• Asia roundup: antipodeans halts 9-day losing streak on upbeat home prices, greenback at 2-year peak as FED dampens bets on more rate cuts, Asian shares plunge - Thursday, August 1st, 2019

    Source: FxWire Pro - Media Round Ups / 04 Aug 2019 08:23:52   America/New_York

    Market Roundup

    • Fed signals rate cuts may be limited
       
    • Fonterra's June milk output in New Zealand jumps 14%
       
    • Australian home prices find a floor in July, outlook improves
       
    • Dollar hits two-year high vs euro
       
    • Oil drops as Fed dampens bets on more rate cuts
       
    • Gold slides to a two-week low as Fed cuts interest rates
       

    Economic Data Ahead

    • (0315 ET/0715 GMT) Spain Markit manufacturing PMI July
       
    • (0330 ET/0730 GMT) Switzerland SVME purchasing managers index July
       
    • (0345 ET/0745 GMT) Italy Markit manufacturing PMI July
       
    • (0350 ET/0750 GMT) France Markit manufacturing PMI July
       
    • (0355 ET/0755 GMT) Germany Markit manufacturing PMI July
       
    • (0400 ET/0800 GMT) EZ Markit manufacturing PMI July
       
    • (0430 ET/0830 GMT) UK Markit manufacturing PMI July
       

    Key Events Ahead

    • (0700 ET/1100 GMT) BoE interest rate decision
       
    • (0700 ET/1100 GMT) BoE meeting minutes
       
    • (0700 ET/1100 GMT) BoE Governor Carney's speech
       

    FX Beat

    DXY: The dollar index surged to a 2-year peak after the Federal Reserve cut interest rates, but Chairman Jerome Powell stated that the move might not be the start of a lengthy campaign to support the economy against global risks. The greenback against a basket of currencies traded 0.3 percent up at 98.81, having touched a high of 98.93 earlier, its highest since May 15, 2017.

    EUR/USD: The euro slumped to a 2-year low as the greenback rallied across the board after U.S. central bank lowered its benchmark overnight lending rate to a target range of 2.00 percent to 2.25 percent but ruled out a lengthy easing cycle. Moreover, data showing Eurozone economic growth halved in the second quarter and inflation slowed sharply in July, reinforced market expectations that the European Central Bank will further ease monetary policy in September. The European currency traded 0.2 percent down at 1.1049, having touched a low of 1.1033 earlier, its lowest since May 16 2017. Investors’ attention will remain on Markit manufacturing PMI's from the Eurozone economies, ahead of the U.S. unemployment benefit claims, construction spending and manufacturing PMI from both Markit and ISM. Immediate resistance is located at 1.1084 (38.2% retracement of 1.1162 and 1.1033), a break above targets 1.1114 (61.8% retracement). On the downside, support is seen at 1.0973 (May 16, 2017, Low), a break below could drag it below 1.0820 (Apr. 24 2017 Low).

    USD/JPY: The dollar rallied to a 2-month peak as the U.S. Federal Reserve cut rates by 25 basis points, as widely expected, to support the economy against risks including trade friction. Investors still see one more rate cut this year, however, Chairman Jerome Powell's comments during the press conference slashed expectations the Fed is prepared to lower rates well into next year. The major was trading 0.4 percent up at 109.18, having hit a high of 109.31 earlier, its highest since May 31. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims, construction spending and manufacturing PMI from both Markit and ISM. Immediate resistance is located at 109.54 (Jan. 29 High), a break above targets 109.92 (May 30 High). On the downside, support is seen at 108.50 (61.8% retracement of 107.21 and 109.31), a break below could take it lower at 108.26 (50% retracement).

    GBP/USD: Sterling plunged to a 2-1/2 year low, weighed down by broad-based greenback strength and growing speculation Britain will go through with a no-deal Brexit. Investors now await the Bank of England policy meeting later in the day, where it is almost certain that the Monetary Policy Committee will vote 9-0 to keep rates on hold at 0.75 percent. The major traded 0.2 percent down at 1.2132, having hit a low of 1.2100 earlier, it’s lowest since Jan. 17 2017. Investors’ attention will remain on the development surrounding Brexit and BoE policy decision, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2200 (23.2% retracement of 1.2522 and 1.2100), a break above could take it near 1.2263 (38.2% retracement). On the downside, support is seen at 1.2082 (Oct. 25, 2016, Low), a break below targets 1.2017 (Jan 17, 2017, Low). Against the euro, the pound was trading 0.1 percent down at 91.10 pence, having hit a low of 91.90 on Tuesday, it’s lowest since Sept 2017.

