SOUTH KOREA: Country Wrap: Further Fiscal Stimulus Announced
- The government has proposed to spend 10.1 trillion won ($7.27 billion) on artificial intelligence (AI) initiatives in 2026 — more than triple the 3.3 trillion won allocated for 2025, according to officials, Friday. The planned spending is in line with President Lee Jae Myung’s vision to position Korea as one of the world’s top three AI powerhouses, alongside the United States and China. The 10.1 trillion won is part of the record-high 728 trillion won budget for 2026, which marks an 8.1 percent increase from 2025 and is projected to raise the national debt-to-GDP ratio to 51.6 percent. (source Korea Times)
- A significant uptick in the July industrial production a day after the BOK held rates, shows that the Central Bank has time to consider their next move. South Korea's July industrial production rose +5.0%, beating estimates of +3.9% YoY. The month-on-month figure rose +0.3%, ahead of expectations, but down significantly on the prior month's revised result of +1.7%. The Cyclical change index rose to +0.5%, from +0.2% prior. The BOK held rates steady yesterday at 2.50%. The Governor noted that the decision reflected concerns about rapidly rising mortgage debt, especially in Seoul, and ongoing financial instability from slowing growth, albeit with some early signs of improvement. Export growth remained solid for a second consecutive month, driven by strong demand in semiconductors and automobiles, aided in part by front-loading amid tariff concerns . Whilst growth projections were slightly upgraded-from 0.8% to 0.9% for the year-this still marks the slowest growth since 2020 . Inflation risks appear manageable, supporting the likelihood of a more gradual easing cycle. The press conference emphasized a balanced approach to monetary easing with market commentators now expecting a possible 25 basis point rate cut in October, contingent on economic developments. (source MNI)
- The KOSPI has had a weak end to the week, down -0.22%, yet remains up by +0.65% for the week as it heads into a big week of data next week.
- The Won has not participated in the regional rally with falls of -0.35% to be at 1,388.35
- Korea's 10yr government bond is finishing the week at 3.82%, down -4bps for the week.
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EURGBP TECHS: Monitoring A Bearish Engulfing Candle
- RES 4: 0.8835 High May 3 2023
- RES 3: 0.8800 Round number resistance
- RES 2: 0.8781 2.236 pro of the Mar 3 - 11 - 28 price swing
- RES 1: 0.8705/69 50% of Jul 28-29 sell-off / High Jul 27 & bull trigger
- PRICE: 0.8656 @ 06:31 BST Jul 30
- SUP 1: 0.8649/42 20- day EMA/Low Jul 29
- SUP 2: 0.8584 50-day EMA
- SUP 3: 0.8540 Low Jun 30
- SUP 4: 0.8508 Low Jun 27
The trend set-up in EURGBP remains bullish, however, Monday’s price pattern - a bearish engulfing candle - does signal a potential short-term reversal. Support at the 20-day EMA, at 0.8649 was pierced on Tuesday, a clear break of this average would signal scope for a deeper retracement. The 50-day EMA lies at 0.8584. For bulls, a move through 0.8769, the Jul 27 high, would confirm a resumption of the uptrend.
FRANCE DATA: Q2 Flash GDP Skewed Higher By Inventories
French Q2 flash GDP was slightly stronger than expected at 0.3% Q/Q (vs 0.1% cons and prior). However, the details of the print are not strong: Inventory investment contributed 0.5pp to the quarterly print (vs 0.7pp prior), with final domestic demand dragging 0.1pp and net exports pulling GDP down by 0.2pp.
SCHATZ TECHS: (U5) Trading Above Last Week’s Low
- RES 4: 107.360 High Jul 22 and a key resistance
- RES 3: 107.267 50-day EMA
- RES 2: 107.233 20-day EMA
- RES 1: 107.155 Low Jul 28
- PRICE: 107.100 @ 05:58 BST Jul 30
- SUP 1: 107.010 Low Jul 25 and a bear trigger
- SUP 2: 107.993 1.500 proj of the Jul 7 - 11 - 22 price swing
- SUP 3: 106.964 1.618 proj of the Jul 7 - 11 - 22 price swing
- SUP 4: 106.928 1.764 proj of the Jul 7 - 11 - 22 price swing
Schatz futures traded sharply lower last week resulting in a break of key short-term support at 107.120, the Jul 11 low and a bear trigger. However, the contract has recovered from the Jul 25 low and recent price patterns highlight a potential base. A continuation higher would expose resistance at the 20-day EMA, at 107.221. The 50-day EMA is at 107.267. On the downside, key support and the bear trigger has been defined at 107.010, the Jul 25 low.
