- China tries to calm currency war fears as CNY slips further.
- IMF – Change in China’s mechanism for determining CNY mid-point welcome step.
- China PBOC Chief Econ – CNY won’t embark on devaluation trend.
- PBOC – Today’s CNY fix mid-point devaluation based on analysis of fresh data, improved quotation mechanism, result of market forces playing decisive role, CNY to steady shortly as market acclimates to new pricing system.
- China Commerce – CNY depreciation will stimulate exports.
- Eyes on US economy, Fed likely unmoved by China devaluation.
- BOJ Policy Board July 14-15 meeting minutes – Most saw inflation expectations up, one didn’t, three doubt inflation target by H1 ’16, risks to Japan outlook include emerging economies, Europe debt, pace of US recovery, China growth deceleration could impact Japan exports.
- Japan July domestic corporate goods price index -0.2% m/m, -3.0% y/y, -0.1% and -2.9% eyed, June -0.2%, -2.4%.
- Australia August Westpac/MI consumer confidence index +7.8% to 99.5, +1% y/y.
- Australia Q2 wage price index hourly pay rates +0.6% q/q, +2.3% y/y, as eyed.
- (0245 ET/0645 GMT) France June current account balance; last E300 mln surplus.
- (0400 ET/0800 GMT) Italy June trade balance global; last bln surplus.
- (0400 ET/0800 GMT) Italy June trade balance EU; last bln surplus.
- (0430 ET/0830 GMT) UK July claimant count, +1.5k eyed; last +7k.
- (0430 ET/0830 GMT) UK June ILO unemployment, 5.6% eyed; last 5.6%.
- (0430 ET/0830 GMT) UK June average weekly earnings, 3-mo average, +2.8% y/y eyed; last +3.2%.
- (0430 ET/0830 GMT) UK June ex-bonus, +2.8% y/y eyed; last +2.8%.
- (0500 ET/0900 GMT) Euro Zone June industrial output, -0.2% m/m, +1.5% y/y eyed; last -0.4%, +1.6%.
- (0500 ET/0900 GMT) Switzerland August ZEW investor sentiment index; last -5.4.
- (1000 ET/1400 GMT) US June JOLTS job openings, 5.3 mln eyed; last 5.36 mln.
Key Events Ahead
- N/A Italy E6 bln 12-mo BOT, Greece E875 mln 13-wk bill, Sweden bill auctions.
- (0530 ET/0930 GMT) Germany E4.0 bln 1.0% 2025 Bund auction.
- (0830 ET/1230 GMT) NY Fed Dudley speech in Rochester, New York.
FX Recap
EUR/USD is supported above 1.1000 levels and currently trading at 1.1071 levels. It has made intraday high at 1.1075 and low at 1.1024 levels. The single currency is stronger on Wednesday as investors’ appetite returned after the Greek deal with its creditors. Moving on, the EUR macro calendar brings in the labour market report from the British economy. While Euro zone industrial production numbers will also be on the cards. Industrial production in the euro zone is seen as advancing 0.2% m/m in June, following a 0.4% decline reported in May, while growing 1.7% when measured annually, compared to a 1.6% gain recorded in May. Looking ahead, the New York session offers not quite relevant macro data with the only exception being the JOLTS job openings data while FOMC member Dudley is scheduled to speak later tonight. Initial support is seen around at 1.0789 and resistance at 1.1195 levels.USD/JPY is supported above 125.00 levels and posted a high of 125.28 levels. It has made intraday low at 125.03 and currently trading at 125.10 levels. The US dollar continues to outperform its Japanese counterpart in the mid-Asian session, driving USD/JPY to fresh two-month highs beyond 125 handle, as another round of Yuan devaluation by PBOC early today has refuelled risk-off trades across the FX board with traders favouring the US currency as a safe-haven. Markets suspect the recent price action by PBOC as staging a currency war in attempts to support the export sector and aid the overall economic growth which is likely to keep the ongoing risk-averse environment intact, boosting safe-haven assets such as US dollar, yen, treasuries and gold. Initial resistance is seen at 125.68 and support is seen at 120.63 levels.GBP/USD is supported above $1.5500 levels. It made an intraday high at 1.5590 and low at 1.5535 levels. Pair is currently trading at 1.5567 levels. Sterling rose 1.9 percent against the Chinese Yuan on Tuesday, to hit a 10-month high after PBOC devalued the currency to make exports more competitive. UK labour data is the major event scheduled for today. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.NZDUSD is supported around 0.6500 levels and trading at 0.6503 levels and made intraday low at 0.6468 and high at 0.6557 levels. The kiwi underperformed under another round of PBOC intervention, devaluing the CNY further. The NZD/USD hit its fresh 2009 low as most currencies are sold off in Asia while the US dollar remains the main beneficiary. The US dollar remains the king in Asia, while any currency where the central bank has an easing bias, or could potentially counteract the CNY weakness with easier monetary policy and the potential for China to become just that little bit more competitive, is being sold today. Initial support is seen at 0.6465 and resistance at 0.6789 levels.AUD/USD is supported below 0.7300 levels and trading at 0.7250 levels. It has made intraday high at 0.7325 levels and low at 0.7216 levels. The latest series of below estimates China economic data had little impact on the tepid recovery seen in the Aussie from fresh multi-year lows, keeping AUD/USD near the mid-point of 0.72 handle. Further data released by the NBS showed fixed asset investment rising 11.2% year-to-date compared with the same period a year ago in July, and retail sales rising 10.5% year-on-year in July, both missing forecasts. China remains Australia’s biggest trading partner. With the devaluation of the Chinese currency, Chinese companies will have less purchasing power to purchase products from Australia. Initial support is seen at 0.7225 and resistance at 0.7647 levels.
Equity Recap
Japan’s benchmark Nikkei 225 index tumbled 1.15% to 20,481.44 points in morning trade, while Tokyo’s broader Topix gauge plunged 1.06% to 1,669.82 points.Hong Kong’s benchmark Hang Seng index nose-dived 1.43% to 24,146.73 points in early trade, and mainland China’s benchmark Shanghai Composite lost 0.44% to trade at 3,910.73 points at the same time.The benchmark Australian S&P/ASX 200 index fell 0.69% to 5,435.60 points in Sydney, with miners trading lower after most commodity prices dropped sharply overnight.New Zealand’s benchmark S&P/NZX 50 index fell 0.45% to 5,796.51points this afternoon in Wellington.Australia’s S&P/ASX 200 index closes down 1.48 pct at 5,392.30 points.Tokyo’s Nikkei average closes down 1.58 pct at 20,392.77.
Treasury Recap
China finance ministry auctions 5-yr bonds at 3.2377 pct yield, market expected 3.22 pct.The benchmark 10-year U.S. Treasury note yield slid to a three-month low on Wednesday as Asian financial markets continued to reel after China’s surprise devaluation of the Yuan, feeding demand for safe-haven assets.
Commodity Recap
Gold gained for a fifth session in a row on Wednesday to trade near a three-week high, benefiting from weaker equities after China’s devaluation of its currency stoked fears of a forex war. Spot gold was up 0.1 percent at $1,109.85 an ounce by 0041 GMT, after peaking at $1,119 on Tuesday, its highest since July 20.Prices of oil extended their losses on Wednesday, hit by another currency move from China amid the ongoing hefty crude supplies. The fresh inventory report is ahead. WTI futures slid 0.46% to trade at $42.88 per barrel, after booking an over 4% loss on Tuesday, while Brent futures lost 0.62% to $49.40 per barrel.
The material has been provided by InstaForex Company – www.instaforex.com