- AUD/USD hits 6-1/2 year low at 0.6986 as GDP data disappoints.
- EUR/USD fell to 1.1243 from 1.1332 Tuesday high. Recovers to 1.1295 levels.
- USD/JPY down from 120.46 Asian highs. 119.68 pullback lows.
- GBP/USD extends to 1.5264 low after construction data.
- UK August Construction PMI 57.3 vs previous 57.1. 57.5 expected.
- Euro zone July Producer prices -0.1% m/m, -2.1% y/y vs previous 0.0%/-2.1% revised. -0.1%/-2.1% expected.
- Australia Q2 GDP 0.2% q/q, 2.0% y/y. 0.4%/2.2% expected.
- China stocks pare losses in wobbly session as govt support helps.
- SSEC closes down 0.2% at 3,160 points.
- China Central Bank to require reserves for all FOREX derivative purchase contracts.
- China FX regulator- Eases restrictions on multinational companies’ management of FX debt.
- (0700 ET/1100 GMT) MBA Weekly Mortgage Application Activity Indices.
- (0800 ET/1200 GMT) Brazil will release data on its industrial output.
- (0815 ET/1215 GMT) US ADP National Employment Report (August) (consensus +201k, previous +185k).
- (0830 ET/1230 GMT) Productivity (Q2 revised) (consensus +2.8% q/q AR, previous +1.3% q/q AR).
- (0830 ET/1230 GMT) Unit Labour Costs (Q2 revised) (consensus -1.0% q/q AR, previous +0.5% q/q AR).
- (1000 ET/1400 GMT) US Factory Orders (July) (consensus +0.9% m/m, previous +1.8% m/m).
- (1000 ET/1400 GMT) US Factory Orders ex-Transportation (July) (previous +0.5% m/m).
- (1030 ET/1430 GMT) EIA Weekly Petroleum Statistics.
- (1130 ET/1530 GMT) Brazil will also release its capital flows and foreign reserves data.
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade operation 30-year Fannie Mae / Freddie Mac (max $2.025 bn).
- (1400 ET/1800 GMT) US Beige Book.
FX Recap
USD: The U.S. dollar recovered ground against yen and euro as fragile global stock markets recovered, it was up 0.6 percent at 120.10 yen, rising from a low of 119.225 yen as European stock markets rose and U.S. stock futures were almost 1 pct higher. The euro fell 0.6 pct to $1.1250, having rallied 0.9 pct on Tuesday when it rose to $1.1332.EUR/USD is supported below 1.1300 levels and currently trading at 1.1271 levels. It has made intraday high at 1.1318 and low at 1.1241 levels. The major pared losses as the risk-sentiment eased a bit after the stocks on the European indices halted its brief recovery and fell back in the red, lifting the demand for the traditional safe-haven in the euro. Most European indices turned lower led by the UK’s benchmark, the FTSE, after the construction sector report from Britain disappointed markets. Meanwhile, the greenback remains supported amid a better risk environment, thereby capping further recovery in EUR/USD. Today Euro zone PPI data released with flat numbers as expected at -0.1%. Markets now shift their attention towards the US ADP figures and the factory orders amid a data-light EUR calendar ahead. Initial support is seen around at 1.1015 and resistance at 1.1363 levels. Option expiries are at 1.1200 (647M), 1.1270-75 (589M), 1.1300 (846M).USD/JPY is supported around 120.00 levels and posted a high of 120.45 levels. It has made intraday low at 119.21 and currently trading at 120.04 levels. The US dollar made early advances against the Japanese yen on Wednesday, with traders beginning to take on more risk after yesterday’s disappointing Chinese factory data sparked a risk-off rally on the yen. Concerns about China are a key driver in currency markets and the PMIs were weaker and not good for overall risk sentiment. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.50 (260M), 120.00 (243M).
