- Japan July flash manufacturing PMI 51.4, June 50.1.
- IMF warns Japan to step up reforms, avoid over-reliance on weak JPY.
- Japan Mitsubishi Motors to end US production, focus more on Asia.
- Japan Mitsubishi Motors won’t move output to Japan even with weaker JPY.
- China Cabinet to expand CNY band both ways.
- China July Caixin manufacturing PMI 48.2, 15-month low, June final 49.4, output 16-month low.
- Commodity currencies hit after China PMI miss forecast.
- New Zealand June trade balance NZ$60 mln deficit, NZ$100 mln expected.
- Euro zone July Markit manufacturing flash PMI 52.2 vs 52.5 previous, 52.5 expected.
- Euro zone July Markit services flash PMI 53.8 vs 54.4 previous, 54.2 expected.
- Euro zone July Markit composite flash PMI 53.7 vs 54.2 previous, 54.0 expected.
- German July Markit manufacturing flash PMI 51.5 vs 51.9 previous, 51.9 expected.
- German July Markit services flash PMI 53.7 vs 53.8 previous, 53.9 expected.
- German July Markit composite flash PMI 53.4 vs 53.7 previous.
- (0900 ET/1300 GMT) Mexico’s jobless rate (June), consensus 4.42%, previous 4.45%.
- (0900 ET/1300 GMT) Mexico’s economic activity, previous 2.1%.
- (0945 ET/1345 GMT) US July Markit PMI manufacturing PMI flash, 53.6 eyed; last 53.6.
- (1000 ET/1400 GMT) US June new home sales, 550k units AR eyed; last 550k, +2.2% m/m.
- (1500 ET/1900 GMT) Argentina’s economic activity (May), consensus1.0%.
Key Events Ahead
- (0945 ET/1345 GMT) Fed Trade ops 30yr Ginnie Mae max $925mn.
FX Recap
EUR/USD is supported below 1.1000 levels and currently trading at 1.0940 levels. It has made intraday high at 1.0994 and low at 1.0930 levels. A slightly weaker PMI survey in Germany pushed the euro 0.3 percent lower to $1.0952 against the dollar after breaching $1.10 for the first time in more than a week on Thursday. The flash manufacturing PMI in France came in at 49.6 in the seventh month of the year, worse than the final reading of 50.7 seen in June, and below expectations of 50.8. Moreover, manufacturing sector results across the euro zone pointed to weaker output in July, flash data showed on Friday. The services sector continued to report healthy activity with a reading of 53.8, albeit at a slightly slower pace than a month ago when it hit 54.4. The flash manufacturing PMI for the euro zone came in at 52.2 points in July, compared to 52.5 in June. Initial support is seen around at 1.0789 and resistance at 1.1083 levels. Option expiries are at 1.0800 (2BLN) 1.0850 (1BLN), 1.0900 (1.2BLN), 1.10 (1.3BLN).USD/JPY is supported around 124.00 levels and posted a high of 124.03 levels. It has made intraday low at 123.83 and currently trading at 123.98 levels. Today Japan released Flash manufacturing PMI data with positive numbers at 51.4 vs 50.1 previous release. Poor PMI prints from the Chinese economy in early trade have prompted investors to accelerate their exodus from the riskier assets in favour of the greenback. Ahead in the session and absent data releases in Japan, US New Home Sales and Markit’s manufacturing PMI will be in the spotlight, looking to add to the recent positive results in the US economy. Near term resistance is seen at 124.57 and support is seen at 120.63 levels. Option expiries are at 122.50 (1.15BLN), 124.00 (1BLN), 124.50 (390M), 125.00 (1BLN).GBP/USD is supported below $1.5500 levels. It made an intraday high at 1.5522 and low at 1.5465 levels. Pair is currently trading at 1.5476 levels. The pound has been under some selling pressure since the London open, which dragged the pair below the $1.55 handle. Meanwhile, US initial jobless claims dropped to 255,000 from last week’s 281,000 and continuing claims also came out better at 2,207K from 2,216 previously. Volatility should be lower on Friday as a holiday spirit is observed on currency markets, with only small reactions to macro figures and releases. Later in the session, US services PMI and new home sales are due. