FX News Today
Asian Market Wrap: 10-year Treasury and JGB yields moved slightly higher, as is appetite improved and stock markets advanced across Asia with the Fed Chairman Powell injecting fresh life into equity markets with an upbeat assessment of the US economy. Positive leads from the US and a record high in the NASDAQ helped to underpin sentiment in Asia amid mixed earnings reports this week. Topix and Nikkei are up 0.48% and 0.71% respectively. The Hang Seng gained 0.20% so far and the CSI 300 0.59%, while the ASX is up 0.61%. Improved risk appetite saw 10-year Treasury yields rising 0.5 bp to 2.866% and 10-year JGB yields are up 0.7 bp at 0.035%, while yields declined in China, Australia and New Zealand. US stock futures suggest further gains in US markets today. The WTI future is down on the day and trading at USD 67.68 per barrel.
FX Update: The Dollar has traded firmer for a 2nd day, buoyed by an upbeat prognosis of the US economy and outlook by Fed chair Powell yesterday at his semi-annual testimony before the Senate Banking Committee. EURUSD descended to a 3-day low at 1.1631 while USDJPY ascended above 113.00 for the first time since January. AU-USD printed a 1-week low at 0.7363 and USDCAD a 3-week high at 1.3227. Powell’s remarks seemed to hit a sweet spot, having expressed optimism on the growth outlook while being somewhat circumscribed on inflation, which leaves the Fed on course for another 25 bp hike in September, and another in December, but not to the displeasure of equity investors, who have also been encouraged by positive Q2 corporate earnings announcements, and expectations for more to come. In the UK, the Prime Minister once again survived a key vote on a Brexit-related bill by the skin of her teeth last night (although lost one concerning the regulation of medicines after Brexit). So the PM and her government survives, but Brexit process is looking borderline disorderly.
Charts of the Day
Main Macro Events Today
- UK CPI & Retail Sales – Expectations – June CPI is expected to tick upward, to 2.6% y/y from the unexpected dip in the prior month to 2.4%, which would be consistent with BoE projections made in its May Inflation Report. As for Retail Sales, growth of 0.2% m/m in June is anticipated, down from the strong 1.3% m/m growth that was posted in May.
- Eurozone CPI – Expectations – Eurozone HICP inflation reached 2.0% y/y with the preliminary release, thus hitting ECB’s upper limit for price stability. However, with French as well as Italian HICP rates revised down by 0.1 percentage points with the final numbers, there is the chance of a downward revision to the final reading. Even with a slight downward revision we don’t expect ECB to be changing its key policy parameters which include the phasing out of net asset purchases by the end of the year.
- US Building Permits – Expectations – estimated to be falling 2.2% to 1.320 mln in June, following a 5.0% surge to a new cycle-high of 1.350 mln in May.
- Fed Chair Powell Testimony for a 2nd day
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Andria Pichidi
Market Analyst
HotForex
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