Daily Market Update 2nd August 2016
OVERNIGHT NEWS
- US:
- U.S. manufacturing activity was mixed during July. The final reading of Markit's PMI jumped to 52.9 (Mkt est: 52.9) from 51.3 in June however the Institute for Supply Management Manufacturing Index slipped to 52.6 (Mkt est: 53.0) from 53.2.
- ISM the new-orders index edged down to 56.9 from 57.0, the production index improved to 55.4 from 54.7, the new export orders index dropped to 52.5 from 53.5 and the employment index declined to 49.4 from 50.4. A total of 11 industries tracked by ISM reported growth led by textile mills, and seven sectors reported contraction including appliances and transportation equipment
- AUSTRALIA:
- RBA meets today and the market is pricing a 74.5% chance of cut to set the rate at a record low of 1.50%. Philip Lowe takes over as new RBA governor in seven weeks and the government focuses on reducing a budget gap and preserving the country’s AAA rating.
- EUROZONE:
- The EC said it will hold a dialog with the European Parliament next month on the potential suspension of structural funds for Spain and Portugal. The two countries last week escaped fines for missing budget targets.
FOREIGN EXCHANGE (INDICATIVE RATES)
| Currency | Last | % Change | Overnight Range |
|---|---|---|---|
| DXY | 95.71 | 0.20% | 95.537 - 95.822 |
| EURUSD | 1.1173 | -0.09% | 1.1155 - 1.1181 |
| USDJPY | 102.28 | -0.27% | 102.12 - 102.68 |
| AUDUSD | 0.7533 | -0.97% | 0.7527 - 0.7615 |
| GBPUSD | 1.3191 | -0.66% | 1.3163 - 1.3273 |
Commodities (INDICATIVE RATES)
| Currency | Price USD | % Change | Overnight Range |
|---|---|---|---|
| Gold | 1352.64 | 0.33% | 1346.45 - 1354.25 |
| Silver | 20.42 | 0.44% | 20.2984 - 20.6502 |
| Oil (BRENT) | 42.35 | 2.75% | 41.87 - 49.22 |
| Oil (WTI) | 40.16 | 3.07% | 39.82 - 41.88 |
COMMODITIES
Precious Metals: Gold gained while silver futures finished at a two-year high, as weaker-than-expected economic data may prompt Fed to hold rates.
Oil: WTI futures traded briefly below key psychological level of $40/bbl and settled below 200-DMA for first time since April on fears that supply glut amplified. JPMorgan cuts both WTI and Brent forecast this quarter, while Societe Generale notes oil to bottom out in high $30 range.
FOREX NEWS
- AUDUSD found good selling interest at 0.7600 with the market pricing more cuts for the RBA meeting today. We could see another 50 pips lower on a cut but the rest of the move will depend on the statement afterward. The main resistance is at 0.7600/0.7650 and there is nothing below until the 200d MA at 0.7631. The risk reward still favour short at this level
- NZD dropped overnight finding good supply at 0.7200 following the strong rally seen on Friday. Yesterday the NZ treasury said that Q2 GDP was stronger than expected
- GBP remains heavy ahead of the BOE meeting this week pricing already a 25 bps cuts. Some economists even see 50 bps and more QE. The main support to break is at 1.3000
- USDCAD rallied on the back of lower oil overnight. We are seeing 2 way of thoughts for USDCAD with many ideas floating around to be long USD but the main resistance at the 200d MA at 1.3315 holds well for the moment and unless Oil prices goes into a freefall, we should see good selling on rallies
Dollar hovers near three-week low, Aussie eyes RBA
The dollar hovered near three-week lows on Tuesday after soft U.S. economic data undermined the case for an early Federal Reserve rate hike while the Australian dollar braced for the probability of a policy easing later in the day.
The dollar index against a basket of six major currencies .DXY =USD stood at 95.758, having fallen to as low as 95.384 last week when it posted its biggest fall in three months.
The index has struggled to stage a meaningful recovery since after the release of very weak U.S. gross domestic product growth for the June quarter late last week.
Weaker-than-expected manufacturing data released on Monday continued to hold the greenback down. The influential Institute for Supply Management's (ISM) index of national factory activity dropped to 52.6 in July from 53.2 in June, below market expectations of 53.0.
Fed funds futures are pricing in less than a 40 percent chance of an interest rate hike by December.
Against the yen, the dollar JPY= changed hands at 102.40 yen, near its three-week low hit on Friday after the Bank of Japan disappointed markets with a less aggressive than expected easing.
Japanese Prime Minister Shinzo Abe is also due to formerly unveil his economic package on Tuesday, which is expected to include 7.5 trillion yen of fiscal spending, though this is not expected to affect the yen much.
"The size and rough contents of the package are already known so I doubt it will move markets. The dollar/yen is likely to fall unless there are clearer signs of a rate hike by the Fed," said Shinichiro Kadota, senior FX and rates strategist at Barclays Securities Japan.
The euro EUR= traded at $1.1165, having moved little so far this week.
Meanwhile, the Australian dollar AUD=D4 was on hold as traders looked to a policy announcement from the Reserve Bank of Australia at 0430 GMT, which is expected to cut interest rates to a new low.
Local interbank futures <0#YIB:> put the probability of a 25 basis point cut at around 60 percent.
While expectations of a rate cut have dented the Aussie dollar, the currency remains relatively well-supported due in part to its still relatively high yield among its developed market peers.
The Aussie 10-year bonds yield stood just above 1.8 percent AU10YT=RR, compared with 1.5 percent for its U.S. counterpart US10YT=RR and below zero percent in Japan JP10YTN=JBTC and Germany DE10YT=TWEB.
Read More at www.reuters.com
