Americas Roundup: Dollar Ends July on Sour Note on Weak U.s. Labor Cost Data-August 1st, 2015

Market Roundup

  • US Employment Costs Q2 0.2%, f/c 0.6%, 0.7%-previous.
  •  US Chicago PMI Jul 54.7, f/c 50.5, 49.4.
  •  China futures regulator to crack down on “irregular” futures trading.
  •  Spain to hike civil servants’ salaries, pensions next year.
  •  Greek stock market aims to reopen on Monday, all shares, including banks, to trade on Monday.
  • Mexico’s Carstens says could raise rates at any time to defend peso.
  •  OPEC oil output rises 140,000 bpd in July, highest in recent history.
  •  US U Michigan Sentiment Jul 93.1, f/c 94, 93.3.
  • Canada GDP MM May -0.2%, f/c 0%, -0.1%-previous, weak as expected from BOC’s Poloz.

Looking Ahead – Economic Data (GMT)

  • 23:30 Australia AIG Manufacturing Index Jul 44.2-previous
  •  00:30 Australia TD-MI Inflation Gauge Jul 0.10%-previous
  • 01:00 China NBS Non-Manufacturing PMI* Jul 53.8-previous
  •  01:00 China NBS Manufacturing PMI* Jul f/c 50.2, 50.2-previous
  • 01:00 Australia HIA New Home Sales m/m Jun -2.30%-previous
  •  01:30 Australia ANZ Newspaper Job Ads Jul -1.30%-previous
  •  01:30 Australia ANZ Internet Job Ads Jul 1.40%-previous
  • 01:35 Japan Nikkei Manufacturing PMI Jul 51.4-previous
  •  01:45 China Caixin Manufacturing PMI Final Jul 48.2-previous

Looking Ahead – Events, Other Releases (GMT)

