News

Asia Roundup: Dollar at 2-week peak on smaller Fed rate cut expectations, oil rallies amid Middle East tensions, Asian shares nudge higher – Tuesday, July 23rd, 2019

Market Roundup

  • Euro steady ahead of ECB meeting
     
  • Gold dips as dollar hits near 2-week high
     
  • Oil inches up amid Middle East tensions

Economic Data Ahead

  • (0400 ET/0800 GMT) ECB Bank Lending Survey
     
  • (0430 ET/0830 GMT) UK FPC Meeting Minutes
     
  • (0600 ET/1000 GMT) UK CBI Industrial Trends Survey – Orders MM July
     

Key Events Ahead

  • (0645 ET/1045 GMT) UK Conservative Party is set to announce the results of the vote for its new leadership
     
  • (0815 ET/1215 GMT) Bank of England Haldane's speech

FX Beat

DXY: The dollar index rallied to a 2-week peak, as traders wait for decisions from the U.S. Federal Reserve on how much and how fast they may reduce interest rates. The greenback against a basket of currencies traded 0.2 percent up at 97.47, having touched a high of 97.48 earlier, its highest since July 10.

EUR/USD: The euro plunged to a 5-week low, amid rising chances that European Central Bank would take interest rates deeper into negative territory on Thursday. The European currency traded 0.2 percent down at 1.1193, having touched a low of 1.1189 on Tuesday, its lowest since June 19. Investors’ attention will remain on the ECB Bank lending survey, and EZ prelim consumer confidence, ahead of the U.S. housing price index and existing home sales. Immediate resistance is located at 1.1211 (23.6% retracement of 1.1281 and 1.1189), a break above targets 1.1236 (50.0% retracement). On the downside, support is seen at 1.1181 (June 18 Low), a break below could drag it below 1.1148 (May 22 Low).

USD/JPY: The dollar rose, extending gains for the third straight session, as the Federal Reserve is widely expected to lower its target range of 2.25 percent – 2.50 percent by 25 basis points at a meeting ending July 31. Investors also await next week’s U.S.-China trade negations in Beijing for easing in on-going geopolitical tension. The major was trading 0.3 percent up at 108.16, having hit a high of 108.18 earlier, its highest since July 17. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. housing price index and existing home sales. Immediate resistance is located at 108.32 (July 17 High), a break above targets 108.63 (July 5 High). On the downside, support is seen at 107.53 (July 3 Low), a break below could take it lower at 107.10 (June 26 Low).

GBP/USD: Sterling slumped, extending prior session losses, as investors increased their bets on a no-deal Brexit ahead of the results of the Conservative Party’s leadership election. Markets expect Boris Johnson, the frontrunner to become the UK's next prime minister, who could pave the way for a no-deal exit from the European Union. The major traded 0.2 percent down at 1.2451, having hit a low of 1.2450 earlier, it’s lowest since July 18. Investors’ attention will remain on UK’s Conservative party leadership contest result, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2522 (July 9 High), a break above could take it near 1.2578 (July 12 High). On the downside, support is seen at 1.2422 (July 18 Low), a break below targets 1.2382 (July 17 Low). Against the euro, the pound was trading down 89.87 pence, having hit a high of 89.54 on Monday, it’s highest since July 15.

AUD/USD: The Australian dollar declined as its U.S. counterpart surged on expectations for a smaller U.S. Federal Reserve rate cut next week. The Aussie trades 0.2 percent down at 0.7018, having hit a high of 0.7082 on Friday, it’s highest since Apr. 24. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6996 (July 17 Low), a break below targets 0.6953 (July 11 Low). On the upside, resistance is located at 0.7091 (Mar 12 High), a break above could take it near 0.7147 (Mar 26 High).

NZD/USD: The New Zealand dollar plunged on a Bloomberg News article, stating that the Reserve Bank of New Zealand has begun scoping a project to refresh its unconventional monetary policy strategy and implementation. The Kiwi trades 0.3 percent down at 0.6735, having touched a high of 0.6790 on Friday, its highest level Apr. 4. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6823 (Mar. 29 High), a break above could take it near 0.6858 (Mar. 15 High). On the downside, support is seen at 0.6704 (10-DMA), a break below could drag it below 0.6664 (July 1 Low).

Equities Recap

Asian shares nudged higher amid growing expectations of policy easing by the Federal Reserve and the European Central Bank.

MSCI's broadest index of Asia-Pacific shares outside Japan nudged up 0.05 percent.

Tokyo's Nikkei rallied 0.9 percent to 21,620.88 points, Australia's S&P/ASX 200 index surged 0.5 percent to 6,724.60 points and South Korea's KOSPI advanced 0.4 percent to 2,102.04 points.

Shanghai composite index rose 0.4 percent to 2,898.08 points, while CSI 300 index traded 0.2 percent up at 3,789.94 points.

Hong Kong’s Hang Seng traded 0.3 percent higher at 28,455.90 points. Taiwan shares added 0.05 percent to 10,947.26 points.

Commodities Recap

Crude oil prices edged higher amid lingering concerns about possible supply disruptions in the Middle East, although an overall weaker demand outlook limited the upside. International benchmark Brent crude was trading 0.05 percent higher at $63.33 per barrel by 0455 GMT, having hit a low of $61.26 on Thursday, its lowest since June 18. U.S. West Texas Intermediate was trading 0.05 percent up at $56.22 a barrel, after falling as low as $54.71 on Thursday, its lowest since the June 20.

Gold prices plunged to a 5-day low as the greenback rose to a near 1-week high on expectation of a smaller interest rate cut by the U.S. Federal Reserve at the end of this month. Spot gold was 0.5 percent down at $1,416.91 per ounce by 0458 GMT, having touched a high of $1,452.80 on Friday, its highest since May, 2013. U.S. gold futures slipped 0.5 percent to $1,419.30 an ounce.

Tresuries Recap

The Japanese government bond prices rose, with the 10-year JGB futures rising 0.04 point to 153.64. The 10-year JGB yield fell 0.5 basis point to minus 0.145 percent. The two-year JGB yield was flat at minus 0.205 percent. The 30-year JGB yield was flat at 0.375 percent.

The Australian government bonds surged during Asian session of the second trading day of the week amid a muted trading session that witnessed data of little economic significance ahead of the Reserve Bank of Australia’s Governor Philip Lowe’s speech, scheduled to be held on July 25 by 03:05GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped nearly 2 basis points to 1.321 percent, the yield on the long-term 30-year bond also suffered 2 basis points to 1.956 percent and the yield on short-term 2-year traded nearly flat at 0.957 percent.


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