- Sterling index near 7-1/2 year highs as investor’s ramp up rate hike bets.
- BOE Miles- UK interest rates will rise ‘pretty soon’.
- 48% of UK households expected BoE to hike in next 6 months.
- German parliament votes in favour of third Greek bailout.
- Total of 454 lawmakers for, 113 against and 87 abstain.
- German Schaeuble- Must give Greece chance for new start.
- Cautious dollar ahead of U.S CPI and Fed minutes due later today.
- EUR/USD rose to 1.1073 from 1.1022, easier into NY at 1.1038.
- CNB says extending weak fx policy beyond 2016 certainly possible.
- Euro Zone June current account NSA 31.1bln vs previous 4.3bln revised. SA 25.4bln vs previous 19.1bln.
- Euro Zone June Net investment flow 47.4bln vs previous 38.3bln.
- DAX closed under 200 DMA for 1st time since Jan. Down 1%. 10734 low.
- Shanghai shares plunge 2.8%, rekindling worries on China growth.
- (0830 ET/1230 GMT) US July CPI, +0.2% m/m, +0.2% y/y eyed; last +0.3%, +0.1%.
- (0830 ET/1230 GMT) US July core, +0.2% m/m, +1.9% y/y eyed; last +0.2%, +1.8%.
- (0830 ET/1230 GMT) US July real weekly earnings, +0.3% m/m eyed; last -0.3%.
- (1130 ET/1530 GMT) US July Cleveland Fed CPI; last +0.3% m/m.
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade operation 30-yr Ginnie Mae (max $1.075 bn).
- (1400 ET/1800 GMT) FOMC Minutes (from meeting of July 28-29).
- (2020 ET/0020 GMT) FRB Minneapolis’s Kocherlakota on monetary policy; Seoul.
FX Recap
USD: The dollar inched lower broadly on Wednesday as investors are cautious ahead of U.S. inflation data and minutes from the US Fed that could signal whether the central bank is on track to raise interest rates in September. The dollar fell 0.3 percent against its basket at 96.747, while the euro traded at $1.1065.EUR/USD is supported below 1.1100 levels and currently trading at 1.1040 levels. It has made intraday high at 1.1073 and low at 1.1025 levels. The euro zone current account surplus increased considerably in the sixth month of the year when compared to the previous month on a seasonally adjusted basis, data from the European Central Bank (ECB) showed on Wednesday. The euro zone’s current account recorded a rise in its surplus to €25.4 billion in June, seasonally adjusted, and compared with a revised €19.1 billion in the previous month, according to the ECB’s report. Wednesday’s data are expected to make a splash in financial markets, particularly in combination with the July FOMC minutes scheduled for release later today. Initial support is seen around at 1.0789 and resistance at 1.1195 levels.USD/JPY is supported above 124.00 levels and posted a high of 124.42 levels. It has made intraday low at 124.20 and currently trading at 124.32 levels. The Japanese trade balance for the month of July came in at JPY -268.1 bln vs JPY -53.0 bln expected and a prior revision of JPY -70.5 bln, with the adjusted reading at JPY -368.8 bln vs JPY -158.6 bln exp. The BOJ meet this week also for their interest rate decision while is likely to remain on hold with the recent GDP numbers reading -0.4% Q/Q for Q2 beating expectations of -0.5%. Initial resistance is seen at 125.68 and support is seen at 120.63 levels.GBP/USD is supported just below $1.5700 levels. It made an intraday high at 1.5697 and low at 1.5656 levels. Pair is currently trading at 1.5686 levels. Sterling was trading near 7-1/2 year highs against a trade-weighted basket of currencies on Wednesday, drawing support from expectations that the Bank of England will start raising interest rates early next year. It was up 0.2 percent against the dollar at $1.5700, having hit a 7-week high of $1.5717 on Tuesday after the CPI data was released. It was slightly lower against the euro at 70.50 pence per euro. Markets will be watching closely US session which offers the latest US CPI numbers for July as well as the Federal Open Market Committee (FOMC) minutes, with both expected to confirm the recent upsurge in the US dollar. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.NZDUSD is supported below 0.6600 levels and trading at 0.6585 levels and made intraday low at 0.6575 and high at 0.6600 levels. Producer prices in New Zealand continued to drop last quarter, with the input Producer Price Index (PPI) sliding 0.3% and the output PPI falling 0.2%, according to Statistics New Zealand. The main drag on both indices was dairy prices. Last night Fonterra’s Global Dairy Trade auction prices rose on average 14.5%, with whole-milk powder prices surging more than 19%. Fonterra restricted supply at the auction to help lift prices. Initial support is seen at 0.6465 and resistance at 0.6789 levels.AUD/USD is supported above 0.7300 levels and trading at 0.7350 levels. It has made intraday high at 0.7364 levels and low at 0.7314 levels. Pair accelerated losses this session after the Chinese equities extended sell-off with the benchmark Shanghai Composite (SSEC) tumbling another 4% after a 6% drop seen on Tuesday. Meanwhile, traders also remain cautious ahead of key US macro data releases CPI and FOMC minutes due later today for further USD moves. Initial support is seen at 0.7225 and resistance at 0.7647 levels.
Market Recap
Emerging markets were under pressure on Wednesday due to worries about China’s economy, while investors await for any hints on U.S. rate hike plans.Europe’s FTSEurofirst 300 was down 0.5 pct in early deals, UK’s FTSE fell 0.2 pct, while France’s CAC and Germany’s DAX plunged 0.7 pct and 0.9 pct respectively.
Tokyo’s Nikkei Average ended down 1.61 pct at 20,222.63 points, Shanghai Composite Index closed up 1.2 pct at 3,794.11 points while China’s CSI300 Index ended up 1.6 pct at 3,886.14 points.
Commodities Recap
Gold rose on Wednesday as cautious investors shifted focus away from the dollar ahead of U.S. CPI data and minutes of the Federal Reserve’s last policy meeting. Spot gold was up 0.4 percent at $1,122.00 at 0920 GMT, while U.S. gold futures for December delivery were up $4.30 an ounce at $1,121.20.Oil prices were steady on Wednesday, consolidating after a 6-week rout driven by global oversupply and concerns about falling demand in Asian economies and the United States. U.S. crude oil futures were down 20 cents at $42.42 a barrel by 0925 GMT. North Sea Brent crude was down 10 cents at $48.71 a barrel.
Treasuries Recap
The benchmark US 10-year note yields were at 2.19 percent.JGB prices ended the day steady to slightly lower, with the 20s finishing softer (+1bp) in choppy trading. Yields on the current 5-yr and 30-yr JGBs finished “the afternoon session” unchanged from yesterday, after inching down 0.5bp yesterday evening toward the final close (17:00JST).Euro zone bond yields calmed on Wednesday after a sharp rise yesterday due to a surprise uptick in UK inflation. German 10-year Bund yields were steady at 0.64 percent. Yields on lower-rated euro zone bonds in Spain, Italy and Portugal were 1 basis point higher, having risen 4-9 bps the previous day. They traded at 2.00 percent, 1.81 percent and 2.48 percent, respectively.Gilts opened 4 ticks lower than the settlement of 117.50, as predicted, as dealers tracked some modest weakness in the Euro zone. Outgoing MPC member David Miles added to the softer open with his comments to the BBC that a rate rise is coming soon.New Zealand government bond yields were as much as 7 basis points higher. Australian government bond futures fell, with the three-year bond contract off 1 tick at 98.050. The 10-year contract was down 3 ticks to 97.2000.
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