  • No Significant Events

Currency SummariesEUR/USD is supported around 1.0970 levels and currently trading at 1.1034 levels. It has made session high at 1.1111 and lows at 1.0998 levels. The euro rebounded strongly against the greenback following Thursday’s losses in the wake of encouraging inflation data in the euro zone. Euro turned higher as the greenback stumbled on the disappointing 0.2 percent gain in labor costs in the second quarter. Analysts had reckoned a rise of at least 0.5 percent in the employment cost index would seal the deal for the Fed to hike rates, perhaps as early as September. The latest ECI reading also tempered the optimism from Thursday’s report on second-quarter U.S. growth. The euro rose 1.4 percent against the dollar at $1.1105, reducing its monthly loss to 0.5 percent. Fed policy-makers have been concerned about the absence of wage pressure even as the jobless rate hit its lowest in over seven years in June. The dollar rebounded strongly against euro in the in the late New York session by gaining almost 100 pips against euro and breaking daily support level at 1.0970. To the upside, immediate resistance can be seen at 1.1015. To the downside, major support level is located at 1.0915 levels.GBP/USD is supported around 1.5525 levels and currently trading at 1.5623 levels. It has made session high at 1.5684 and low at 1.5552 levels. Sterling edged higher against US dollar on Friday, after Employment Cost Index hit historically low figures which printed 0.2% against 0.6%. Against the broadly weaker dollar, sterling was up 0.1 percent at $1.5625, having hit a four-week high of $1.5691 on Wednesday. Data out of Britain has been robust, with consumer demand holding up well and growth accelerating in the second quarter. Bank of England Governor Mark Carney has indicated a decision on rates will come around the turn of the year. The Bank has said publicly that it does not have to wait for the Fed to hike rates. But many reckon that, behind closed doors, it is concerned that if it were to raise rates first, the already-strong pound would appreciate further, hurting exporters and pushing down consumer prices. To the upside, immediate resistance can be seen at 1.5670. To the downside, major support level is located at 1.5460 levels.USD/JPY is supported around 123.50 levels and currently trading at 123.93 levels. It has made session high at 124.37 and low at 123.50 levels. US dollar slipped to daily lows against Japanese yen on Friday after weak US employment cost index figures. The pair slipped almost 50 pips immediately after the data was released. The pair gave up all the gain it made in the last two days. In the late New York session the dollar recovered some ground after renewed buying optimism across the board for dollar. On Friday Bank of Japan Governor Haruhiko Kuroda said, he never intended to put a floor under the yen and, like many Japanese policymakers, would prefer to see the currency weaken further rather than bounce up sharply. Kuroda sparked a yen rally last month when he told parliament the currency’s real, effective exchange rate was already “very low” and there was not much room to fall further. While he later stressed he didn’t intend to draw any “line in the sand” for the dollar/yen, the pair has since been capped at 125 yen, around the level when he made the remark. The BOJ has not publicly commented on what investors began to perceive as the “Kuroda line”. But foreign investors who have peppered BOJ officials with queries about it have been told informally that no such line exists. To the upside, immediate resistance can be seen at 124.30. To the downside, major support level is located at 123.50 levels.USD/CAD is supported around 1.2910 levels and currently trading at 1.3037 levels. It has made session high at 1.3092 and low at 1.2940 levels. The Canadian dollar was firmer against its U.S. counterpart in the early New York session on Friday, after figures that showed the Canadian economy shrank in May for the fifth straight month were overshadowed by U.S. data that weakened the greenback. The loonie flirted briefly with its weakest levels in more than a decade following the Canadian gross domestic product data, the latest sign the country was likely in recession in the first half of the year. The U.S. dollar fell against a basket of major currencies after figures showed employment costs rose less than forecast in the second quarter, recording the smallest increase in 33 years, which pared bets the Federal Reserve will resume raising interest rates later this year. In the late New York session dollar rebounded against Canadian dollar, after renewed buying interest shown by investor’s for the greenback. To the upside, immediate resistance can be seen at 1.3100. To the downside, major support level is located at 1.2970 levels.Equities RecapEuropean stocks ended the week marginally up after Inflation in the Eurozone remained unchanged in July. UK’s benchmark FTSE 100 gained 0.5 percent at close, the pan-European FTSEurofirst 300 closed, up by 0.1 percent, Germany’s Dax closed up by 0.4 percent, France’s CAC closed up at 0.7 percent, Italy’s FTSE MIB up closed up by 0.6 percent. Meanwhile, Spain’s IBEX 35 was up by 0.1 percent at close.US stocks US stocks slipped on Friday in the backdrop of falling oil price and disappointing corporate earnings. The Dow Jones Industrial Average closed down by 0.29 percent, S&P 500 closed down by 0.29,Nasdaq Composite closed down 0.1 percent.Treasuries RecapU.S. Treasuries rallied on Friday after data showed labor costs rose in the second quarter by the smallest margin on record, putting a dent in the argument for the U.S. Federal Reserve to raise interest rates in September.The two-year Treasury note yield fell to a low of 0.6610 percent from 0.7398 after the ECI data. It last traded around 0.6685 percent, up 4/32 of a point in price. Benchmark 10-year Treasury yields fell to a three-week low of 2.1850 percent, the price up 23/32 of a point. The 30-year Treasury popped higher, rising more than a full point in price, driving the yield down to a fresh two-month nadir of 2.8950 percent. It was last up 30/32 of a point, yielding 2.9054 percent. Commodities RecapGold reversed earlier losses on Friday as the dollar fell after weaker-than-expected U.S. data, but prices remained on course for their biggest monthly decline in more than two years on expectations the Federal Reserve will soon raise interest rates.Spot gold lower initially, rose as much as 1.4 percent to a session high of $1,103.13 an ounce, before trading up 0.8 percent at $1,095.80 by 2:34 p.m. EDT (1834 GMT).U.S. gold for August delivery climbed 0.6 percent to settle at $1,094.90 an ounce.Investor confidence was shaken last week with when bullion prices tumbled to a 5-1/2-year low of $1,077 on July 24. The metal has lost 6.4 percent so far this month, its steepest decline since June 2013.U.S. crude posted its biggest monthly drop since the 2008 financial crisis on Friday after a string of losses in July triggered by China’s stock market slump and signs that top Middle East producers were pumping crude at record levels.Oil prices fell for a fifth straight week, U.S. crude settled down $1.40, or almost 3 percent, at $47.32 a barrel. It slid more than 2 percent on the week.Through July, U.S. crude was down 21 percent, its largest monthly decline since October 2008, when oil had an epic collapse at the outbreak of the financial crisis.Brent settled down $1.10, or 2 percent, at $52.21 a barrel. It lost 5 percent on the week and 18 percent on the month.

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