GBP better bid as May takes over
Market Brief
US equity indices printed new all-time high yesterday as investors cast aside their concerns about slowing global growth and Brexit spillovers. In Wall Street yesterday, the Dow Jones Industrial average broke its previous record from May 19 2015 and hit 18,259.12 points. The S&P 500 set, for the second day in a row, a new all-time high at 2,155.40.
In the bond market, US treasury yields eased slightly during the Asian session, taking a breather after rallying for fifth straight days. The monetary sensitive 2-year yields eased to 0.6752% from 0.69%; the 10-year yields fell to 1.4875% after testing 1.5288%. The rally in bonds’ yields should keep going as investors continue to favour riskier assets in this improving risk environment.
In the FX market, the pound sterling continued to rally as Theresa May takes over as Prime Minister. The fact that she made clear she won’t rush towards the exit helped to dissipate the clouds in the short-term and allowed the pound to rally for a fourth day in row, up to $1.33, while it was still trading at around $1.29 last Friday. However, the pound’s upside potential may be limited as the BoE is expected to cut its benchmark interest rate on Thursday. GBP/USD traded range bounded in Tokyo between 1.3225 and 1.3338 as it tumbled on the 1.3350 resistance area (previous highs from early July).
In Japan, the yen stabilised after rallying roughly 4% over the last three days. We expect the Japanese yen to resume its freefall as traders keep buying back their short positions and investors adjust their positioning ahead of the BoJ meeting at the end of July. USD/JPY edged down 0.50% to 104.42 after hitting 104.99 in Wall Street.
Commodity currencies took a hit with NZD, AUD, NOK and CAD falling sharply on Wednesday as crude oil prices edged lower and traders locked in their recent profits. NZD/USD fell roughly 1% from Wall Street’s high, down to 0.7250, while the Australian dollar slid 0.90%. Both currencies failed to break to the upside their respective key resistance levels as crude oil prices stabilised. USD/CAD rose slightly to 1.3070, while USD/NOK was up 0.40%.
Today traders will be watching CPI from Spain, Italy and Russia; industrial production from the Eurozone; MBA mortgage application, monthly budget statement, Beige Book and crude oil inventories from the US; retail sales from South Africa; interest rate decision from Canada.
| Global Indexes | Current Level | % Change |
|---|---|---|
| Nikkei 225 Index | 16231.43 | 0.84 |
| Hang Seng Index | 21322.34 | 0.46 |
| Shanghai Index | 3056.742 | 0.24 |
| FTSE futures | 6608 | -0.25 |
| DAX futures | 9942.5 | -0.22 |
| SMI Futures | 8117 | -0.07 |
| S&P future | 2143.1 | -0.13 |
| Global Indexes | Current Level | % Change |
|---|---|---|
| Gold | 1340.43 | 0.55 |
| Silver | 20.38 | 1.03 |
| VIX | 13.55 | 0.07 |
| Crude wti | 46.33 | -1 |
| USD Index | 96.46 | 0.01 |
| Today's Calendar | Estimates | Previous | Country/GMT |
| SP Jun CPI Core MoM | - | 0,30% | EUR/07:00 |
| SP Jun CPI Core YoY | 0,80% | 0,70% | EUR/07:00 |
| CH Jun Exports YoY CNY | 0,30% | 1,20% | CNY/07:00 |
| CH Jun Imports YoY CNY | -1,20% | 5,10% | CNY/07:00 |
| CH Jun Trade Balance CNY | 323.00b | 324.77b | CNY/07:00 |
| SP Jun F CPI EU Harmonised MoM | 0,40% | 0,40% | EUR/07:00 |
| SP Jun F CPI EU Harmonised YoY | -0,90% | -0,90% | EUR/07:00 |
| SP Jun F CPI MoM | 0,50% | 0,50% | EUR/07:00 |
| SP Jun F CPI YoY | -0,80% | -0,80% | EUR/07:00 |
| NO 2Q House Price Index QoQ | - | 1,70% | NOK/08:00 |
| IT Jun CPI FOI Index Ex Tobacco | - | 99,7 | EUR/08:00 |
| IT Jun F CPI EU Harmonized YoY | -0,30% | -0,30% | EUR/08:00 |
| UK Bank of England Credit Conditions & Bank Liabilities Surveys | - | - | GBP/08:30 |
| EC May Industrial Production SA MoM | -0,80% | 1,10% | EUR/09:00 |
| EC May Industrial Production WDA YoY | 1,30% | 2,00% | EUR/09:00 |
| US Jul 8 MBA Mortgage Applications | - | 14,20% | USD/11:00 |
| SA May Retail Sales Constant YoY | 1,40% | 1,50% | ZAR/11:00 |
| SA May Retail Sales MoM | 0,40% | -1,70% | ZAR/11:00 |
| BZ May IBGE Services Sector Volume YoY | -4,00% | -4,50% | BRL/12:00 |
| US Jun Import Price Index MoM | 0,50% | 1,40% | USD/12:30 |
| US Jun Import Price Index YoY | -4,60% | -5,00% | USD/12:30 |
| CA Jun Teranet/National Bank HPI MoM | - | 1,80% | CAD/12:30 |
| CA Jun Teranet/National Bank HP Index | - | 185,24 | CAD/12:30 |
| CA Jun Teranet/National Bank HPI YoY | - | 9,00% | CAD/12:30 |
| RU Jul 11 CPI Weekly YTD | - | 3,70% | RUB/13:00 |
| RU Jul 11 CPI WoW | - | 0,40% | RUB/13:00 |
| US Fed's Kaplan Speaks to World Affairs Council of Houston | - | - | USD/13:00 |
| CA Jul 13 Bank of Canada Rate Decision | 0,50% | 0,50% | CAD/14:00 |
| CA Bank of Canada Releases Monetary Policy Report | - | - | CAD/14:00 |
| US Jul 8 DOE U.S. Crude Oil Inventories | -3000k | -2223k | USD/14:30 |
| US Jul 8 DOE Cushing OK Crude Inventory | -123k | -82k | USD/14:30 |
| EC ECB's Angeloni participates in panel discussion in Frankfurt | - | - | EUR/14:30 |
| BZ Currency Flows Weekly | - | - | BRL/15:30 |
| US Jun Monthly Budget Statement | $23.0b | - | USD/18:00 |
| US U.S. Federal Reserve Releases Beige Book | - | - | USD/18:00 |
Currency Tech
EURUSD
R 2: 1.1428
R 1: 1.1186
CURRENT: 1.1053
S 1: 1.0913
S 2: 1.0822
GBPUSD
R 2: 1.3981
R 1: 1.3534
CURRENT: 1.3269
S 1: 1.2798
S 2: 1.1880
USDJPY
R 2: 107.90
R 1: 106.84
CURRENT: 104.38
S 1: 99.02
S 2: 96.57
USDCHF
R 2: 1.0328
R 1: 0.9956
CURRENT: 0.9885
S 1: 0.9522
S 2: 0.9444
- S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
Author
Arnaud Masset
Swissquote Bank Ltd
Arnaud Masset is a Market Analyst at Swissquote Bank. He has a strong technical background and also works in the development of quantitative trading strategies.
