The Morning Brief: Dollar, Oil and BREXIT
The Asian traded mixed following the flat close on Wall St. and weakness in energy, to which we saw Natural Gas decline nearly 5%. The Nikkei 225 (-0.3%) was initially negative as a stronger JPY put a dampener on exporter sentiment but then recovered on short covering ahead of tomorrow’s market closure. ASX 200 (-0.4%) was pressured by energy losses with financials also subdued after Big-4 Common wealth Bank missed on its earnings, despite posting a record FY net. Shanghai Comp (-0.1%) traded with mild losses, while Hang Seng (+0.5%) outperformed on earnings releases.
Japanese PPI (Jul) Y/Y -3.90% vs. Exp. -4.00% (Prev. -4.20%)
-PPI (Jul) M/M 0.00% vs. Exp. -0.10% (Prev. -0.10%). (Newswires)
Japanese Machine Orders Y/Y (Jul) -0.90% vs. Exp. -4.50% (Prev. -11.70%)
-Machine Orders (Jul) M/M 8.3% vs. Exp. 3.2% (Prev. -1.4%).
China 2016 PPI could decline 2.7%, according to Chinese Press.
Peoples Bank Of China set CNY mid-point at 6.6530 (Prev. 6.6594). They also injected CNY 80bln via 7-day reverse repos.
EUROPE & United Kingdom
According to the UK’s Institute for Fiscal Studies, any Brexit deal that does not result in the UK remaining a member of the single market will accentuate the negative economic fallout from the UK's vote to leave the EU. (CityAM)
The Dollar weakened across the board to the benefit of its major counterparts with GBP/USD rising by nearly a point while USD/CAD fell below 1.3100. USD/JPY resumed its decline with selling in the pair seen at the open of Tokyo trade ahead of tomorrow’s holiday and as Asia participants react to overnight price action amid thin conditions. Conversely, AUD/USD saw mild advances and briefly broke above 0.7700 although the pair was later unreactive to the final speech by Governor Stevens, who’s term ends next month, in which Stevens highlighted limitations on monetary policy.
RBA Governor Stevens said there is a need for realism on what monetary policy can do and that it is not only interest rate changes which are needed to sustain growth. Stevens also added that monetary policy cannot simply dial up economic growth that is needed and that the board has talked about risks associated with rates being too low.
Oil prices were at a standstill overnight after WTI crude futures failed to gain a foothold above USD 43/bbl in US trade. Gold (+0.4%) extended on its gains with the precious metal underpinned by continued USD weakness which also simultaneously lifted silver prices. Elsewhere, copper was marginally higher as it nursed yesterday’s losses.
US API Crude Oil Inventories (Aug 5) W/W 2090K (Prev. -1300K).
Goldman Sachs cut their Q3 GDP estimate from 2.5% to 2.4% following the wholesale inventories report.
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