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Europe Roundup: USD rises from 2-week low versus Yen; Fed's meeting in focus - July 28th, 2015
28 July 2015, 14:06
Market Roundup
EUR/USD is supported below 1.1100 levels and currently trading at 1.1032 levels. It has made intraday high at 1.1098 and low at 1.1029 levels. The Euro has surrendered initial gains amidst thin trade and scarce volatility while a cautious tone amongst market participants is growing bigger in light of the FOMC meeting. The main focus will remain Wednesday's conclusion of the FOMC meeting, which is not expected to bring any changes to monetary policy, but Fed Chair Janet Yellen might suggest some further hints as to when the main rate will be hiked. The September meeting is still in play. Furthermore, US GDP for the second quarter is due on Thursday and should post growth of 2.5%, returning to strong figures after Q1's dismal -0.2%. Looking ahead, US macro data due later today may also influence the pair amid data-quiet European session ahead. Initial support is seen around at 1.0789 and resistance at 1.1195 levels. Option expiries are at 1.1000 (417M), 1.1030-40 (717M).
USD/JPY is supported below 124.00 levels and posted a high of 123.77 levels. It has made intraday low at 123.06 and currently trading at 123.73 levels. The major erased loses and rebounded higher to session highs after the USD bulls jumped back into bids largely on profit-taking after the recent drop. The US dollar index, a virtual gauge of the greenback's relative strength reversed previous losses and edged 0.10% higher to 96.72. Markets ignored the extended sell-off seen in Chinese equities on Tuesday which offers little support to the safe-haven appeal in yen. Near term resistance is seen at 124.57 and support is seen at 120.63 levels. Option expiries are at 122.50 (445M), 123.00 (250M), 123.40 (500M).
GBP/USD is supported around $1.5600 levels. It made an intraday high at 1.5616 and low at 1.5527 levels. Pair is currently trading at 1.5598 levels. Pair was trading elevated on Monday despite better-than-expected US durable goods orders for June, ahead of Wednesday's conclusion of the FOMC meeting. Pair stayed in a moderate rebound in July, increasing from the six-week bottom at $1.5328 seen July 8. However, sterling gave up most of its bullish momentum as the trading activity has been locked in a relatively narrow range for the last two weeks. UK economic growth in the second quarter accelerated in line with expectations, with an increase in services and the mining and quarrying sectors acting as the main upward drivers. The UK economy sped up to 0.7% in the second quarter, up from 0.4% a quarter before, and in line with expectations. Year-on-year growth came in at 2.6%, slightly less than estimated. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.
NZDUSD is supported above 0.6600 levels and trading at 0.6661 levels and made intraday low at 0.6597 and high at 0.6681 levels. Absolutely dry Asian session with Asian equities extending their sell-off tracking negative close on Wall Street overnight amid China turmoil. While Chinese markets extended in the red for the third straight session, albeit recovered heavy losses seen at open. The Kiwi led the rally, correcting higher towards 0.6650 levels after falling to fresh six-year lows recently. Initial support is seen at 0.6465 and resistance at 0.6722 levels.
AUD/USD is supported above 0.7300 levels and trading at 0.7313 levels. It has made intraday high at 0.7325 levels and low at 0.7256 levels. Unwinding US dollar positions ahead of the FOMC statement lifted the Aussie above the $0.73 handle. The gains are offset, however, by a sharp fall on Chinese equity markets, raising the sense of nervousness on financial markets. On the flip side, the gains are offset by a sharp fall in the Shanghai equity market, and the consequent fall on global equity markets, with further falls in commodity prices, which has left a sense of nervousness across financial markets, while bears watch closely. Initial support is seen at 0.7225 and resistance at 0.7647 levels. Option expiries are at 0.7300 (491M), 0.7325 (341M).
Equity Recap
Stocks rose on Tuesday, with Europe snapping a five-day losing streak as investors shrugged off further weakness in commodity markets and Chinese shares to focus on more encouraging merger activity and earnings.
The FTSEuroFirst 300 index of leading European shares was up 0.5 percent at 1,537 points in the early trading. Germany's DAX, France's CAC 40 and Britain's FTSE 100 were all up around 0.5 percent too.
MSCI's broadest index of Asia-Pacific shares outside Japan ended the day 0.2 percent higher after falling nearly 1 percent early on, touching its lowest level since July 9. Tokyo's Nikkei ended 0.1 percent lower. The Shanghai market benchmark closed 1.7 percent lower.
Commodity Recap
Oil prices dropped for a fifth straight session on Tuesday to their lowest in almost six months, as a rout in Chinese equities cast further doubt over the outlook for crude demand in the world's top commodities consumer. Brent fell 78 cents to $52.69 a barrel by 0821 GMT, having hit a session low of $52.28, its lowest since early February, bringing the losses for July to nearly 18 percent. U.S. crude was last down 36 cents at $47.03 a barrel after ending the previous session down 75 cents.
