Market Roundup
- China “fully capable” of stabilizing yuan (PBOC economist Ma Jun).
- Fed’s Dudley: Hopefully Fed can raise rates in near future, says Fed would reexamine policies if a financial or foreign shock lifts US unemployment; not the case now.
- Germany views 3rd Greek bailout package as insufficient.
- Greek bank bailout funds depend on business plan, stress test.
- Greek bailout deal will be get first review in October (EU sources).
- RBA’s Lowe: watching China devaluation closely, could set off chain reaction of events.
- Mexico’s Carsten’s: could act before Fed to anchor inflation expectations, sees limited impact on Mexico from yuan devaluation.
- Moody’s: main drivers of downgrade of Brazil ratings were weak economic growth, increased government spending and a lack of political consensus.
- US JOLTS Job Openings Jun +5.249m, f/c 5.300m, +5.357m-previous.
- Brazil Retail Sales MM* Jun -0.4%, f/c -0.4%, -0.80%-previous, fall for fifth straight month.
- Switzerland to lift sanctions against Iran on Thursday.
Looking Ahead – Economic Data (GMT)
- 22:30 New Zealand Manufacturing PMI* Jul 55.2-previous
- 22:45 New Zealand Food Price Index* Jul 0.5%-previous
- 23:50 Japan Machinery Orders MM* Jun f/c -5.6%, 0.6%-previous
Looking Ahead – Events, Other Releases (GMT)
- No Significant Events
Currency Summaries
EUR/USD is supported above 1.1141 levels and currently trading at 1.1171 levels. The pair has made session high at 1.1213 and hit lows at 1.1142 levels. Euro surged higher against US dollar on Wednesday in the New York session. Euro continued its yesterday’s bullish momentum in the New York session by hitting one month high against US dollar. Dollar fell to its lowest level in about a month against a basket of major currencies, on doubts over whether the U.S. Federal Reserve will raise interest rates in September given China’s devaluation of the yuan. The euro rose against the dollar on worries that China’s actions, and the ensuring market volatility, could prompt the Fed to avoid increasing rates next month. The dollar stands to benefit from the Fed’s first rate increases in nearly a decade since they are expected to drive investment flows into the United States. The European Union moved to keep Greece on a tight rein after its latest bailout, with sources saying the 85 billion euro deal will be reviewed by lenders in October and any discussion of debt relief will only come at a later stage. The bailout agreement reached on Tuesday has given Greece some relief, after months of tough negotiations with its creditors. The bailout, Greece’s third since 2010, must still be adopted by parliament in Athens and approved by euro zone countries. To the upside, immediate resistance can be seen at 1.1200. To the downside, immediate support level is located at 1. 1142 levels.
GBP/USD is supported in the range of 1.5540 levels and currently trading at 1.5614 levels. It reached session high at 1.5661 and dropped to session low at 1.55497 levels. The Sterling inched higher against US dollar on Wednesday, The Sterling recovered all the losses it suffered against the green back in yesterday’s New York session to hit session high at 1.5661 as US liftoff sentiment fell in early American hours. The Cable retreated to 1.5600 by New York session after US equity moves turned flat, earlier in European session data showed that, British wage growth slowed more than expected in June, taking some pressure off the Bank of England to raise interest rates. The data released by the Office for National Statistics showed growth in average weekly earnings in the three months to June slowed to 2.4 percent on the year, from 3.2 percent in the three months to May and well below economists’ forecasts of 2.8 percent. The BoE is closely watching the labour market as it judges when to raise rates for the first time since the start of the financial crisis in rose half a percent to $1.5655 against a dollar which weakened after doubts raised over whether the U.S. Federal Reserve could raise rates as soon as September given China’s move to push down the yuan. To the upside, immediate resistance can be seen at 1.5650. To the downside, immediate support level is located at 1.5580 levels.
