ILS: Shekel Extends Gains, July Inflation Data On Tap
Aug-15 09:10
USD/ILS trades -110 pips at 3.3731 as the shekel remains the best EMEA performer this week. A move through Jul 23 low of 3.3240 would allow bears to take aim at Jul 10 low of 3.3030. Conversely, a rebound above Aug 5 high of 3.4592 would suggest that bulls are taking the initiative again.
- Israel will report inflation data for the month of July at 12:00BST/14:00IDT. Consensus is for a deceleration in headline CPI to +3.1% Y/Y from +3.3% registered in June.
- Goldman Sachs expect inflation to have edged lower to +3.2% Y/Y. They point to a moderate base effect in food inflation offset by elevated food inflation momentum and sticky core inflation (especially when it comes to services and housing inflation).
- JP Morgan see the print as affected by airfares (up) and petrol prices (up), but note that otherwise, momentum in goods likely remained well behaved, while in services it remained elevated. They expect inflation to print at +3.2% Y/Y.
- Defence Minister Katz and IDF chief Zamir met to defuse recent tensions and agreed on a need for close coordination between the army and political leadership.
- The TA-35 Index has added 0.6% this morning.
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GILT AUCTION RESULTS: 4.50% Sep-34 Gilt Tender Result
Jul-16 09:03
| 4.50% Sep-34 Gilt | |
| Amount | GBP1.50bln |
| Avg yield | 4.547% |
| Bid-to-cover | 3.32x |
| Tail | 0.4bp |
| Avg price | 99.600 |
| Low price | 99.573 |
| Pre-auction mid | 99.571 |
FOREX: Greenback Consolidating Tuesday Advance, GBP Contained Post CPI
Jul-16 08:57
- G10 currency ranges have been very contained early Wednesday, allowing the US dollar to consolidate the prior day’s broad-based advance following the release of US inflation figures. The recent USD index recovery has now extended to around 2.3% from cycle lows printed on July 01. The rally marks the cleanest evidence yet of a material break of the downtrend posted off the February high, bolstered by a clean break above the 20-day EMA.
- USDJPY moderately extended its significant upswing overnight, printing at the highest level since April 03 at 149.18. Bullish momentum was underpinned by the rising US yields and breaks above the June and May highs likely exacerbated the move. The May high around 148.65 has provided support this morning, keeping a short-term bullish theme prominent.
- the next focus will be on 149.38, the 50.0% retracement of the Jan 10 - Apr 22 bear leg, and 150.49, the Apr 2 high.
- Despite headline and core CPI in the UK surprising to the upside, we think the BOE will largely describe inflation in the August MPR as broadly in line with their forecast. This explains the very limited reaction for GBP this morning, as markets assess the upcoming labour market data on Thursday and bearish technical developments for the pound.
- GBPUSD breached important trendline support below 1.3430 yesterday, drawn from the Jan 13 low. A clear break of the trendline strengthens a bearish threat and exposes 1.3335, the May 20 low.
- The data focus later today will be on US PPI, industrial production and the Fed’s beige book. There are also various FOMC speakers expected.
BONDS: Bonds Off Lows As Technical Supports Hold & Oil Softens
Jul-16 08:52
A downtick in crude oil helps stabilise wider core global FI.
- Technicals also play a part, with gilt futures respecting their early June low (91.16), while TY futures fail to break through Tuesday/overnight lows.
- Benchmark futures trade away from lows on the follow.
