- DXY up at 96.886 from last week’s monthly low at 95.926.
- Dollar supported as focus returns to Fed rate hike speculation.
- EUR/USD to 1.1063 early doors but recovers to session highs.
- Sterling rises after BOE Forbes fuels UK rate hike talk.
- GBP/USD 1.5690 highs. EUR/GBP sold lower to 0.7064 levels.
- BOE Forbes- Waiting too long to raise rates could damage recovery.
- Economic Minister Amari- Govt is not trying to engineer a decline in the yen.
- Euro zone June Euro stat trade NSA 26.4bln vs previous 18.8bln.
- Merkel- No haircut on Greek debt but maturity extensions possible.
- German Finance Minister- Room to extend maturities on Greek loans, but scope limited.
- German Bundestag & Dutch parliament will both vote on Greek deal on Wednesday.
- PBOC sets Yuan midpoint at 6.3969 vs previous spot close of 6.3918.
- (0830 ET/1230 GMT) Empire State Manufacturing Survey (August) consensus 5.00, previous 3.86.
- (0830 ET/1230 GMT) Statistics Canada is set to release the holdings of Canadian securities by non-residents for June.
- (1000 ET/1400 GMT) NAHB Housing Market Index (August) consensus 61, previous 60.
- (1000 ET/1400 GMT) E-Commerce Retail Sales (Q2).
- (1600 ET/2000 GMT) Treasury International Capital Statistics (June).
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade operation 15-year Fannie Mae / Freddie Mac (max $475 mn).
FX Recap
USD: The dollar rose against a basket of currencies for a third trading day running on Monday, as traders shift their focus to the prospect of higher U.S. interest rates. It was 0.3 percent higher at $1.1075 per euro and the dollar index was a third of a percent up at 96.833.EUR/USD is supported around 1.1100 levels and currently trading at 1.1102 levels. It has made intraday high at 1.1120 and low at 1.1062 levels. The bearish trend on the euro prevails, although it retook the $1.11 handle. While there is not much data to watch at the beginning of the week, traders will be able to focus on the Greek debt repayment and US CPI figures in the days ahead. This week traders’ attention will once again shift to the latest Greek bailout which was approved by EU finance ministers on Friday. August 20 is the day when Greece is scheduled to make a €3.5 billion bond repayment to the European Central Bank. Moreover, this week’s US inflation data will feed into the debate as to when the central bank is likely to push the button on a modest rate increase. 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 124.57 levels. It has made intraday low at 124.24 and currently trading at 124.53 levels. Data out of Japan on Monday showed the economy contracted 0.4% in the June quarter, slightly better than the 0.5% contraction forecast by markets, but down sharply on first-quarter growth of 1%. The Bank of Japan is currently forecasting the economy to expand 1.7% in fiscal 2015 and 1.5% in fiscal resistance is seen at 125.68 and support is seen at 120.63 levels.GBP/USD is supported above $1.5600 levels. It made an intraday high at 1.5688 and low at 1.5622 levels. Pair is currently trading at 1.5632 levels. Sterling rose 0.4 percent against the euro on Monday, buoyed by hawkish comments from BoE policymaker Kristin Forbes that reinforced expectations that interest rates are headed higher in coming months. Sterling rose to 70.74 pence per euro, having hit a peak of 70.645, its highest in nearly a week. Against the dollar, sterling traded flat at $1.5650, having risen to $1.5690 in early European trade, its highest in two weeks. It will be a key week for the pound, as inflation figures are due tomorrow ahead of Retail Sales (Thursday) and Public Sector Net Borrowing (Friday). 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 0.6541 levels and made intraday low at 0.6528 and high at 0.6554 levels. The New Zealand dollar experienced bearish pressure on Friday after the retail sales report, which proved to be negative. Moreover, the US dollar stayed firm, pushing the so-called kiwi close to its lowest level since 2009. Pair is a quiet start as we progress early Asia having been supported on the downside in to the close of last week’s session on 0.6520. The US dollar got a boost last week from better than expected retails sales. For this week, markets are awaiting the CPI’s and FOMC minutes to set the pace for the rest of the month. Initial support is seen at 0.6465 and resistance at 0.6789 levels.AUD/USD is supported above 0.7300 levels and trading at 0.7363 levels. It has made intraday high at 0.7382 levels and low at 0.7354 levels. Westpac chief economist Bill Evans sees the Reserve Bank of Australia keeping interest rates on hold well into next year, even as the market prices in a high chance of a cut by November. Westpac chief economist Bill Evans is one of few economists who believe the RBA is done easing for now, and sees interest rates remaining on hold well into 2016. In contrast, the market is pricing in a 50% chance of a rate cut by November, and a near 90% chance of a cut by early 2016. Market will focus on RBA’s monetary policy meeting minutes due tomorrow for the further directions. Initial support is seen at 0.7225 and resistance at 0.7647 levels.
