- Stock markets diverge, commodities fall as China jitters persist.
- U.S. crude down after big gasoline builds.
- US Treasuries turn broadly lower erase gains tied to NY Fed’s Dudley that downplay Sept hike.
- Fed’s Dudley: Sept rate hike seems less compelling than a few weeks ago, International developments have increased downside risks to US econ, wants to see more data before making judgment on first hike.
- ECB’s Praet global econ risk, commodity prices raise downside risk to inflation.
- Japan’s Hamada: don’t think BOJ needs to ease immediately, can wait to gauge impact of China turmoil, USD/JPY at 116/118 not a big risk to Abenomics.
- China cabinet: to lower import/export fees, quicken development of leasing sector.
- Fitch ST macro outlook on China likely to be overdone, spillover effects from more protracted slowdown could have significant regional & global credit implications.
- US Durable Goods Jul 2%, forecast -0.4%, 4.1%-previous.
- US Nondefe Cap Ex-Air* Jul 2.2%, forecast – 0.4%, 1.4%-previous.
- Peru Central bank says to restrict NDFs to defend currency.
Looking Ahead – Economic Data (GMT)
- 23:50 Japan Foreign Bond Investment w/e 600.3b-previous
- 23:50 Japan Foreign Invest JP Stock w/e -501.1b-previous
- 01:30 Australia Capital Expenditure* Q2 f/c -2.5%, -4.4%-previous
- 01:30 Australia Building Capex* Q2 f/c -4.7%, -6.5%-previous
- 01:30 Australia Plant/Machinery Capex* Q2 f/c -1%, -0.5%-previous
Looking Ahead – Events, Other Releases (GMT)
- No Significant Events
EUR/USD is likely to find support at 1.1208 levels and currently trading at 1.1310 levels. The pair has made session high at 1.1435 and hit lows at 1.1300 levels. The dollar rallied against Euro for a second straight session on Wednesday as some calm returned to financial markets with Wall Street stocks firmer and European shares recouping some losses, all of which reduced the need to buy safe-haven currencies like the yen. Meanwhile, FOMC Vice Chair Dudley said on Wednesday that, the decision to begin rate normalization at the conclusion of the September 16/17 policy meeting is now less compelling to him than a few weeks ago, as international developments have increased the downside risks to the U.S. economy. New York Fed President William Dudley’s remarks were the clearest indication yet that market ructions caused by fears of an economic slowdown in China could affect U.S. monetary policy. In the mid New York session Euro started to decline from 1.1441 to hit session lows at 1.3121, shedding almost 120 pips against the green back. To the upside, immediate resistance can be seen at 1.1343. To the downside, immediate support level is located at 1.1288 levels.
GBP/USD is supported in the range of 1.5417 levels and currently trading at 1.5467 levels. It reached session high at 1.5485 and dropped to session low at 1.5450 levels. Sterling slipped to a two-week low against the dollar on Wednesday after robust U.S. data lifted the greenback and relative calm returned to currency markets, with no volatility seen in the market. Data released on Wednesday showed U.S. non-defence capital goods orders excluding aircraft increase 2.2 percent in July, the biggest rise since June last year and handily beating expectations. Sterling fell 0.8 percent to $1.5562, its lowest since Aug. 12, with investors increasingly unsure about the timing of expected increases in British interest rates amid stock market turmoil. Money markets have pushed out the timing for a Bank of England (BoE) hike to around the third quarter of next year compared with early 2016 when the central bank published its quarterly inflation report three weeks ago. To the upside, immediate resistance can be seen at 1.5490. To the downside, immediate support level is located at 1.5450 levels.
USD/JPY is supported around 119.80 levels and currently trading at 119.98 levels. It has hit session high at 119.98 and made session lows at 118.14 levels. The US Dollar edged higher against Japanese yen on Wednesday, after US Core durable goods orders printed positive figures at 0.6% against the forecast of 0.4%. The pair rebounded from 118.42 levels after the data was out. Japanese yen conceded almost 60 pips to dollar, as the market calmed with no volatility in the session. Meanwhile, China’s central bank ramped up its efforts to shore up sentiment, pumping $21.8 billion into the money market, a day after it cut interest rates and relaxed reserve requirements for some large banks. The dollar was up 0.3 percent at 119.80yen, having slumped to a 7-month low of 116.16 on Monday. To the upside, immediate resistance can be seen at 120.24. To the downside, immediate support level is located at 119.77 levels.
USD/CAD is supported at 1.3300 levels and is trading at 1.3296 levels. It has made session high at 1.3337 and lows at 1.3296 levels. The Canadian dollar firmed against the greenback on Wednesday, and led its commodity counterparts in outperforming key currencies, as investors dipped their toes back into riskier assets. The move came as some calm took hold in currency markets and equity markets tried to rally following a volatile start to the week on worries about China’s economic growth. The currency’s strongest level of the session was C$1.3252, while its weakest level was C$1.335. On the data front, There were no economic data from Canada. In the United States, a gauge of U.S. business investment plans posted its largest increase in just over a year in July, underscoring the durability of the economic recovery despite a slowing global economy. The price of oil, a key Canadian export, was stable on Wednesday following the Chinese central bank’s move, though prices remained near 6-1/2-year lows. U.S. crude prices were down 0.20 percent to $39.23. To the upside, immediate resistance can be seen at 1.3303. To the downside, immediate support level is located at 1.3270 levels.
European shares ended nearly two percent lower on Wednesday after a volatile session, as china worries continue to bite European stock market.
UK’s benchmark FTSE 100 closed down by 1.3 percent, the pan-European FTSEurofirst 300 ended the day down by 1.6 percent, Germany’s Dax ended down by 1 percent, France’s CAC finished the day down by 1.1 percent.
US stocks surged on Wednesday, ending six days sell-offs, after concerns related to China’s economy gave way to bargain hunters emboldened by expectations the U.S. Federal Reserve might not raise interest rates next month.
Dow Jones closed up by 3.96 percent, S&P 500 ended up by 3.90 percent, Nasdaq finished the day up by 4.22 percent.
Longer-dated U.S. Treasuries prices stumbled on Wednesday after a top Federal Reserve official scaled back his view of a rate increase in September in the wake of market turbulence stemming from worries about China’s economy.
The benchmark 10-year Treasuries notes fell 14/32 to yield 2.184 percent, up 5 basis points from Tuesday.
The 30-year bond was the weakest maturity as traders bet a delay in a Fed rate increase bolsters the risk of higher long-term inflation. The long bond was down nearly 2 points with a yield of 2.948 percent, up nearly 10 basis points from late on Tuesday.
Oil prices fell almost 2 percent on Wednesday after a huge drawdown in U.S. crude stockpiles was offset by a larger-than-expected build in gasoline and distillates, which include diesel.
U.S. crude’s front-month contract settled down 71 cents, or 1.8 percent, at $38.60 a barrel.
The front-month in Brent, the global oil benchmark, finished down 7 cents at $43.14, after initially trading higher right after the EIA data.
Gasoline’s front-month tumbled for a third straight session to 7-month lows, settling down 6 percent on the day and 12 percent on the week.
Gold slipped 2 percent on Wednesday as the dollar gained and U.S. stocks advanced, while investors kept a close eye on China’s efforts to support its economy.
Spot gold fell as much as 2 percent to a one-week low of $1,117.35 an ounce, but was down 1.2 percent at $1,126.66 by 3:03 p.m. EDT (1903 GMT). It was its third straight decline from last week’s seven-week high.
U.S. gold for December delivery settled down 1.2 percent, at $1,124.60 an ounce.
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