Articles

Headlines:

• Powell speech the main event to watch to start the week
• Treasury yields jump higher to start the week after Trump assassination attempt
• Eurozone May industrial production -0.6% vs -1.0% m/m expected
• Switzerland June producer and import prices 0.0% vs -0.3% m/m prior
• SNB total sight deposits w.e. 12 July CHF 458.9 bn vs CHF 453.4 bn prior
• Firms lower China 2024 growth forecast after softer data earlier

Markets:

• NZD lags on the day
• European equities lower; S&P 500 futures up 0.5%
• US 10-year yields up 3.9 bps to 4.225%
• Gold up 0.3% to $2,418.40
• WTI crude down 0.1% to $82.10
• Bitcoin up 2.7% to $62,460

The main story to start the week came over the weekend, that being the assassination attempt on former president Trump. The incident rebuffed the narrative of Trump winning his re-election bid and the betting odds translated somewhat to markets as well.

The dollar opened with a minor gap higher but saw that advance fade in European morning trade. Meanwhile, Treasury yields opened higher as well but are being kept in check during the session.

USD/JPY traded to a high of 158.43 in Asia but is now settling closer to 158.00 with large option expiries seen at the figure level. Likewise, EUR/USD also has large expiries pulling the pair close to 1.0900 after its opening gap lower near 1.0885.

There wasn’t too much significant action in major currencies, with the dollar still looking shaky after last week’s losses.

Elsewhere, European stocks are weighed lower as the EU is to meet to discuss fiscal plans. US futures gradually nudged higher though, continuing the good form in the last two weeks. S&P 500 futures are up 0.5% on the day with more bank earnings slipping in.

Coming up later, Fed chair Powell will be making an appearance so that will offer something for traders to be wary about to start the week.

This article was written by Justin Low at www.forexlive.com.

Unfortunately, I reckon we might get a repeat performance to his comments last week in Congress. Sure, there was the US CPI report in between that and now. But I don’t think Powell will choose to rock the boat again today. It will be too early to be that confident on the inflation outlook, or at least to not be explicit about it.

He might acknowledge last week’s report as being one in the right direction but the overall progress remains gradual. There’s still time before committing to a move in September, so there is little to gain by preempting that at this point in time.

Once again, it’ll likely be a case of what Powell doesn’t say is what might matter more for markets.

September is pretty much fully priced in now while traders are seeing some ~63 bps of rate cuts for the year.

He will be due to speak in an interview later at the Economic Club of Washington D.C. at 1600 GMT with the event to carry on until 1730 GMT.

This article was written by Justin Low at www.forexlive.com.

Note – it’s a holiday in Japan today, markets are closed there.

On the data calendar China is the focus. The ‘activity’ data (retail sales, industrial production and investment) for June is expected to have shown a slightly reduced pace of improvement from May.

As a heads up, this week brings the third plenum of the Chinese Communist Party’s 20th National Congress. From July 15 to 18.Be on the lookout for any economic policy initiatives from this.

This snapshot from the ForexLive economic data calendar, access it here.

The times in the left-most column are GMT.

The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

This article was written by Eamonn Sheridan at www.forexlive.com.

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

This article was written by Eamonn Sheridan at www.forexlive.com.

New Zealand Performance of Services Index for June 2024, via BusiznessNZ, performed even worse than the appalling May report.

June came in at 40.2, second month in a row the lowest level of activity for the sector for a non-COVID lockdown month since the survey began in 2007

• prior 43.0
• Employment sub index @45.6 was at its lowest point since February 2022

BNZ’s Senior Economist Doug Steel said that “the Performance of Services Index has been well below average for more than a year. Moreover, the weakness appears to be accelerating”.

NZD/USD has weakened to below 0.6100

This article was written by Eamonn Sheridan at www.forexlive.com.

A Goldman Sachs Asset Management view on US stoicks for the rest of 2024, in a nutshell:

• “What do we expect for the rest of the year? Essentially a
  flattish market”
• “Our view is that the
  full-year market return has been achieved in the first half”

Citing:

• earnings growth of the first half of 2024 will decelerate in the
  next six months
• uncertainty over Fed rate cuts and inflation
• geopolicital risks (GS think oil could be a useful hedge here, gold too)

Info from their

midyear investment outlook released last week.