Gold hovered near its weakest level since early 2010 on Tuesday, reflecting investor hesitation to bid up bullion amid growing expectations of a near-term hike in U.S. interest rates. Spot gold rose 0.3 percent at $1,096.96 an ounce by 0615 GMT. Bullion fell to as low as $1,077 on Friday, its cheapest since February 2010, stretching its losing run to a fifth week.
Treasuries Recap
Bond yields edged higher, with the 10-year U.S. Treasuries yield up 2 basis points at 2.25 percent and similar rises in UK and German yields.
Sep UK Gilts are around 12 ticks lower on the data to trade last at 116.50. Sellers will be looking at Friday's high on 10-year cash yields as the next target at 1.983%. Screens are currently marked at 1.962%.
JGB prices ended the day mostly unchanged from yesterday in relatively active trading amid a lack of the BOJ's buying operations. JGBs saw relatively good two-way flow in the 5-yr to 20-yr zone. But yields moved in a very narrow range of 1bp or less, finishing the day at their intraday highs. Ten-year Japanese bond yields held firm at 0.40 percent, from 0.55 percent two weeks earlier.
New Zealand government bonds dropped with yields as much as 5.5 bps higher. Yields on the 10-year bond hit a 3-month low of 3.25 percent at one point. Australian bond futures dipped, with the 3-year contract off 2 ticks at 98.120. The 10-year contract was a tick lower at 97.2050.
- UK Q2 prelim GDP +0.7% m/m vs 0.7% expected 0.4% previous.
- UK Q2 prelim GDP +2.6% y/y vs 2.6% expected 2.9% previous.
- EUR/GBP drops from 0.7129 to 0.7073 levels.
- GBP/USD climbs from 1.5528 to 1.5618 levels.
- Chinese regulator vows share support after markets tumble 8.5%.
- PBOC - Policy meeting in August will make adjustments as
needed.
- As oil slumps, BOJ relies on yogurt, ketchup to hit price goal.
- Greek Finance Minister- Greece will respect & implement Euro Summit
decisions.
- Rising German labour costs are beginning to undermine German
competitiveness.
- Why the RBA has gone soft on expected growth, don't expect another rate
cut.
- China securities regulator to investigate Monday share dumping.
- (0830 ET/1230 GMT) Canada June Producer Prices, consensus -1.2% y/y, -1.3%
previous.
- (0855 ET/1255 GMT) Redbook Same Store Sales Index previous +1.2%
y/y.
- (0900 ET/1300 GMT) US May CaseShiller 20, +1.3% m/m nsa, +5.6% y/y eyed;
last +1.1%, +4.9%.
- (0945 ET/1345 GMT) US July Markit services PMI flash, 55.0 eyed; last
54.8.
- (0945 ET/1345 GMT) US July Markit composite PMI flash; last
54.6.
- (1000 ET/1400 GMT) US July consumer confidence index, 100.0 eyed; last
101.4.
- (1000 ET/1400 GMT) US July Richmond Fed services/comp/mfg shipments indices;
last 19, 6.
- (1030 ET/1430 GMT) US July Dallas Fed services revenues/serv outlook indices; last 13.2, 4.1.
- (1145 ET/1545 GMT) Fed trade ops 30-yr F.Mae/Fr.Mac max
$1.525bln.
- (1300 ET/1700 GMT) FOMC two-day meeting begins.
- (1330 ET/1730 GMT) BEA briefs media on annual GDP revisions due on July 30.
EUR/USD is supported below 1.1100 levels and currently trading at 1.1032 levels. It has made intraday high at 1.1098 and low at 1.1029 levels. The Euro has surrendered initial gains amidst thin trade and scarce volatility while a cautious tone amongst market participants is growing bigger in light of the FOMC meeting. The main focus will remain Wednesday's conclusion of the FOMC meeting, which is not expected to bring any changes to monetary policy, but Fed Chair Janet Yellen might suggest some further hints as to when the main rate will be hiked. The September meeting is still in play. Furthermore, US GDP for the second quarter is due on Thursday and should post growth of 2.5%, returning to strong figures after Q1's dismal -0.2%. Looking ahead, US macro data due later today may also influence the pair amid data-quiet European session ahead. Initial support is seen around at 1.0789 and resistance at 1.1195 levels. Option expiries are at 1.1000 (417M), 1.1030-40 (717M).
USD/JPY is supported below 124.00 levels and posted a high of 123.77 levels. It has made intraday low at 123.06 and currently trading at 123.73 levels. The major erased loses and rebounded higher to session highs after the USD bulls jumped back into bids largely on profit-taking after the recent drop. The US dollar index, a virtual gauge of the greenback's relative strength reversed previous losses and edged 0.10% higher to 96.72. Markets ignored the extended sell-off seen in Chinese equities on Tuesday which offers little support to the safe-haven appeal in yen. Near term resistance is seen at 124.57 and support is seen at 120.63 levels. Option expiries are at 122.50 (445M), 123.00 (250M), 123.40 (500M).
