The re-ignition of the US-China trade worries following US’ Navarro’s comments triggered a fresh round of risk-aversion across the financial markets in Asia this Wednesday, sending the US Treasury yields deeper into losses. The US dollar was dragged down across the board by the selling in the US rates while Gold prices rallied hard to retest 1440 barrier, as global growth concerns also returned to markets.
Across the fx board, the Yen was the strongest and drove the USD/JPY pair lower to pre-G20 levels near107.55 region while the Aussie traded flat around the 0.70 handle amid risk-off and mixed Australian and Chinese macro data. The Australian trade surplus showed a bigger-than-expected expansion while the Chinese June Caixin Services PMI hit fresh 4-month lows. The Kiwi, however, clung onto gains amid stabilizing oil prices but the upside attempts were capped below 0.67 handle.
Meanwhile, both the European currencies, the Euro and the pound, attempted a tepid recovery but lacked follow-through ahead of the Services PMI reports. The Swiss franc traded better bid vs. the greenback around 0.9850 while the Loonie was little changed just ahead of the 1.31 handle.
Main Topics in Asia
US Pres. Trump: “Iran now breached their stockpile limit. Not good!”
US Pres. Trump’s negotiator signals flexibility in North Korea talks – Axios
Gold bulls again run out of steam near $1,440
USD/IDR: 4H 100MA, 50.00% Fibo. question the rise towards falling wedge resistance
WTI prices plummeted overnight from the $60 handle
Morgan Stanley cuts long-term Brent price forecast
BOJ has trimmed its purchases of JBS maturing in 3-5 and 10-25 years
Aussie May Trade Balance: surplus of AUD$5.745m
Australian May Business Approvals fell by 0.5%
China’s Caixin services PMI drops to 52.0 in June, surprises negatively
BOJ’s Funo: Must maintain sufficiently low rates for prolonged period
BOJ’s Funo: Japan’s economy may be affected by overseas slowdown for time being
US Commerce Dept: US to impose duties on steel exported from Vietnam
US government staff told treat Huawei as blacklisted – Reuters
US-China trade war could reignite any time – SCMP
Key Focus Ahead
Markets brace for a busy event calendar this Wednesday, as a raft of Services PMI reports from both sides of Atlantic are slated for released amid other key macro releases. The European session will see the Euro area Markit Services PMI numbers, the main focus on the German and UK PMIs due at 0755 GMT and 0830 GMT respectively.
Ahead of the US open, the US ADP Employment Change report, due at 1215 GMT will grab some attention, soon followed by the US Trade Balance, Jobless Claims and The Canadian Trade Report at 1230 GMT. Meanwhile, the US Markit and ISM Services PMI data will drop in around 1400 GMT alongside the Factory Orders release. Also, in focus remains the US EIA Crude Oil Stocks data due for release at 1430 GMT.
Apart from the economic releases, the sentiment around the fx space will be also influenced by the renewed US-China trade worries and ongoing global economic growth concerns while the UK/ EU political headlines will also garner some attention.
EUR/USD: Sidelined below 38.2 Fib, focus on German services PMI
The shared currency is struggling for direction ahead of the European session with the EUR/USD pair sidelined below 1.1296 – the 38.2% Fibonacci retracement of the rally from 1.1107-1.1412. Focus on German services PMI.
GBP/USD: Sellers catch a breath near 2-week low, all eyes on UK Services PMI
GBP/USD retraces latest declines amid lack of fresh clues from the UK. Risk-off continues to weigh on the US rates, dollar. Trade and political headlines, UK/US Services PMI act as the key catalysts to follow.
ADP Employment Preview: The turn of the tide?
The US business clients of ADP are predicted to add 150, 000 new employees to their payrolls in June after 27,000 were hired in May.
US Services PMI Preview: Worry is normal but contained
The headline Purchasing Manager’s Index is predicted to drop to 55.9 in June from 56.9 in May. The business activity index will fall to 60.0 from 61.2.
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