Equities Recap
European stocks rebounded from last week’s heavy selloff on Monday and the dollar rose broadly, with investors reassured by stability in China’s Yuan exchange rate after it was fixed slightly higher for the second day running.The FTSEuroFirst 300 index of leading shares was up 0.8 percent at 1,540 points, clawing back some of last week’s 3 percent decline – its biggest loss in six weeks.Germany’s DAX was up 0.6 percent and France’s CAC 40 up 0.7 percent, Britain’s resource and commodity-heavy, however, was 0.2 percent lower.China’s CSI300 Index ended up 0.1pct at 4077.87 points, Shanghai Composite Index closed up 0.7 pct at 3993.67 points
Commodities Recap
Oil prices fell towards six-year lows on Monday after data showed Japan’s economy contracted and producers in the United States added drilling rigs for a fourth straight week despite a recent rout in prices. U.S. crude, or West Texas Intermediate (WTI), for September was trading 70 cents lower at $41.80 a barrel at 0830 GMT, close to its lowest level in more than six years. Brent for October was down 60 cents at $48.59 a barrel; still a few dollars shy of its six-year low of $45.19. The September contract expired on Friday.Gold edged higher on Monday as concerns persisted over a weaker Yuan after China devalued its currency last week, with the uncertainty likely to burnish bullion’s safe-haven appeal. Spot gold was up 0.4 percent at $1,117.80 an ounce by 0600 GMT. The metal touched a three-week peak of $1,126.31 on Thursday, helping it end a seven-week losing run. U.S. gold for December delivery rose 0.4 percent to $1,117.30 an ounce.
Treasuries Recap
The benchmark 10-year U.S. Treasury yield slipped two basis points to 2.18 percent.JGB prices ended the day steady to slightly lower in thin trading, sending yields up by 1bp to 1.5bp from last Friday’s afternoon close in the 7-yr and longer zone, as shown above. JGBs opened softer on weaker German Bunds and US TSY notes last Friday, and then extended their earlier losses modestly after lunch in the long-term and super-long zone amid a lack of the BoJ purchase and on caution ahead of tomorrow’s 20-yr JGB auction.Spanish, Italian and Portuguese bond yields fell on Monday, with lower-rated euro zone assets buoyed by a third bailout deal for Greece and a relatively stable Chinese yuan. German 10-year Bund yields were a touch higher at 0.66 percent, Spanish 10-year bond yields fell 5 basis points to 1.97 percent. Italian and Portuguese yields were down by a similar amount at 1.77 percent and 2.38 percent, respectively.UK Gilts opened 4 ticks higher than the settlement of 117.48 as caution ahead of the FOMC minutes on Wednesday overshadowed some hawkish central bank rhetoric. Bank of England Governor Dr Mark Carney and MPC member Kristin Forbes both made comments in the weekend press. 10-year cash has been operating in a rather narrow 1.878% to 1.844% range with the top side being the 61.8% Fibonacci resistance from year lows to highs.New Zealand government bond yields were flat. Australian government bond futures eased, with the three-year bond contract off 2 ticks at 98.010. The 10-year contract was down half a tick to 97.1850.
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