GBP/USD is supported around $1.5600 levels. It made an intraday high at 1.5616 and low at 1.5527 levels. Pair is currently trading at 1.5598 levels. Pair was trading elevated on Monday despite better-than-expected US durable goods orders for June, ahead of Wednesday's conclusion of the FOMC meeting. Pair stayed in a moderate rebound in July, increasing from the six-week bottom at $1.5328 seen July 8. However, sterling gave up most of its bullish momentum as the trading activity has been locked in a relatively narrow range for the last two weeks. UK economic growth in the second quarter accelerated in line with expectations, with an increase in services and the mining and quarrying sectors acting as the main upward drivers. The UK economy sped up to 0.7% in the second quarter, up from 0.4% a quarter before, and in line with expectations. Year-on-year growth came in at 2.6%, slightly less than estimated. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.
NZDUSD is supported above 0.6600 levels and trading at 0.6661 levels and made intraday low at 0.6597 and high at 0.6681 levels. Absolutely dry Asian session with Asian equities extending their sell-off tracking negative close on Wall Street overnight amid China turmoil. While Chinese markets extended in the red for the third straight session, albeit recovered heavy losses seen at open. The Kiwi led the rally, correcting higher towards 0.6650 levels after falling to fresh six-year lows recently. Initial support is seen at 0.6465 and resistance at 0.6722 levels.
AUD/USD is supported above 0.7300 levels and trading at 0.7313 levels. It has made intraday high at 0.7325 levels and low at 0.7256 levels. Unwinding US dollar positions ahead of the FOMC statement lifted the Aussie above the $0.73 handle. The gains are offset, however, by a sharp fall on Chinese equity markets, raising the sense of nervousness on financial markets. On the flip side, the gains are offset by a sharp fall in the Shanghai equity market, and the consequent fall on global equity markets, with further falls in commodity prices, which has left a sense of nervousness across financial markets, while bears watch closely. Initial support is seen at 0.7225 and resistance at 0.7647 levels. Option expiries are at 0.7300 (491M), 0.7325 (341M).
Equity Recap
Stocks rose on Tuesday, with Europe snapping a five-day losing streak as investors shrugged off further weakness in commodity markets and Chinese shares to focus on more encouraging merger activity and earnings.
The FTSEuroFirst 300 index of leading European shares was up 0.5 percent at 1,537 points in the early trading. Germany's DAX, France's CAC 40 and Britain's FTSE 100 were all up around 0.5 percent too.
MSCI's broadest index of Asia-Pacific shares outside Japan ended the day 0.2 percent higher after falling nearly 1 percent early on, touching its lowest level since July 9. Tokyo's Nikkei ended 0.1 percent lower. The Shanghai market benchmark closed 1.7 percent lower.
Commodity Recap
Oil prices dropped for a fifth straight session on Tuesday to their lowest in almost six months, as a rout in Chinese equities cast further doubt over the outlook for crude demand in the world's top commodities consumer. Brent fell 78 cents to $52.69 a barrel by 0821 GMT, having hit a session low of $52.28, its lowest since early February, bringing the losses for July to nearly 18 percent. U.S. crude was last down 36 cents at $47.03 a barrel after ending the previous session down 75 cents.
Gold hovered near its weakest level since early 2010 on Tuesday, reflecting investor hesitation to bid up bullion amid growing expectations of a near-term hike in U.S. interest rates. Spot gold rose 0.3 percent at $1,096.96 an ounce by 0615 GMT. Bullion fell to as low as $1,077 on Friday, its cheapest since February 2010, stretching its losing run to a fifth week.
Treasuries Recap
Bond yields edged higher, with the 10-year U.S. Treasuries yield up 2 basis points at 2.25 percent and similar rises in UK and German yields.
Sep UK Gilts are around 12 ticks lower on the data to trade last at 116.50. Sellers will be looking at Friday's high on 10-year cash yields as the next target at 1.983%. Screens are currently marked at 1.962%.
JGB prices ended the day mostly unchanged from yesterday in relatively active trading amid a lack of the BOJ's buying operations. JGBs saw relatively good two-way flow in the 5-yr to 20-yr zone. But yields moved in a very narrow range of 1bp or less, finishing the day at their intraday highs. Ten-year Japanese bond yields held firm at 0.40 percent, from 0.55 percent two weeks earlier.
New Zealand government bonds dropped with yields as much as 5.5 bps higher. Yields on the 10-year bond hit a 3-month low of 3.25 percent at one point. Australian bond futures dipped, with the 3-year contract off 2 ticks at 98.120. The 10-year contract was a tick lower at 97.2050.
Yuan acceptance gets thumbs up from LME, IMF review comes next
28 July 2015, 13:54
London Metal Exchange, the world's oldest and most significant metals
exchange, is now ready to accept the offshore version of the
Chinese currency as collateral for trades at its clearing house.
This move points at two things -
The LME was bought by Hong Kong Exchanges and Clearing in 2012. It has seen growing numbers of Chinese entities becoming members of the exchange. Moreover Hong Kong is totally under Chinese influence.