USD/JPY is supported at 123.77 levels and currently trading at 124.15 levels. It peaked to hit session high at 124.26 and made session lows at 123.77 levels.US dollar slipped lower against Japanese Yen in Wednesday New York session after uncertainty were raised about Fed’s Rate hike in September due to Currency devaluation by china . The Dollar was broadly weaker against a basket of Major currencies. The Japanese Yen hit its highest level against the greenback in about a week at 123.77 after China’s central bank set its daily mid-point reference at 6.3306, even weaker than Tuesday’s devaluation. The PBOC surprised markets on Tuesday by aggressively lowering its guidance rate, pushing the yuan down nearly 2 percent. The dollar was last down 0.92 percent against the Japanese yen at 124 levels. In the mid New York session dollar rebounded from 123.77 and recovered some losses to trade at 124.21 levels. On the data front, core machinery orders and foreign bonds buying are set to released from Japan in the early Asian hours. To the upside, immediate resistance can be seen at 124.47. To the downside, immediate support level is located at 123.77 levels.
USD/CAD is likely to find support at 1.2860levels and is trading at 1.2997 levels. It has made intraday high at 1.3023 and lows at 1.2950 levels. The Canadian dollar rallied against its U.S. counterpart on Wednesday, buoyed by steady oil prices and a weaker greenback, while Chinese currency moves continued to dominate market focus. The Canadian dollar gained almost 100 pips against green back in the New York session. Crude prices, hit hard on Tuesday, rose after a bullish report by the International Energy Agency (IEA) on rising oil demand outweighed the bearish impact of another batch of disappointing Chinese economic data and further weakening in the country’s currency. Canada is a major oil producer, questions over whether China’s yuan devaluation will derail the U.S. Federal Reserve’s plans to hike interest rates this year, possibly as early as September, helped pushed the U.S. dollar sharply lower against a basket of major currencies. The currency traded between C$1.2952 and C$1.3158 so far on Wednesday. To the upside, immediate resistance can be seen at 1.3020. To the downside, immediate support level is located at 1.2954 levels.
Equities Recap
European stock markets slipped lower on Wednesday, as China devaluated its currency for the second straight day . UK’s benchmark FTSE 100 closed, down by 1.4 percent, the pan-European FTSEurofirst 300 closed, down by 2.7 percent, Germany’s Dax closed, down by 3.1 percent, France’s CAC closed, down by 3.3percent, Italy’s FTSE MIB closed, down by 3 percent. Meanwhile, Spain’s IBEX 35 was down by 2.4 percent at close.
US stocks erased losses on Wednesday to close higher, after China’s devalued its currency for a second day resulted in heavy losses for Yuan. Dow Jones closed, up by 0.00 percent, S&P 500 closed, up by 0.10 percent, Nasdaq closed, up by 0.15 percent.
Treasuries Recap
Long-dated U.S. Treasury debt prices fell late on Wednesday, surrendering gains from a safety-bid rally ignited by China allowing its currency to decline, while Wall Street bounced back from sharp losses.
Treasuries, including benchmark 10-year notes whose yields brushed three-month lows early on Wednesday, softened in price after a lackluster auction of $24 billion of 10-year notes by the government.
China’s unexpected actions, including allowing the yuan to weaken further on Wednesday, fueled fears of currency wars, knocked down stock markets and encouraged buying of top-quality government debt.Yields on 2-year German debt went to a new low of minus 0.29 percent.
Prices for the 10-year note were last off 3/32 and yielding 2.1498 percent.
Thirty-year Treasuries, a maturity the government will auction on Thursday, was last off 20/32 and yielding 2.8382 percent.
Commodities Recap
Oil ended up on Wednesday as a weaker dollar and lower U.S. crude stockpiles provided a modest bounce off six-year lows hit the previous session, when worries about China’s plummeting currency and economic slowdown deflated prices. Concerns that U.S. inventories could build again from higher crude imports and refinery outages kept a lid on the rebound.
U.S. crude futures settled up 22 cents, or 0.5 percent, at $43.30 a barrel, after gaining almost 80 cents at the session high. The market lost $1.88, or more than 4 percent, on Tuesday, settling at $43.08 a barrel, its lowest since March 2009.
Futures of Brent, the global benchmark, closed up 48 cents, or 1 percent, at $49.66 a barrel, after a session high at $50.01.
The material has been provided by InstaForex Company – www.instaforex.com