The Nikkei stocks were better bid in Tokyo. The exporter gains on weak JPY outweighed the greater than expected drop in industrial and vehicle production in June, the jobless rate retreated from 4.0% to 3.9%, alongside with the contraction in overall household spending. JPY dipped overnight, Japan 10-year government bond yields traded above 0.79%.
USDJPY and JPY crosses traded higher in Asia. After clearing light offers at 98.20, USDJPY advanced to 98.46 on month-end Gotobi and importer demand. The broad based USD-weakness and the the climb in Nikkei stocks helped.
In Australia, the Aussie took a dive amid RBA Governor Gelnn Stevens said that the recent inflation data ' may afford some scope to ease policy further if needed to support demand' adding that the recent weakness in the Aussie is justified by the macroeconomic factors and he would 'not be surprised if a further decline occurred over time.' AUDUSD dipped to 0.9066 on Stevens' comments, the lowest since July 15th; AUDJPY dropped to 89.23. The sentiment turned negative, the probability of an RBA cut is revised up to 85% from 77% yesterday, with bearish bias suggesting that AUDUSD should re-test 0.9000 key support in the next step.
EURUSD failed to break above the strong resistance at 1.3300 for the third consecutive trading day, somewhat weakening the bull-momentum. The pair traded in the tight range of 1.3246/66 in Tokyo. Ahead of the event-risk back-loaded to the second half of the week, EURUSD is expected to range-trade with bids eyed above 1.3200, 1.3100 then 1.3088 (200-dayMA).
In UK, the cable strength remained capped at 1.5413 fibonacci resistance, sending the pair down to 1.5316. First bids are seen at 1.5303 (50-dayMA & psychological support) while the topside should remain limited ahead of the FOMC meeting tomorrow, followed by BoE policy verdict on Thursday.
In the lack of major event today, the fx markets are likely to range-trade on position adjustment ahead of the event stream to start tomorrow. The next stop is the FOMC meeting, where we do not expect any significant comment on tapering nor the interest rate target set between zero to 0.25% to support the economic recovery since 2008. As the Fed Chairman Bernanke insisted on his last speech, the asset purchases are 'by no means on a preset course' and will depend on the progress seen in economic conditions.
Else, the PBOC injected 17bn yuan through reverse repos today, its first open market operation over the past five weeks. The seven day repo rate stabilized at 5.1%, with lower swap rates by three to six bps.
Today, the focus is on German GfK Consumer Confidence, Spain and Sweden 2Q(Prelim) GDP y/y & y/y, Spain July Inflation y/y, Euro-Zone July Economic Confidence, Business Climate Indicator, Industrial, Consumer and Services Confidence, German July(Prelim) CPI m/m & y/y, Canada June Industrial Production Price and Raw Materials Index m/m, US S&P/CaseShiller Home Price Index and US July Consumer Confidence Index.
IMOH, Clement I.
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