Not only Yuan, but London has also much to gain from the deal as it is competing with Singapore to become largest trading and settlement hub for offshore Chinese currency.
The move is also a nice break for Chinese government, who are looking to internationalize Yuan.
So, is IMF next in accepting Yuan?
This move points at two things -
- China's growing importance in global commodity market
- Yuan's growing importance in trade and margin settlement.
The LME was bought by Hong Kong Exchanges and Clearing in 2012. It has seen growing numbers of Chinese entities becoming members of the exchange. Moreover Hong Kong is totally under Chinese influence.
Not only Yuan, but London has also much to gain from the deal as it is competing with Singapore to become largest trading and settlement hub for offshore Chinese currency.
The move is also a nice break for Chinese government, who are looking to internationalize Yuan.
So, is IMF next in accepting Yuan?
- IMF is scheduled to review (done once in every 5 years) its SDR basket and main question policy makers will be facing whether or not to add Yuan to the currency basket.
UK economy to expand further
28 July 2015, 13:46
The UK economy is expected to expand further, mainly driven by domestic
demand, especially private consumption, which is stimulated by a combination of
low interest rates, very high consumer confidence, increasing house prices, high
employment and positive real wage growth.
"Investments are also expected to pick up as the slack in the labour market has diminished significantly although it is uncertain to what degree investments will be affected by the in/out EU referendum", says Danske Bank.
UK exports have been weak due to a combination of the strong GBP and weak growth in Europe. If growth picks up in Europe, this would increase foreign demand for UK goods and services and according to Bank of England calculations more than offset the negative impact of the strong GBP.
"The fiscal consolidation will also pull growth down but less than previously expected", added Danske Bank.
"Investments are also expected to pick up as the slack in the labour market has diminished significantly although it is uncertain to what degree investments will be affected by the in/out EU referendum", says Danske Bank.
UK exports have been weak due to a combination of the strong GBP and weak growth in Europe. If growth picks up in Europe, this would increase foreign demand for UK goods and services and according to Bank of England calculations more than offset the negative impact of the strong GBP.
"The fiscal consolidation will also pull growth down but less than previously expected", added Danske Bank.
NATO SECRETARY GENERAL SAYS ALL ALLIES EXPRESSED STRONG SUPPORT FOR TURKEY
EUR/USD breaks short term support 1.1045, targets 1.0925
28 July 2015, 13:46
- EUR/USD has retreated after making a high of 1.11277. It is currently
trading at 1.10315.
- It is facing strong resistance at 1.110 in intraday and any indicative break
will extend gains till 1.1125/1.1150/1.1178 in short term.
- On the downside minor support is at 1.1045 and nay break below will drag the
pair further down till 1.100/1.0950 in short term.
- The minor resistance is around 1.10850.
FxWirePro: Inverse saucer pattern forms on WTI crude, testing supports at 23.6% Fibo retracement, any breach below drags next target to 42.22
28 July 2015, 13:36
On EOD charts of WTI CL1! We had traced out an inverse saucer pattern and
call for targets at 47.14. Today it is very well achieved with day's low of
46.68 levels. Inverse saucer patterns can prolong for weeks or even extend into
years. But for now the new trend that develops may last a similar duration to
the previous trend it reversed at 60.27 levels.
This unusual formation evidences no clear price targets but usually implies quite a lot of potential since 50% or more retracement of the preceding uptrend can be expected. At the current levels this commodity price is testing a significant supports at 47 levels which is 38.2% retracement from peaks of previous uptrend.
Volume during inverse saucers formation with gap down opening at 54.90 resembles the bowl-like shape of prices during a saucer. Volume which was spiking high during such uptrend beginning (zone 42-60 as shown by red trendline) and then began cooling off as the expectations shift and again traders become indecisive during early May 2015 to end June 2015 (prices moved in a channel line as shown blue colored trendlines), Volume then increases as the new trend is established. We think any breach below the supports at 47 levels would certainly drag this commodity until 42.22 levels.
R1: 1.5671 (Daily High Jul 23)
R2: 1.5731 (Session high Jul 1)
R3: 1.5744 (Session high June 30)
Support Levels:
S1: 1.5595 (Daily High Jul 27)
S2: 1.5568 (4h Kijun-Sen)
S3: 1.5530 (Trendline support)
This unusual formation evidences no clear price targets but usually implies quite a lot of potential since 50% or more retracement of the preceding uptrend can be expected. At the current levels this commodity price is testing a significant supports at 47 levels which is 38.2% retracement from peaks of previous uptrend.
Volume during inverse saucers formation with gap down opening at 54.90 resembles the bowl-like shape of prices during a saucer. Volume which was spiking high during such uptrend beginning (zone 42-60 as shown by red trendline) and then began cooling off as the expectations shift and again traders become indecisive during early May 2015 to end June 2015 (prices moved in a channel line as shown blue colored trendlines), Volume then increases as the new trend is established. We think any breach below the supports at 47 levels would certainly drag this commodity until 42.22 levels.