    AUD/USD: The Australian dollar rose, halting a 9-day losing streak after domestic data showed home prices stabilised in July, providing some relief to the Reserve Bank of Australia. Earlier in the day, the major tumbled to a 7-month low amid growing expectations RBA will be forced into cutting official interest rates to a new low of 0.75 per cent by December after the inflation just rose by 0.6 percent in the June quarter. The Aussie trades 0.05 percent up at 0.6847, having hit a low of 0.6828 earlier, it’s lowest since Jan. 3. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6800, a break below targets 0.6744 (Jan 3 Low). On the upside, resistance is located at 0.6888 (23.6% retracement of 0.7082 and 0.6828), a break above could take it near 0.6955 (50% retracement).

    NZD/USD: The New Zealand dollar declined to a fresh 6-week trough, as the greenback rallied on Federal Reserve's policy stance. The major attempted a minor recovery after Dairy group Fonterra said milk production in June rose 13.9 percent year-on-year, as weather conditions improved collection in the current season. The Kiwi trades flat at 0.6555, having touched a low of 0.6534 earlier, its lowest level June 20. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6594 (23.6% retracement of 0.6790 and 0.6534), a break above could take it near 0.6662 (50.0% retracement). On the downside, support is seen at 0.6513 (July 19 Low), a break below could drag it below 0.6487 (June 14 Low).

    Equities Recap

    Asian shares plunged to a 6-week low, while the greenback rallied to 2-year highs as the U.S. Federal Reserve slashed market expectations of a lengthy easing cycle following a 25 basis-point rate cut.

    MSCI's broadest index of Asia-Pacific shares outside Japan slumped 0.4 percent.

    Tokyo's Nikkei rose 0.1 percent to 21,540.99 points, Australia's S&P/ASX 200 index fell 0.4 percent to 6,788.90 points and South Korea's KOSPI plunged 0.3 percent to 2,018.91 points.

    Shanghai composite index eased 0.7 percent to 2,912.29 points, while CSI 300 index traded 0.7 percent down at 3,808.09 points.

    Hong Kong’s Hang Seng traded 0.9 percent lower at 27,536.74 points. Taiwan shares shed 0.9 percent to 10,731.75 points.

    Commodities Recap

    Crude oil prices steadied after declining from a 2-week peak in the previous session after the U.S. Federal Reserve dampened hopes for a string of rate cuts and U.S.-China trade talks ended without progress. International benchmark Brent crude was trading 0.2 percent higher at $64.35 per barrel by 0441 GMT, having hit a high of $65.41 on Wednesday, its highest since July 16. U.S. West Texas Intermediate was trading 0.05 percent up at $57.87 a barrel, after rising as high as $58.79 on Wednesday, its highest since the July 16.

    Gold prices plunged to a 2-week low after the U.S. Federal Reserve cut rates by 25 basis points as expected but tampered market expectations of a lengthy easing cycle. Spot gold was 0.2 percent down at $1,409.35 per ounce by 0444 GMT, having touched a low of $1,404.16 earlier, its lowest since July 17. U.S. gold futures slipped 1.2 percent to $1,421 an ounce.

    Treasuries Recap

    The Japanese government bond prices eased, with the benchmark 10-year JGB futures falling 0.13 point to 153.67. The 10-year cash JGB yield rose 1.5 basis points to minus 0.145 percent. The five-year JGB yield rose 1.5 basis points to minus 0.230 percent, while the two-year JGB yield rose 1 basis point to minus 0.200 percent. The 20-year yield rose just 0.5 basis point to 0.205 percent, while the 30-year JGB yield was flat at 0.350 percent.

    The Australian 10-year government bond yield hovered near record-low during the Asian session after the Federal Reserve cut its benchmark interest rate by 25 basis points for the first time in a decade, also signalling for further rate cuts in the coming months. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped nearly 1 basis point to 1.198 percent, the yield on the long-term 30-year bond hovered around 1.862 percent and the yield on short-term 2-year also remained nearly steady at 0.865 percent.

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