This
chart is from our charting app, which is free and can
be found at this link

This article was written by Eamonn Sheridan at www.forexlive.com.

Japanese markets are closed for the public holiday in Japan today, its Marine Day.

• Marine Day, or “Umi no Hi,” is a national holiday in Japan celebrated on the third Monday of July. It honors the ocean’s importance to Japan as an island nation and recognizes maritime activities and the economic and cultural significance of the sea. The holiday also encourages people to reflect on the blessings of the ocean and to think about the environment. Many people celebrate by spending time at the beach, participating in marine-related events, and enjoying water sports.

Physical US bond trade during Asian hours is primarily in Japan. So, with the absence of Japanese markets today UST physical trade will be barely existent during the timezone here.

Japan is one of the largest holders of US Treasury securities. The high demand and substantial holdings of US Treasuries in Japan create a deep and liquid market, which attracts traders and institutions looking to buy or sell these bonds during Asian hours. Major Japanese financial institutions, including banks and insurance companies, are significant participants in the US Treasury market. Their active participation necessitates a robust trading infrastructure in Japan.

Flow liquidity will also be lessened for markets such as Forex.

Marine Day in Japan – wishing all well who are celebrating!

This article was written by Eamonn Sheridan at www.forexlive.com.

The dollar might’ve opened with a slight gap higher today but didn’t do much with it. It is arguably a kneejerk reaction to the Trump shooting but did that really change the big picture outcome? Not quite I would say, at least considering Trump was already odds on to defeat Biden in November. But this perhaps solidifies that case, albeit emotions are still running high.

In any case, major currencies have quickly settled down with the dollar giving that back. EUR/USD is now flat on the day just above 1.0900, though large option expiries close to the figure level might keep gains in check.

The June high at 1.0916 is also one to watch, offering some added resistance on the day.

Besides that, USD/JPY is also trading back to flattish at 157.85 after having nudged up to around 158.20 earlier in the session. GBP/USD is also near flat at 1.2985 after having touched a low of 1.2960 in Asia trading.

The move comes as stock futures continue to rip higher though. S&P 500 futures are up 0.4% now, providing some added optimism to the broader risk mood today. As for Treasury yields, the earlier jump is also slightly tempered with. 10-year yields are now up just 2.3 bps to 4.21% from near 4.24% at the start of the day.

This article was written by Justin Low at www.forexlive.com.

• Prior -0.1%; revised to 0.0%

Euro area industrial output slumped by less than estimated in May with the breakdown as follows:

This article was written by Justin Low at www.forexlive.com.

UBS are wary of much more weakness ahead for the yen in the near term.

Citing the backdrop of the rise in JPY after the US CPI report, helped along by Bank of Japan intervention leaning into the weakness for USD/JPY, UBS cite:

• they expect the differential between US/Japan, but to do so more meaningfully later this year
• investor speculative short JPY positioning is close to a record

And say they expect further pull back drops for USD/JPY as us Data continues to indicator a soft landing for the US economy.

ICYMI:

• Heads up for a holiday in Asia today – Japanese markets are closed (no UST physical trade)

This article was written by Eamonn Sheridan at www.forexlive.com.

This comes after the miss on Q2 numbers earlier today here.

Goldman Sachs is cutting their 2024 GDP forecast for China to 4.9%, down from 5.0% previously. Meanwhile, JP Morgan slashed their estimate to 4.7% compared to 5.2% previously. On the revision, JP Morgan continues to argue that the Chinese economy remains “fragile, unstable and uneven”.

This article was written by Justin Low at www.forexlive.com.

US President Biden addressing the nation from the White House Oval Office:

• we need to lower the temperature in politics
• no place for this kind of violence, no exceptions
• I will continue to speak up for US democracy and the rule of law

This article was written by Eamonn Sheridan at www.forexlive.com.