USD/CAD struggles to break above 1.3050, good to sell on rallies
28 July 2015, 13:23
- USD/CAD has formed head and shoulder pattern in one hour chart and it
confirms short term weakness , decline till 1.2915 is possible .
- It is facing major resistance around 1.3050 and break above would extend
gains till 1.3120/1.3287 in short term.
- On the downside minor support is around 1.2980 and break below will drag the
pair further down till 1.2944/1.2915 in short term.
- Overall bullish invalidation only below 1.2905.
FxWirePro: GBP/USD bounces off Trendline support on upbeat UK GDP data
28 July 2015, 13:08
- Pound sterling has gathered some steam after the UK GDP release, GBP/USD
edges higher from day's low by 1.5527
- UK economy has expanded at an annual pace of 2.6% and 0.7% inter-quarter,
vs. previous prints at 2.9% and 0.4%, respectively
- GBP/USD is currently trading at day's highs by 1.5612, with a low of 1.5527
on the day
- Hourly price action has edged out of cloud, decent support on the downside
seen at the cloud top by 1.5579
- Breach below could take the pair to 1.5570 (4h 50 MA) and then to 1.5533
(Trendline support)
- US services PMI and consumer confidence in focus, stability in the major
equity markets across the globe may push the Treasury yields higher and bring
USD bulls back in the market
R1: 1.5671 (Daily High Jul 23)
R2: 1.5731 (Session high Jul 1)
R3: 1.5744 (Session high June 30)
Support Levels:
S1: 1.5595 (Daily High Jul 27)
S2: 1.5568 (4h Kijun-Sen)
S3: 1.5530 (Trendline support)
UK’s service dependent economy at risk of EU referendum
28 July 2015, 12:57
Today UK GDP preliminary reading showed UK economy is on its way to another
block buster pace of growth in second quarter. GDP increased by 0.7% in the
second quarter of 2015. GDP is expected to grow at 2.6% in the second quarter
from a year ago.
GDP grew by 0.4% in first quarter.
However notably, this block buster economy has its strength too concentrated on services sector. The largest contribution to the increase came from the services sector, contributing 0.5 percentage points to second quarter.
Problem with UK's growth is that though overall pace and services sector surpassed peak before 2008 great recession, manufacturing and construction activity still after six years remain well below their pre-crisis peak.
With Bank of England ready to reverse its crisis easing, it won't be easier for these two rate sensitive sectors.
And Britain's crown jewel service sector is facing a grave risk.
UK Prime Minister has proposed a referendum by 2017 over its stay within EU, if the government fails to negotiate some pre-conditions, which will protect Britain, moreover London from EU rules and taxations and in turn will benefit UK's services sector mainly financials.
IF Prime Minister Mr. Cameron's government fails to negotiate UK's demand, which might require a treaty change in EU and people of Britain still vote to stay in EU, services sector will be single biggest loser.
In the short term GDP boosted pound, which now stands as the best performer today so far, trading at 1.561 against dollar.
GDP grew by 0.4% in first quarter.
However notably, this block buster economy has its strength too concentrated on services sector. The largest contribution to the increase came from the services sector, contributing 0.5 percentage points to second quarter.
Problem with UK's growth is that though overall pace and services sector surpassed peak before 2008 great recession, manufacturing and construction activity still after six years remain well below their pre-crisis peak.
With Bank of England ready to reverse its crisis easing, it won't be easier for these two rate sensitive sectors.
And Britain's crown jewel service sector is facing a grave risk.
UK Prime Minister has proposed a referendum by 2017 over its stay within EU, if the government fails to negotiate some pre-conditions, which will protect Britain, moreover London from EU rules and taxations and in turn will benefit UK's services sector mainly financials.
IF Prime Minister Mr. Cameron's government fails to negotiate UK's demand, which might require a treaty change in EU and people of Britain still vote to stay in EU, services sector will be single biggest loser.
In the short term GDP boosted pound, which now stands as the best performer today so far, trading at 1.561 against dollar.
FxWirePro: USDCHF low implied volatility portrays hedging with condor spreads
28 July 2015, 12:56
Since the implied volatility of USDCHF is perceived to be minimal, so here
comes a multiple leg of option strategy for regular traders of this currency
cross when there is little IV. A total of 4 legs are involved in the condor
options strategy and a net debit is required to establish the
position.
The trader can construct a long condor option spread as follows, as shown in the figure; the trader can implement this strategy using call options with similar maturities.
So strategy goes this way, writing 7D (-0.5%) In-The-Money call and buying deep striking (-1.5%) 0.84 delta In-The-Money call, writing a higher strike (0.5%) Out-Of-The-Money calls and buying another deep striking (1.5%) Out-Of-The-Money 0.17 delta call for a net debit.