GBP/USD is supported below $1.5300 levels. It made an intraday high at 1.5318 and low at 1.5263 levels. Pair is currently trading at 1.5277 levels. The pair remains pressured amid favourable environment towards the US dollar while the recent below estimates UK macro releases continue to dent investors’ confidence in the UK economic prospects. On Wednesday, the UK’s construction PMI gained pace and rose to 57.3 in August following the previous months reading of 57.1, while markets were expecting a reading of 57.5. Meanwhile, focus now shifts to the upcoming US session with the ADP figures and factory orders on the cards. The latest ADP employment report for August is expected to come in at 200,000 compared to 185,000 in the previous month Initial support is seen at 1.5220 and resistance is seen around 1.5436 levels.NZDUSD is supported above 0.6300 levels and trading at 0.6332 levels and made intraday low at 0.6311 and high at 0.6367 levels. The New Zealand dollar was one of the strongest performing currencies on Wednesday morning in Asia, with a rebound in Chinese equities and a strong rise at Fonterra’s dairy auction providing some support for the currency. The Global Dairy Trade (GDT) Price index posted a sharp 10.9% gain early on Wednesday in New Zealand when compared with the previous price at Fonterra’s auction early on August 18. Looking ahead, markets now await the upcoming US macro data including the crucial ADP employment change, the forerunner for Friday’s non-farm payrolls data, for further momentum on the pair. Initial support is seen at 0.6195 and resistance at 0.6511 levels. Option expiry is at 0.6450 (207M).AUD/USD is supported around 0.7000 levels and trading at 0.7002 levels. It has made intraday high at 0.7046 levels and low at 0.6981 levels. The Australian dollar tumbled to its weakest level in six years on Wednesday after an unexpectedly bad GDP growth reading took traders by surprise. Economic growth in Australia slowed to 0.2% in the June quarter from 0.9% in the March quarter, as lackluster mining and construction activity weighed on production. However, the recovery in the Aussie seems short-lived as the Australian currency remains under pressure from the ongoing growth concerns about China, its biggest trading partner. Meanwhile, traders now look forward to a slew of US economic data to be released later in the US session for further AUD/USD moves. Initial support is seen at 0.6945 and resistance at 0.7122 levels. Option expiry is at 0.7300 (716M).
Equities Recap
The fresh government support for China’s edgy markets and bets on a more dovish stance from PBoC provided limited relief from a stock market sell-off on Wednesday as oil resumed its fall.Europe’s FTSEurofirst 300 Index turned negative and was down 0.1 pct, in the early deals Germany’s DAX rose 0.4 pct, France’s CAC 40 climbed 0.4 pct and UK FTSE 100 inched higher 0.5 pct.Tokyo’s Nikkei ended down 0.39 pct at 18,095.40, Australia’s S&P/ASX 200 Index closed down 0.23 pct at 5,084.70 points. China’s CSI300 Index closed up 0.1 pct at 3,365.83 points, while Shanghai Composite Index ended down 0.2 pct at 3,160.17 points.
Commodities Recap
Oil prices plunged as concerns about the global economy exacerbated worries that an oversupply of crude could last longer than expected.Brent crude for October was down 75 cents at $48.81 a barrel by 0915 GMT. U.S. crude for October fell $1.00 to $44.41 a barrel.Gold steadied on Wednesday with appetite for the metal soured by a firmer dollar despite weaker Asian equities, and failure to breach a key resistance and a looming U.S. rate hike suggest more downside risk. Spot gold was flat at $1,140.70 an ounce by 0624 GMT, after touching a one-week high of $1,147.16 on Tuesday. U.S. gold for December delivery was flat at $1,140.20 per ounce.
Treasuries Recap
JGB prices ended the day steady to slightly lower despite firmer US TSY overnight. Volatile stocks prevented many JGB players to take large positions in either direction today. The current 20-yr JGBs remained steady, while other tenors ended softer, sending yields up 0.5bp from yesterday’s afternoon close (06:15GMT). The new 10-yr JGBs traded in a narrow 0.385%-0.395% range before ending at 0.39%, vs 0.421% for yesterday’s average accepted yield.
German 10-year yields were 1 bp lower at 0.79 percent. Portuguese 10-year yields edged up 2 basis points to 2.77 percent as investors made way on their books for 7-year bonds the country Portugal is selling via a syndicate of banks. Italian and Spanish 10-year yields were flat on the day at 2.00 percent and 2.15 percent, respectively.UK Gilts opened 11 ticks higher than the settlement of 117.35 as global growth concerns underpinned after another weak session for Asian equities.Dec Gilts are a touch softer on the UK construction PMI data at 117.54.New Zealand government bonds eased, pushing yields 1.5 bps lower along the yield curve. Australian government bond futures eased, with the 3-year bond contract off 1 tick at 98.220. The 10-year contract was down 2.5 ticks to 97.3050.
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