Europe Roundup: Usd Strong on fED Rate Hike Bets, Gbp slips on Month-End Flows – July 31st, 2015

Market Roundup

  • EUR/USD rebound to 1.0977 from Thursday 1.0894 low.
  • Kiwi takes another step lower, 0.6536, eyes July 16 0.6498 low.
  • Germany June Retail Sales 5.1% y/y vs -0.4% previous, -2.3% m/m vs +0.5% previous, +0.3% expected.
  • Euro zone July flash CPI 0.2% y/y vs 0.2% previous, 0.2% expected.
  • Euro zone June Unemployment rate 11.1% vs 11.1% previous, 11.1% expected.
  • UK July GFK consumer confidence +4, +5 eyed, June +7, global econ woes cited.
  • SNB says will not pay dividend for 2015 if results don’t improve.
  • BOJ sees weak yen as beneficial for economy.
  • BOJ happy with yen fall as long as pace is moderate.
  • Japan June core CPI +0.1% y/y, Tokyo July core -0.1%, unchanged eyed for both.
  • New Zealand July ANZ biz confidence -15.3%, lowest reading since mid-’09.
  • US bond funds $3.5 bln, stock funds $1.8 bln outflows latest week.
  • China security regulator restricts 24 trading accounts for suspected trade irregularities.
  • China Agricultural Development Bank seeking PBOC funding support.

Economic Data Ahead

  • (0830 ET/1230 GMT) Canada May GDP m/m, consensus 0.0%, -0.1% previous.
  • (0830 ET/1230 GMT) Employment Cost Index Q2 consensus +0.6% q/q, previous +0.7%.
  • (0945 ET/1345 GMT) Chicago PMI consensus 50.5, previous 49.4.
  • (1000 ET/1400 GMT) University of Michigan Sentix Index July consensus 94.0, previous 93.3.
  • (1000 ET/1400 GMT) University of Michigan Current Condition Index July consensus 106.3, previous 106.
  • (1000 ET/1400 GMT) University of Michigan Expected Index Jul consensus 86.0, previous 85.2.

Key Events Ahead

  • (1145 ET/1545 GMT) Fed Trade ops 30yr F.Mae/Fr.Mac max $1.950bln.

FX Recap

USD: The dollar steadied near a 1-week high against a basket of currencies on Friday and was on track for an almost 2 pct monthly rise, with the latest U.S. growth data supporting the case for the US Fed to hike rates this year. It was up 0.1 percent at 124.26 yen on Friday, close to the 7-week high of 124.58 yen set on Thursday. The dollar index traded at 97.585 on Friday after rising to as high as 97.773 on Thursday.EUR/USD is supported below 1.1000 levels and currently trading at 1.0982 levels. It has made intraday high at 1.0987 and low at 1.0920 levels. Greece could take the centre stage ahead of the weekend due to the Greek parliament fallouts and the IMF recently saying that they will not back a Greek debt program unless Euro zone creditors reach “explicit and concrete’ agreement. The pair is regaining some of the recent ground lost, after the FOMC meeting and decent US GDP figures have boosted the demand for the US dollar. Higher-than-expected consumer prices in the euro area during July have lent support to the euro, collaborating with the pair’s upside at the same time. EU inflation figures show that yearly basis it remains at 0.2%, albeit the Core CPI for July came out at 0.9% slightly above expected. Initial support is seen around at 1.0789 and resistance at 1.1195 levels. Option expiries are at 1.0850 (418M), 1.0900-05 (500M), 1.1000 (2.38BLN).USD/JPY is supported above 124.00 levels and posted a high of 124.29 levels. It has made intraday low at 123.89 and currently trading at 123.96 levels. The dollar-yen pair retreated in Asia, after the yen bulls jumped back into the bids cheering a tad better than expectations Japan’s national CPI print. Japan’s national CPI excluding fresh food rose 0.1% from a year earlier, the statistics bureau said Friday. Markets had estimated a flat reading. Looking ahead, Employment Cost Index (ECI) from the US will shed more light on the stubbornly slow wage growth in the face of a substantial tightening of the jobs market. The baseline scenario is for a 0.6% increase in labour costs. Initial resistance is seen at 124.57 and support is seen at 120.63 levels. Option expiries are at 123.50 (678M), 124.00 (485M), 125.00 (1.6BLN).GBP/USD is supported below $1.5600 levels. It made an intraday high at 1.5614 and low at 1.5548 levels. Pair is currently trading at 1.5582 levels. Sterling slipped on month-end outflows and investors booking profits on a rally that took it to its highest in four weeks against the greenback earlier this week. Against the dollar, sterling was down 0.2 pct at $1.5565, having hit a 4-week high of $1.5691 on Wednesday. The euro was up 0.25 percent at 70.26 pence. 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. 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 0.6554 levels and made intraday low at 0.6535 and high at 0.6614 levels. As the ANZ Business outlook indicator showed a significant decline in private sector confidence, the kiwi reflected the disappointment and declined. As the ANZ Business outlook showed on Friday, confidence in the private sector dropped the most since April 2009 in July. Although other indicators held up better, the economy still points to a slowdown, bringing worries to the market related to the island’s economy. Initial support is seen at 0.6465 and resistance at 0.6789 levels. Option expiry is at 0.6650 (389M).AUD/USD is supported below 0.7300 levels and trading at 0.7253 levels. It has made intraday high at 0.7308 levels and low at 0.7244 levels. The Australian dollar struggled near six-year lows on Friday as falling commodity prices, jitters about China and rising speculation of a U.S. interest rate hike set the stage for the largest monthly fall since October last year. Today Australia released PPI data. Australia Producer Price Index (QoQ) declined to 0.3% from previous 0.5% while the country’s private sector credit (YoY) fell from previous 6.2% to 5.9% in June. Initial support is seen at 0.7225 and resistance at 0.7647 levels. Option expiries are at 0.7250 (885M), 0.7275-80 (590M).