Maximum returns for this strategy is achievable only when the exchange rate of USDCHF falls between the 2 middle strikes at maturity. It can be derived that the maximum profit is equal to the difference in strike price of the 2 lower striking calls less the initial debit taken to enter the trade.
The trader can construct a long condor option spread as follows, as shown in the figure; the trader can implement this strategy using call options with similar maturities.
So strategy goes this way, writing 7D (-0.5%) In-The-Money call and buying deep striking (-1.5%) 0.84 delta In-The-Money call, writing a higher strike (0.5%) Out-Of-The-Money calls and buying another deep striking (1.5%) Out-Of-The-Money 0.17 delta call for a net debit.
Maximum returns for this strategy is achievable only when the exchange rate of USDCHF falls between the 2 middle strikes at maturity. It can be derived that the maximum profit is equal to the difference in strike price of the 2 lower striking calls less the initial debit taken to enter the trade.
UK’s service dependent economy at risk of EU referendum
28 July 2015, 12:55
Today UK GDP preliminary reading showed UK economy is on its way to another
block buster pace of growth in second quarter. GDP increased by 0.7% in the
second quarter of 2015. GDP is expected to grow at 2.6% in the second quarter
from a year ago.
GDP grew by 0.4% in first quarter.
However notably, this block buster economy has its strength too concentrated on services sector. The largest contribution to the increase came from the services sector, contributing 0.5 percentage points to second quarter.
Problem with UK's growth is that though overall pace and services sector surpassed peak before 2008 great recession, manufacturing and construction activity still after six years remain well below their pre-crisis peak.
With Bank of England ready to reverse its crisis easing, it won't be easier for these two rate sensitive sectors.
And Britain's crown jewel service sector is facing a grave risk.
UK Prime Minister has proposed a referendum by 2017 over its stay within EU, if the government fails to negotiate some pre-conditions, which will protect Britain, moreover London from EU rules and taxations and in turn will benefit UK's services sector mainly financials.
IF Prime Minister Mr. Cameron's government fails to negotiate UK's demand, which might require a treaty change in EU and people of Britain still vote to stay in EU, services sector will be single biggest loser.
In the short term GDP boosted pound, which now stands as the best performer today so far, trading at 1.561 against dollar.
GDP grew by 0.4% in first quarter.
However notably, this block buster economy has its strength too concentrated on services sector. The largest contribution to the increase came from the services sector, contributing 0.5 percentage points to second quarter.
Problem with UK's growth is that though overall pace and services sector surpassed peak before 2008 great recession, manufacturing and construction activity still after six years remain well below their pre-crisis peak.
With Bank of England ready to reverse its crisis easing, it won't be easier for these two rate sensitive sectors.
And Britain's crown jewel service sector is facing a grave risk.
UK Prime Minister has proposed a referendum by 2017 over its stay within EU, if the government fails to negotiate some pre-conditions, which will protect Britain, moreover London from EU rules and taxations and in turn will benefit UK's services sector mainly financials.
IF Prime Minister Mr. Cameron's government fails to negotiate UK's demand, which might require a treaty change in EU and people of Britain still vote to stay in EU, services sector will be single biggest loser.
In the short term GDP boosted pound, which now stands as the best performer today so far, trading at 1.561 against dollar.
28 July 2015, 12:46
INDONESIA RAISES 2.5-YR PROJECT-BASED SUKUK WEIGHTED AVG YIELD AT 8.17987 PCT
- FIN MINISTRY
28 July 2015, 12:45
INDONESIA RAISES 1-YR PROJECT-BASED SUKUK WEIGHTED AVG YIELD AT 7.75000 PCT -
FIN MINISTRY
28 July 2015, 12:45
INDONESIA RAISES 6-MTH ISLAMIC T-BILL WEIGHTED AVG YIELD AT 6.79794 PCT - FIN
MINISTRY
28 July 2015, 12:44
INDONESIA RAISES 2.93 TRLN RPH FROM ISLAMIC BONDS AUCTION - FIN MINISTRY
On the lower side minor support are at 123.20 and any break below will drag the pair further down till 122.90/122.40.
The pair's resistance is at 123.90 and above that will take the pair to next level at 124.50/125.
It is good to buy at dips around 123.55-60 with SL around 123.20 for the TP of 124.40/125
USDJPY struggles to break below 123, targets 124.40/125
28 July 2015, 12:41
- RES 4: 126.88 (161.8% retracement of 124.43 and 120.45)
- RES 3 : 125.85 (jun 5th high)
- RES 2:125
- RES 1: 124.40 (Jun 24th high)
- SUP 1 : 123.25( 200 day 4 HMA)
- SUP 2 :122.90 (Jul 14th low)
- SUP 3: 122.40
- SUP 4: 121.98 (61.8% retracement of 120.40 and 124.44)
On the lower side minor support are at 123.20 and any break below will drag the pair further down till 122.90/122.40.
The pair's resistance is at 123.90 and above that will take the pair to next level at 124.50/125.
