- Forex today was a little sour in terms of risk where Wall Street’s decline, (FANGs sector), ricocheted across the board.
- The yen was catching a modest bid early in the day before giving some ground back to a downtrodden greenback that had fallen within the day’s range of between 94.2600-94.7560.
US yields were climbing into the NY morning but gave way in the 2yrs that ended a fraction lower at 2.66% and the 10yr yields dropped lower to but around 2.97%, holding there for a fifth day and keep knocking on the 3% mark. The Fed’s fund futures were little changed, pricing about an 80% chance of a 26 September rate rise following the positive GDP numbers on Friday which are forcing rate markets to price in a more aggressive Fed path.
Meanwhile, the week ahead’s events are keeping investors on the sidelines ad we start with the BoJ, where, there will be no fixed time. Traders will be looking for tweaks to their policy stance, although any adjustments to, say, their guidance on monthly bond JGB and equity ETF purchases, is likely seen as inconsequential against weakening Asian currency bloc as a whole. Afterall, they will not likely be changing the basic target of 0% yield on the 10-year bond although inflation forecasts are likely to be lowered. As per price action in NY, there was little movement in the yen despite soured risk on Wall Street. The pair was oscillating around 111.00 for the most part and awaiting the BoJ decision.
Currency action
The single currency outperformed with the street eyeing the ECB as next to make a move should the BoJ make any material adjustments. The euro rallied on the heels of a spike in the Bund yields, getting back above 1.17 the figure, (clearing the 10, 21 & 55-DMAs as well as the daily cloud base), and closing around 0.4% higher for the day on a weaker dollar and a tighter DE/US spread. Sterling was chasing a weaker dollar around as well, climbing from 1.3096 to a high of 1.3152 as the London fix high before buckling back to 1.3127, firming up into NorAm close and ending at 1.3142 +0.24% within a NY range of between 1.3151-1.3107. The cross was yet again bid on the back of Brexit concerns weighing on the pound which continue to simmer away in the background, despite the market seeing an 86% chance of 25bp hike this Thursday- (BOEWATCH). EUR/GBP ended the NY day at 0.8912 +0.25% within the 0.8919-04 NY range.
As for the commodity sector, this was mixed. The CRB was higher, stuck around the 200-D SMA that continues to support on dips. Copper was heavy as a derivative of the Chinese equity markets in decline again where the Aussie trades as a proxy. Despite the weaker dollar, AUD/USD was unable to make any meaningful advance from the 21/10-D SMAs and continues to look at risk while below the 55-D SMA and could base.
Key notes in the US:
- Wall Street closes in red as tech stocks extend losses
- Possible BoJ options for today – Goldman Sachs
Key events ahead in Asia:
Analysts at Westpac offerd their outlook for today’s key events in Asia as follows:
- “At 11:30am Syd/9:30am Sing/HK, Australia June dwelling approvals are expected to be flat (Westpac +1.0%) after a drop of 3.2% in May characterised by some unusual swings at the state level. June private credit is expected to rise 0.3% as housing credit continues to slow.
- China’s official July manufacturing and services sentiment surveys are released at 11amSyd/9am local, with consensus for little change at 51.3 and 54.9 respectively.
- The BOJ meeting (no fixed time) will see the market focus on possible tweaks to their policy stance such as guidance on monthly bond JGB and equity ETF purchases but without changing the basic target of 0% yield on the 10 year bond. Inflation forecasts are likely to be lowered.”
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