Equity Recap

European markets relieved that Greece looks to be staying in the euro after its last-minute deal this month, saw a solid start to the day to cap a more than 4 percent monthly rise for stocks.Europe’s FTSEurofirst 300 climbed 0.1 pct at 1,572.97 points in early trading, Eurostoxx 50 futures was up 0.3 pct, Germany’s DAX rose 0.1 pc. Britain’s FTSE 100 was up 0.3 pct and France’s CAC 40 climbed 0.3 pct.Tokyo’s Nikkei average closed up 0.30 pct at 20,585.24, Taiwan stocks ended up 0.2 pct at 8,665.34 points. China’s CSI300 index closed flat at 3,816.70 points, HK’s Hang Seng Index closed up 0.6 pct at 24,636.28 points, while Shanghai Composite Index  lost 1 percent.

Commodities Recap

Oil prices dropped as concern over global oversupply intensified after the head of oil producers’ cartel OPEC indicated there would be no cuts in production despite a huge global oversupply. Brent was down 70 cents at $52.61 a barrel by noon after settling 7 cents lower in the previous session. U.S. light crude was down 90 cents at $47.62 a barrel.Gold fell over 7 percent on the month at $1,081.95 an ounce as it chalked up its longest run of week-on-week falls in 16 years. Spot gold was down 0.6 percent to $1,081.30 an ounce by noon, losing 1.6 percent for the week. U.S. gold for August delivery fell 0.9 percent to $1,079.10 an ounce.

Treasuries Recap

JGB prices closed the day steady to slightly higher in relatively quiet trading. Today, as widely expected, the BoJ offered to buy JPY375bn of JGBs in the 1-yr to 5-yr zone, JPY425bn of JGBs in the 3-yr to 5-yr zone, and JPY400bn of JGBs in the 5-yr to 10-yr zone under its massive JGB purchase program. The offer-to-cover ratio in the 5-yr to 10-yr zone rose again sharply from 3.58x last time (July 27) to 4.61x, the highest level since May 19, 2014 (4.70x for the same JPY400bn). But the results had limited negative impact on JGBs, as one large nationwide public pension fund purchased JGBs across the curve today for its turn-of-the-month duration adjustments. Super-long JGBs turned firmer after lunch, and then extended their earlier gains modestly in late afternoon trading, finishing the afternoon session near their intraday lows (20s at 1.155%, 30s at 1.405%).Italian 10-year bond yields declined 1 basis point to 1.83 percent, on track for a fall over 50 bps this month, its best run since April 2013. Other euro zone bond yields, including the bloc’s benchmark Germany, were broadly unchanged. Greek equivalents were the best performers down 7 bps at 12.16 percent.UK Gilts opened 4 ticks higher than the settlement of 116.44, as month end and IMF concerns about whether Greece has the resolve to deliver a concrete reform plan to unlock further funding proved supportive. 10-year cash yields are virtually unchanged from the close last night at 1.97% and are sitting rather comfortably in the middle of the recent range of 1.95% to 2.00%.New Zealand government bond yields were as much as 7.5 basis points lower at the long end of the curve. Australian government bond futures climbed, with the 3-year bond contract up 3 ticks at 98.080. The 10-year contract shot up 7.5 ticks to 97.1950, leading to a bullish flattening of the curve.

The material has been provided by InstaForex Company –