It is good to buy at dips around 123.55-60 with SL around 123.20 for the TP of 124.40/125
Deteriorating crop prospects in Europe
28 July 2015, 12:24
The poorer yield prospects in the EU are putting the brakes on the price
slide in its latest monthly report. The European Commission's MARS forecasting
unit for example has corrected its corn yield estimate for the EU 2015 crop
significantly downwards, notes Commerzbank. Admittedly, yields had already been
expected to fall by around 10% as compared with the previous year's record level
- now, however, the decline looks set to total as much as 17% following the
prolonged spell of dry and extremely hot conditions in July, says
Commerzbank.
Hardest-hit are France and Germany, though other countries such as Italy, Poland, Romania and Hungary are also affected. In Ukraine, an important EU supplier, MARS rates the conditions for corn as good overall, though regional dry conditions have also led to a downward revision of the anticipated yield here, which is now expected to fall short of the previous year, adds Commerzbank.
Hardest-hit are France and Germany, though other countries such as Italy, Poland, Romania and Hungary are also affected. In Ukraine, an important EU supplier, MARS rates the conditions for corn as good overall, though regional dry conditions have also led to a downward revision of the anticipated yield here, which is now expected to fall short of the previous year, adds Commerzbank.
Excellent weather conditions and squaring of long positions to weigh on US corn price
28 July 2015, 12:20
The weather conditions in the key corn-growing areas of the US Midwest have
improved considerably of late following the excessive rainfall earlier in the
summer.
At the same time, short-term-oriented market participants, who had been building up net long positions again last reporting week despite the fact that prices were already falling, now appear to be closing their positions in grand style.
Both of these factors are weighing heavily on the corn price in Chicago, which plunged by 5% yesterday alone. Losses since mid-July now amount to 13%, says Commerzbank.
At the same time, short-term-oriented market participants, who had been building up net long positions again last reporting week despite the fact that prices were already falling, now appear to be closing their positions in grand style.
Both of these factors are weighing heavily on the corn price in Chicago, which plunged by 5% yesterday alone. Losses since mid-July now amount to 13%, says Commerzbank.
Chinese gold imports fall to ten-month low in June
28 July 2015, 12:19
Gold has not been able to hold its own above the $1,100 per troy ounce mark
despite a weak US dollar and slid for a time yesterday to $1,089. The
depreciating US currency meant that the price in euro terms was under even
greater pressure and was driven down to €984 per troy ounce.
According to data from the Census and Statistics Department of the Hong Kong government, China imported a mere 37.1 tons of gold on a net basis in June, notes Commerzbank. That is a good 8% down on the already weak month of June last year, and also the lowest net import volume since August 2014. What is more, imports were only a good half of what they were in May. Imports in the first half year thus total a good 370 tons, which is 17% less than in the equivalent period last year.
A major part of the weak demand is no doubt attributable to the sharp rise in Chinese equity markets in the first 5½ months of the year, which reduced the attractiveness of gold. According to Commerzbank, the slump in equity markets that began in mid-June and the fall in gold prices themselves will generate increased interest in buying gold in the second half of the year, which should lend support to the gold price. Coin sales in the US also continue to be very robust: according to figures from the U.S. Mint, 157,500 ounces of gold coins have already been sold in July, which is twice as much as in the whole of June.
According to data from the Census and Statistics Department of the Hong Kong government, China imported a mere 37.1 tons of gold on a net basis in June, notes Commerzbank. That is a good 8% down on the already weak month of June last year, and also the lowest net import volume since August 2014. What is more, imports were only a good half of what they were in May. Imports in the first half year thus total a good 370 tons, which is 17% less than in the equivalent period last year.
A major part of the weak demand is no doubt attributable to the sharp rise in Chinese equity markets in the first 5½ months of the year, which reduced the attractiveness of gold. According to Commerzbank, the slump in equity markets that began in mid-June and the fall in gold prices themselves will generate increased interest in buying gold in the second half of the year, which should lend support to the gold price. Coin sales in the US also continue to be very robust: according to figures from the U.S. Mint, 157,500 ounces of gold coins have already been sold in July, which is twice as much as in the whole of June.
Speculative net short positions in gasoil
28 July 2015, 12:17
Speculative positioning in gasoil is net short for the first time since
November 2014. Thich is attributable above all to a renewed sharp increase in
short positions.
Oil prices fell yesterday for the fourth consecutive day and still find themselves under selling pressure.
The pessimistic sentiment expresses the plentiful supply situation as reflected in almost record-high ARA gasoil stocks and low gasoil crack spreads, says Commerzbank.
Oil prices fell yesterday for the fourth consecutive day and still find themselves under selling pressure.
The pessimistic sentiment expresses the plentiful supply situation as reflected in almost record-high ARA gasoil stocks and low gasoil crack spreads, says Commerzbank.
Cable trades higher on better than expected UK GDP data, jump till 1.5670 is possible
28 July 2015, 12:16
- GBP/USD has recovered from the low of 1.5527 after release of U.K GDP data
which was in line with expectations.
