- RBA leaves OCR as is at 2.0%, to continue assessing whether current settings appropriate.
- RBA drop reference on need for more depreciation, inflation consistent with target.
- RBA- Policy needs to be accommodative, growth below long-term average.
- Australia growing as IPO destination for Chinese firms spooked by slump.
- Australia June retail sales +0.7% m/m vs 0.3% previous, 0.5% expected.
- Australia June trade deficit A$2.933bn vs A$2751bn previous, A$3.1bn expected.
- New Zealand July ANZ commodity price index -11.2% m/m vs -3.1% previous.
- New Zealand July QV residential property price index +10.1%y/y vs +9.3% previous.
- China CITIC Securities suspends short-selling of shares.
- BOJ Dep Gov Iwata- Do not see risks from any possible Fed, BoE rate hikes.
- Japan wants New Zealand to make realistic offer on dairy goods-negotiator.
- Iwata- Stable FX reflecting fundamentals desired, FX set by markets.
- Iwata- Central bank concentration on price stability, achieving price target.
- Iwata- Moves in interest rate differentials hard to gauge.
- Iwata- BOJ conducting ETF simulations taking place, too early to discuss exit.
- Euro zone June producer prices -0.1%m/m vs 0.0% previous, 0.0% expected.
- Euro zone June producer prices -2.2%y/y vs -2.0% previous, -2.2% expected.
- Greece expects to conclude bailout deal by August 18.
- UK July Nationwide house prices +0.4%m/m vs -0.2% previous, +0.4% expected.
- UK July PMI construction 57.1 vs 58.1 previous, 58.4 expected.
- UK starts RBS sell-off with GBP 2.1bn stake sale.
- (0700 ET/1100 GMT) US MBA weekly mortgage application indices.
- (0800 ET/1200 GMT) Brazil’s industrial output.
- (0855 ET/1255 GMT) US Redbook same-store sales index Aug 1 wk, previous +1.0% y/y.
- (0900 ET/1300 GMT) Mexico’s May gross fixed investment, consensus 2.3% y/y.
- (1000 ET/1400 GMT) US Factory orders June, consensus +1.4% m/m, previous -1.0%.
- (1000 ET/1400 GMT) US Factory orders ex-trans Jun, previous +0.8% m/m.
- (1030 ET/1430 GMT) US EIA Weekly Petroleum Statistics.
Key Events Ahead
- (1000 ET/1400 GMT) Fonterra dairy results expected.
- (1145 ET/1545 GMT) Fed Trade operation 30-year Ginnie Mae, max $900mn.
- (1430 ET/1830 GMT) Fed Trade operation 15-year Fannie Mae/Freddie Mac, max $475mn.
FX Recap
EUR/USD is supported below 1.1000 levels and currently trading at 1.0976 levels. It has made intraday high at 1.0980 and low at 1.0931 levels. The pair keeps the weekly range below the 1.1000 handle, against a backdrop of a cautious tone from investors in light of relevant releases in the US economy and ahead of the critical Non-farm Payrolls due on Friday. Market participants largely bypassed auspicious results from manufacturing PMIs in Euro zone during July posted yesterday, more concerned instead on the potential slowdown of the Chinese economy and the increasing selling bias in the commodities space, with direct implications on the EM universe. Market will eye on US factory orders for the further directions. Initial support is seen around at 1.0789 and resistance at 1.1195 levels. Option expiries are at 1.0835-40 (500M), 1.0900 (308M), 1.1095-1.1100 (2.1BLN).USD/JPY is supported around 124.00 levels and posted a high of 124.09 levels. It has made intraday low at 123.79 and currently trading at 123.94 levels. Pair trades modestly flat at fresh session highs of 124.10, struggling to resist 124 handle. USD/JPY edged slightly higher in Asia, erasing a part of yesterday’s losses following a poor show displayed US factories with ISM manufacturing PMI easing to 52.7 in July from 53.5 results booked in June, which was the highest reading since January. Bank of Japan Deputy Governor Kikuo Iwata spoke earlier today suggesting the BOJ will not intervene should the yen suffer a rapid decline if the Federal Reserve implements its first interest rate hike in 9 years. We have a crucial week ahead in terms of key US economic releases while BOJ’s monetary policy statement will also remain in focus. Initial resistance is seen at 124.57 and support is seen at 120.63 levels. Option expiries are at 123.00 (391M), 123.85 (250M), 124.45 (200M).GBP/USD is supported below $1.5600 levels. It made an intraday high at 1.5616 and low at 1.5570 levels. Pair is currently trading at 1.5590 levels. Sterling dropped against the dollar and the euro on Tuesday, after UK construction PMI slowed unexpectedly in July. It fell to $1.5583, down slightly on the day, having traded around $1.5606 beforehand. The euro inched up to 70.38 pence, up 0.1 percent on the day and slightly firmer than 70.28 before the data was released. The Bank of England is set to convene on interest rates on August 6th and for the first time it will publish Monetary Policy Committee (MPC) minutes and the Inflation Report all at the same time. Although no change in the interest rates is expected, given the recent verbal hawkishness from the MPC members, including David Miles and BOE’s governor Mark Carney, sterling is likely to be boosted should the inflation forecast be accompanied by a solid wage growth forecast, justifying monetary tightening markets shrugged off upbeat UK manufacturing PMI data which continued its expansion in July. