oil, a major Canadian export, fell on concerns that demand could be dented by slower economic growth. U.S. crude fell $2.14, or 4.3 percent. That was the biggest one-day percentage drop for U.S. crude since Feb. 9. Canada's central bank, is widely expected to hold rates steady next week, as domestic business sentiment remained subdued in the second quarter, weighed by cheaper oil and modest domestic demand.
AUD/USD is supported around 0.7440 levels and currently trading at 0.7457 levels. It hit session high at 0.7488 and made session lows at 0.7452 levels. The Australian dollar initially rose against its U.S. counterpart but declined later in US session as worries about Britain's exit from the European Union pushed Australian dollar lower. Reserve Bank of Australia gave no clear guidance on whether it would ease again, leaving markets wondering if it had switched back to a neutral stance. The market had been looking for the Reserve Bank of Australia (RBA), which kept the cash rate at a record low 1.75 percent, to sound dovish given a more uncertain outlook at home and abroad. Instead, the RBA noted that any effects on the global economy from the UK referendum remained to be seen. The political gridlock at home did not get a mention in the statement. Australia's election on Saturday produced no clear winners even though more than two-thirds of the votes have been counted. It may be days, if not weeks, before an outcome is known.
Equities Recap
European closed mixed on Tuesday, weighed down by losses among mining and financial stocks, while Italian bank Monte dei Paschi di Siena plunged to a record low on worries about its capital strength.
UK's benchmark FTSE 100 closed up 0.5 percent, the pan-European FTSEurofirst 300 ended the day down by 1.47 percent, Germany's DAX ended down by 1.7 percent, France’s CAC finished the day down by 1.7 percent.
Wall Street stocks fell on Tuesday as investors faced continued uncertainty in Europe and tumbling oil prices weighed on energy shares.
Dow Jones closed down by 0.62 percent, S&P 500 ended down by 0.70 percent, Nasdaq finished the day down by 0.83 percent.
Treasuries Recap
Yields on long-term U.S. Treasuries sank to record lows on Tuesday as global investors loaded up on U.S. government debt in hopes it would shield them from threats to the global economy including fallout from Britain’s vote to split from the European Union.
Prices surged for 10-year notes, sending yields lower for the global benchmark reference rate for trillions of dollars of credit on everything from U.S. mortgages to emerging market bonds. Their yields, which move inversely to prices, hit 1.357 percent and 30-year bond yields dropped to 2.131 percent, unprecedented lows for both.
U.S. five and seven-year Treasury yields hit their lowest since June 24 of 0.924 percent and 1.176 percent, respectively. U.S. two-year yields hit 0.550 percent, their lowest since June 27.
Commodities Recap
Gold prices rose for a fifth straight session and traded close to a two-year high above $1,350, as weak China data and ongoing uncertainty following Britain's vote to leave the European Union triggered a fresh wave of demand for the safe-haven metal.
Spot gold was up 0.4 percent at $1,355.51 an ounce by 2:11 p.m. EDT (1811 GMT). U.S. gold futures for August delivery settled up about 1.5 percent at $1,358.70 an ounce.
Oil prices tumbled nearly 5 percent on Tuesday as investors worried that Britain's exit from the European Union would slow the global economy, making it unlikely energy demand will grow enough to absorb a supply glut.
Brent futures settled down $2.14, or 4.3 percent, at $47.96 a barrel while U.S. crude fell $2.39, or 4.9 percent, to end at $46.60.
The material has been provided by InstaForex Company – www.instaforex.com