- UK GDP expanded by 0.7% in the three months ending Jun 30 comparing to 0.4%
growth in preceding quarter.
- Technically Cable is facing resistance around 1.5580 and nay break above
would extend gains till 1.5630/1.5670.
- Any break above 1.5670 confirms trend reversal a jump till 1.5745/1.5800
cannot be ruled out.
- On the downside minor support is around 1.5525 and break below target 1.5480/1.5450.
Speculative financial investors withdraw from Brent
28 July 2015, 12:16
Oil prices fell yesterday for the fourth consecutive day and still find
themselves under selling pressure. Brent is falling to a 6-month low of $52.3
per barrel this morning, while WTI is priced at less than $47 per
barrel.
The last time it was this cheap was four months ago. At 214,000 contracts, the level of speculative net long positions in Brent is still comparatively high, as compared both with recent years and with the current level of net long positions in WTI, which are a good 100,000 contracts lower.
According to data published yesterday by the ICE, speculative net long positions in Brent declined by 12,900 contracts in the week to 21 July for the first time in four weeks. The reduction was primarily due to the cut in long positions.
In the three preceding weeks, speculative (net) long positions in Brent had been sharply expanded for no obvious reason despite tumbling prices and a visible withdrawal of investors from WTI.
"Falling equity markets around the world are generating negative sentiment among market participants, who are therefore likely to continue offloading their oil investments. There is still correction potential for Brent", says Commerzbank.
The last time it was this cheap was four months ago. At 214,000 contracts, the level of speculative net long positions in Brent is still comparatively high, as compared both with recent years and with the current level of net long positions in WTI, which are a good 100,000 contracts lower.
According to data published yesterday by the ICE, speculative net long positions in Brent declined by 12,900 contracts in the week to 21 July for the first time in four weeks. The reduction was primarily due to the cut in long positions.
In the three preceding weeks, speculative (net) long positions in Brent had been sharply expanded for no obvious reason despite tumbling prices and a visible withdrawal of investors from WTI.
"Falling equity markets around the world are generating negative sentiment among market participants, who are therefore likely to continue offloading their oil investments. There is still correction potential for Brent", says Commerzbank.
Speculative net short positions in gasoil
28 July 2015, 12:14
Oil prices fell yesterday for the fourth consecutive day and still find
themselves under selling pressure. Brent is falling to a 6-month low of $52.3
per barrel this morning, while WTI is priced at less than $47 per
barrel.
The last time it was this cheap was four months ago. At 214,000 contracts, the level of speculative net long positions in Brent is still comparatively high, as compared both with recent years and with the current level of net long positions in WTI, which are a good 100,000 contracts lower.
According to data published yesterday by the ICE, speculative net long positions in Brent declined by 12,900 contracts in the week to 21 July for the first time in four weeks. The reduction was primarily due to the cut in long positions.
In the three preceding weeks, speculative (net) long positions in Brent had been sharply expanded for no obvious reason despite tumbling prices and a visible withdrawal of investors from WTI.
"Falling equity markets around the world are generating negative sentiment among market participants, who are therefore likely to continue offloading their oil investments. There is still correction potential for Brent", says Commerzbank.
The last time it was this cheap was four months ago. At 214,000 contracts, the level of speculative net long positions in Brent is still comparatively high, as compared both with recent years and with the current level of net long positions in WTI, which are a good 100,000 contracts lower.
According to data published yesterday by the ICE, speculative net long positions in Brent declined by 12,900 contracts in the week to 21 July for the first time in four weeks. The reduction was primarily due to the cut in long positions.
In the three preceding weeks, speculative (net) long positions in Brent had been sharply expanded for no obvious reason despite tumbling prices and a visible withdrawal of investors from WTI.
"Falling equity markets around the world are generating negative sentiment among market participants, who are therefore likely to continue offloading their oil investments. There is still correction potential for Brent", says Commerzbank.
Guide to today’s important data and events
28 July 2015, 12:09
All medium risk economic dockets scheduled for release
today.
Data released so far -
Data released so far -
- Italy - Consumer confidence dropped to 106.5 in July from 109.3 prior. Business confidence dropped to 103.6 from 103.9 in June.
- UK - Preliminary estimate shows that GDP rose by 0.7% in second quarter, making annual growth rate at 2.6%
- Canada - Raw material price index and Industrial product price to be released at 12:30 GMT.
- US - Redbook index to be released at 12:55 GMT, followed by S&P/ Case - Shiller home prices at 13:00 GMT. In April price rose by 4.9%, today it is expected to grow by 5.6% for May. Preliminary reading on Markit services and composite PMI to be released at 13:45 GMT. Better numbers are expected today. Richmond FED manufacturing index to be released at 14:00 GMT. Along with consumer confidence.
- Japan - Japan will report details on retail trade at 23:50 GMT.
- Auctions - US will auction 1 month bills at 15:30 GMT, followed by 2 year note at 17:00 GMT.