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.NZDUSD is supported around 0.6600 levels and trading at 0.6602 levels and made intraday low at 0.6548 and high at 0.6608 levels. As oil prices steadied and RBA changed its tone, major currencies closely linked to commodities prices recovered some ground on Tuesday after a rough few weeks. The New Zealand dollar remains largely subdued versus its American counterpart following disappointing Chinese manufacturing PMI report which came in at lowest levels in two years. The latest Caixin China General Manufacturing PMI final reading stood at 47.8 versus 48.2 preliminary, witnessing sharpest deterioration in two years. Meanwhile, markets now await a set of NZD job data due tomorrow for the further directions. Initial support is seen at 0.6465 and resistance at 0.6789 levels.AUD/USD is supported around 0.7400 levels and trading at 0.7391 levels. It has made intraday high at 0.7393 levels and low at 0.7262 levels. The Australian dollar extended gains after the Reserve Bank of Australia (RBA) kept its policy unchanged, with rates untouched at 2%. Stevens further said that “domestic inflationary pressures have been contained” and that inflation is forecast “to remain consistent with the target over the next one to two years, even with a lower exchange rate.” Today Australia also released retail sales data. Retail sales rose a seasonally-adjusted 0.7% month-on-month in June, and 0.8% in volume terms, according to the Australian Bureau of Statistics, coming in stronger than the revised 0.4% growth in the value of sales recorded in May. Initial support is seen at 0.7225 and resistance at 0.7647 levels. Option expiry is at 0.7400 (229M).
Equities Recap
European stock markets lost ground, with French bank Credit Agricole and German carmaker BMW reporting disappointing results and as the recent drop in oil prices weighed on energy stocks. EUROSTOXX 50 Futures dropped 0.2 pct, DAX futures declined 0.1 pct, CAC 40 futures fell 0.3 pct,UK’s FTSE plunged 0.1 pct, France’s CAC was down 0.3 pct, Germany’s DAX dropped 0.3 pct in early trades.Shares in Greece, which plunged 16 percent on Monday after re-opening following a 5-week shutdown, also added to weak mood as they fell a further 4 percent.Japan’s Nikkei stock index kept losses to 0.14 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan had turned positive and extended gains late in the session as China shares rose. The Shanghai Composite Index ended more than 3.5 percent higher and the CSI300 index added 3.1 percent in a third day of gains.
Commodities Recap
Oil recovered to just above $50 a barrel on Tuesday after touching a six-month low in the previous session, although high global production and concern over the economic outlook in China weighed on the outlook. By 0849 GMT, Brent crude was up 57 cents at $50.09 and U.S. crude gained 61 cents to $45.78. Brent fell to $49.36 at one point on Monday, its lowest since Jan. 30.Gold hovered near a 5-1/2-year low on Tuesday, still pressured by expectations that the Federal Reserve was well on course to raise interest rates this year. Spot gold was up 0.2 percent at $1,087.70 an ounce by 0639 GMT, near last month’s low of $1,077, the weakest since February 2010. U.S. gold for December delivery slipped 0.2 percent to $1,087 an ounce.
Tresuries Recap
JGB prices finished the day higher, with the 7-yr to 10-yr zone outperforming the rest of the curve. JGBs opened modestly firmer in the wake of a continued fall in US TSY yields, stock prices, and crude oil prices overnight, and then extended their earlier gains steadily on the back of decent results of today’s monthly JPY2.4tn 10-yr JGB auction to re-open the current issue. Yields on the current and new 10-yr JGBs briefly fell as low as 0.39%, their lowest level since May 29, around 5 minutes before the MoF released the auction results at 03:45GMT (12:45JT). The 10s ended the afternoon session at the same level.
Swiss 10-year bond yields hit the lowest since April at -0.094 pct.UK Gilts opened 16 ticks higher than the settlement of 117.33, as they took their lead from external core markets. Any potential early selling against the robust Nationwide house prices for July and a bounce from Asian equity space was wiped out by some below forecast earnings in the eurozone.Australian government bond futures were mixed, with the 3-year bond contract down 1 tick at 98.100. The 10-year contract added 4 ticks to 97.2500, leading to a flattening of the curve. New Zealand government bond yields were as much as 5 basis points lower at the long end of the curve.
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