Archives of “July 2019” month

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Eurostoxx futures -0.1% in early European trading

  
Analysis, Global Indices

Flattish tones observed in early trades

  • German DAX futures flat
  • French CAC 40 futures +0.1%
  • UK FTSE futures +0.3%
UK stocks are once again the standout here as the pound continues to be ravaged to start the new week. Sentiment elsewhere is more reflective of the mood in US equity futures, which are near flat levels as well with E-minis just up by 0.1% currently.
All eyes are on the Fed decision tomorrow but just be wary of any potential headlines to follow from Shanghai as US-China trade talks resume today and tomorrow.

Nikkei 225 closes higher by 0.43% at 21,709.31

  
Analysis, Global Indices

Asian equities fare slightly better after mixed sentiment overnight

Nikkei 30-07

The gains today belie the more choppy market sentiment ahead of the Fed decision tomorrow as traders and investors are all waiting with bated breath on what the US central bank will decide and communicate to markets.

US futures are up by about 0.1% but it isn’t really telling of much in my view as we will only get more clarity after the Fed. USD/JPY holds lower at 108.63 amid pressure from GBP/JPY selling as the pound continues to stay weak on the day.

IG Markets: Pound seen falling to 1.1800 level as Brexit woes worsen

  
  Analysis

IG markets say

The GBPUSD may fall further as funds fret over the UK’s divorce from the EU, according to IG markets.
They say:
  • “PM Johnson putting together a brigade of Brexiteets to take a hard line with Europeans are seeing markets react negatively to sterling”
  • “The rates futures curves in the UK shows an increased chance the Bank of England will cut rates next year as markets price a hard Brexit shot to the economy, and that’s also weighing on the currency”
  • “Breaching the 122 level where there was reasonable support is significant — we are open now to the downside”, with 1.1800 as a target over the next several months

Bank of Japan leaves short-term interest rates at -0.1% as per expectations

  
Analysis, Economy

Bank of Japan interest rate decision

  • Keeps monetary policy steady
  • maintains a short-term interest rate target at -0.1%
  • maintains 10 year JGB yield target around 0%
  • leaves unchanged for guidance on interest rates, says will keep current extremely low rates for extended period time at least through spring of 2020
  • medium core CPI forecast for fiscal 2019 – 20 at 1.0% versus 1.1% in April forecast
  • risks are skewed to the downside on economy
  • Japan inflation is gradually to accelerate toward 2%
  • won’t hesitate to take extra action if needed
  • won’t hesitate to take additional easing of momentum to goal lost
  • CPI currently at around 0.5%
  • fiscal year 2019 GDP forecast is 0.7% versus 0.8% previously
  • fiscal year 2020 GDP forecast is 0.9% versus 0.9% previously
  • fiscal year 2021 GDP forecast 1.1% versus 1.2% previously
  • sees fiscal year 2019 core CPI including sales tax at 1.0% versus 1.1% previously
  • sees fiscal year 2020 core CPI including sales tax 1.3% versus 1.4% previously
  • sees fiscal year 2021 core CPI forecast 1.6 versus 1.6 previously

Japan industrial production MoM for June (P) -3.6% vs -1.7% estimate

  
Analysis, Economy

Japan industrial production

Industrial production year on year is down near lows going back to 2016
  • industrial production for June preliminary MoM -3.6% versus -1.7% estimate. Prior month +2.0%
  • industrial production for June YoY -4.1% versus -2.0% estimate. Prior month -2.1%
  • shipments MoM -3.3% versus +1.3% last month
  • inventories  MoM 0.3% versus 0.5% last month
  • inventory ratio MoM2.8% versus 1.7% last month
  • shipments year on year, -4.2% versus -1.8% last month
  • inventories year on year, 2.9% versus 1.5% last month
  • inventory ratio year on year, 6.3% versus 4.5% last month

Japan industrial production fell more than expected in June. The preliminary release is showing a -3.6% decline versus -1.7% estimate. Last month industrial production rose 2.0%.

For the year, industrial production fell -4.1% versus -2.0% estimate. The prior month was at -2.1%.

The numbers are not good and likely reflect the global slowing as a trade tensions.

USDJPY trades in the middle of channel ahead of data/rate decision

  
Analysis, Forex

Channel has topside trend line at 109.13, and lower trend line at 108.52

The Japan employment report and industrial production data will be released at 2330 GMT and 2350 GMT respectively.  Later, the 2-day Bank of Japan meeting will conclude. The BOJ is expected to keep rates unchanged.
Channel has topside trend line at 109.13, and lower trend line at 108.52
The USDJPY is trading near the high for the week at 108.893. That is just below the 38.2% retracement of the move down from the April 24 high at 112.389. That retracement level comes in at 108.918. The high for July reached 108.985 on July 10. The 108.92 to 109.00 is a key area for the bulls and bears through the data and rate decision. A move above would be more bullish, with the topside channel trendline cutting across at 109.14.
On the downside, the move below the 108.72 level, could see more selling momentum with a lower channel trend line 108.52 (and rising) as a level that would need to be broken to solicit more selling.

Dollar is tougher to love with Trump threatening action – SocGen

  
Analysis, Forex

What’s the state of play

Kit Juckes from SocGen talks about the FX market’s focus on growth dynamics at the moment and how that will mitigate any rate cut from the Fed this week.
At the same time, he worries that we will probably hear more about USD intervention in the weeks ahead, especially if/when the dollar strengthens.

“How then to position? We like EUR/JPY shorts at times of uncertainty and will stick with those. Decent US data and a dovish Fed ‘ought;’ to help those of us inclined to bottom-fish for cheaper AUD and CAD, even if neither of those positions has done us any favours in the last week. USD/CAD shorts look more secure than AUD/USD longs, but since July’s best currency so far is the Turkish Lira, despite a large CBRT rate cut, maybe yield-seekers are going for ‘proper’ yields and bypassing G10 currencies that yield less than the US anyway.”

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