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels. Option expiry is at 1.5550 (214M).NZDUSD is supported below 0.6600 levels and trading at 0.6575 levels and made intraday low at 0.6561 and high at 0.6623 levels. The New Zealand dollar is the biggest mover this week, jumping 1.5 percent after the RBNZ disappointed those who bet on a larger cut in interest rates and toned down its call for more falls for the kiwi. The Official Cash Rate (OCR) was lowered from 3.25% to 3.0% on Thursday, and the central bank explicitly stated that further rate cuts were likely. Today New Zealand’s monthly merchandise trade balance fell into deficit for the first time since December last month. The monthly trade balance went from a revised surplus of $371 million in May to a shortfall of $60 million last month, according to Statistics New Zealand data released Friday, coming in worse than analysts’ predicted $100 million surplus. Initial support is seen at 0.6465 and resistance at 0.6722 levels.AUD/USD is supported below 0.7300 levels and trading at 0.7284 levels. It has made intraday high at 0.7360 levels and low at 0.7268 levels. The Australian dollar plunged to a 6-year low after the China posted the worst reading on manufacturing sentiment in more than a year. It fell to $0.7269 in early European deals on worries over the health of the China’s economy. The big miss in China’s Flash Caixin PMI, lowest in 15 months, has reinforced the bearish sentiment in the Aussie, with the smart money continuing to push the rate lower, which coupled with stop loss orders being triggered sub 0.73, has allowed sellers to capitalize on this latest Chinese disappointment. Initial support is seen at 0.7225 and resistance at 0.7647 levels. Option expiries are at 0.7325 (201M), 0.7525 (504M).
Equity Recap
The pan-European FTSEurofirst 300 hit a one-week low early in the day , but quickly rebounded to trade 0.2 percent higher at 1582.67. Britain’s FTSE 100 was flat in the early trade; France’s CAC 40 was down 0.2 pct, while Germany’s DAX fell 0.4 pct.Australia’s S&P/ASX 200 index closed down 0.44 pct at 5,565.60 points. Tokyo’s Nikkei average ended down 0.67 pct at 20,544.53 points.Shanghai Compsite Index closed down1.3 pct at 4,070.91 points, while China’s CSI300 index ended down 1.8 pct at 4,176.28 points.
Treasury Recap
The benchmark U.S. 10-year yield stood at 2.29 percent in Asian trading, compared to its U.S. close of 2.278 percent on Thursday with some analysts expecting 10-year yields to rise to 3 percent by the year end.Euro zone bond yields fell, German 10-year bond yields fell 3 bps to 0.68 pct.JGB prices ended the day marginally mixed, with yields on the current 5-yr, 10-yr, 20-yr JGBs mostly unchanged from yesterday’s final close. JGB yields moved in a very narrow range of 1bp or less across the curve in relatively thin trading ahead of the weekend. Stronger US TSY bonds overnight and weaker Tokyo stocks today had limited positive impact on JGBs. In the AM session, a few regional banks bought 10-yr JGBs maturing in 6 years, while some domestic investors bought 20- yr JGBs maturing in around 15 years to earn extra income. But the majority of commercial banks seemed to be very reluctant to chase higher prices in the 10-yr to 20-yr zone, as they didn’t expect yields on the current 10-yr and 20-yr JGBs to fall below 0.40% and 1.15%, respectively, in the near future, according to JGB traders.New Zealand government bond yields were down as much as 8 bps at the long end of the curve. While Australian government bond futures rose as the poor Chinese data added to the case for more policy easing. The 3-year bond contract added 8 ticks to 98.100, while the 10-year contract rose 6 ticks to 97.1650.
Commodity Recap
Oil prices edged up on Friday after closing at their lowest in months in the previous session as oversupply and disappointing Chinese factory activity dragged on the market. U.S. crude for September delivery traded 25 cents higher at $48.70 a barrel by 0651 GMT, after closing down 74 cents at $48.45, the lowest settlement since March 31. Brent September crude was up 7 cents at $55.34 a barrel. The contract had settled at its lowest since early April at $55.27, down 86 cents.Gold slid more than 1 percent to its lowest since early 2010 on Friday, on course for its biggest weekly loss in nine months, as upbeat U.S. jobs data helped deepen this week’s rout and fuelled fears the metal still has some way to fall. Spot gold fell as much as 1.2 percent to 1,077 an ounce, its lowest since February 2010. It was down 0.5 percent at $1,084.80 at 0610 GMT.
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