FOREX: Dollar Firmer as Payrolls Awaited, NZDUSD Eyes Key Support
Sep-04 16:47
- Aside from a very brief dip in APAC trade, the USD index has been slowly grinding higher on Thursday, undeterred by some slightly softer ADP and claims data, and moderately boosted by an above-expectation ISM services release. Overall, the moves have been relatively contained (DXY up 0.25%) given the imminent release of the highly significant US employment report on Friday.
- These moves come despite solid demand for the major equity benchmarks and lower US yields, and therefore could be more reflective of positioning ahead of the Friday’s data.
- As usual, USDJPY has been an accurate reflection of the broader greenback price action, with a brief dip to 147.80 well supported in Asia, and the pair then rallying around 10 pips in steady fashion to session highs of 148.78. Solid resistance is seen at 149.12/14, a level that could come under threat should a further weakening of the US labour market not materialise.
- The stronger dollar in the aftermath of the US data continues to weigh most notably on the likes of AUD and NZD, which currently have session losses of 0.5 and 0.65% respectively.
- NZDUSD price action narrows the gap to the aforementioned key double bottom and psychological support at 0.5800. A break of this level would strengthen bearish conditions and signal a move towards 0.5728, the 61.8% retracement of the Apr-Jul rally.
- For AUDUSD, initial resistance between 0.6560/70 held well on Wednesday, despite the firmer-than-expected GDP reading. Support for the pair remains further out, at 0.6415, the Aug 21 / 22 low. A clear break of it would resume a bear leg and highlight a stronger reversal pattern.
- Kiwi weakness slightly outpacing its regional peer sees AUDNZD trade to fresh cycle highs of 1.1157, narrowing the gap to a key medium-term level at 1.1180.
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BONDS: EGBs-GILTS CASH CLOSE: Mixed After Initial Rally
Aug-05 16:46
EGB and Gilt yields finished up from their intraday highs Tuesday to trade mixed overall.
- Early trade was constructive, with Friday's poor US employment report continuing to buoy core instruments. At the onset of the session, the 10Y Bund yield hit its lowest intraday levels since Jul 23; for Gilts, Jul 2.
- However yields would mostly drift higher from there despite few evident catalysts, as equities and the US dollar pulled back.
- Data was relatively non-impactful. We saw above-expected Spanish and French industrial production alongside slight downward revisions to Eurozone final July services/composite PMIs, with UK services PMI seeing an upward revision. Eurozone June PPI was a touch lower than expected.
- A soft US ISM Services reading saw bonds rally, though a higher prices paid component muted the impact.
- For the session, both the UK and German curves leaned slightly flatter, with Gilts underperforming despite a solid 10Y UK auction. Periphery/semi-core EGB spreads were mostly tighter on the day, with 10Y BTPs failing to close below the 80bp mark to Bund.
- German factory orders highlight Tuesday's docket, with Italian industrial production and Eurozone retail sales also due. Thursday's BOE decision remains the calendar highlight of the week - MNI's preview is here.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.7bps at 1.908%, 5-Yr is down 0.2bps at 2.215%, 10-Yr is unchanged at 2.624%, and 30-Yr is up 0.3bps at 3.138%.
- UK: The 2-Yr yield is up 2bps at 3.826%, 5-Yr is up 1.8bps at 3.956%, 10-Yr is up 0.7bps at 4.516%, and 30-Yr is up 1.2bps at 5.339%.
- Italian BTP spread down 0.1bps at 80.2bps / French OAT down 0.3bps at 65.9bps
ENERGY: Russia Mulls Ukraine Air-Truce Offer to Trump: Bloomberg
Aug-05 16:45
The Kremlin is weighing options for a concession to US President Donald Trump that could include an air truce with Ukraine to try and prevent secondary sanctions, even as Russia remains determined to continue the war, Bloomberg reported.
- While US envoy Steve Witkoff is visiting Moscow, expectations for success in talks are low, sources familiar with the matter told Bloomberg.
- A pause on air strikes involving drones and missiles as a de-escalation gesture may be one potential proposal provided that Ukraine also signed up, a source told Bloomberg.
- Vladimir Putin will not agree to a general ceasefire as Russian forces continue a summer offensive before weather changes later in the year.
- It is not clear if offer of air restraints would also include conditions that would make it unacceptable to Ukraine and its allies.
- Trump has threatened to impose secondary sanctions including 100% tariffs on buyers of Russian oil, singling out India and China.
FED: US TSY 3Y AUCTION: NON-COMP BIDS $153 MLN FROM $58.000 BLN TOTAL
Aug-05 16:45
- US TSY 3Y AUCTION: NON-COMP BIDS $153 MLN FROM $58.000 BLN TOTAL
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