09 August 2016 at 11:43 GMT
Markets are overall fairly calm today with the largest August data releases now behind us. Copper has retraced 50% of its June-July rally while oil prices have continued their short-covering and verbal intervention-fueled rally.
Interestingly, the British pound chose today of all days to make its move below the 1.30 mark versus USD; something that we have not seen since the intial post-Brexit plunge.
Given the dovish Bank of England and some poor post-Brexit data, it was difficult to see much in the way of upside for GBP, but until today it had been holding the line.
- Canadian housing starts (July, 1215 GMT)
- US wholesale inventories (June, 1400 GMT)
A quiet day as with the European summer schedule little is expected from ECB officials, keeping the sentiment as-is for the time being.
No bigger moves so far apart from GBP lower and GBPUSD trading below 1.300. This is new territory, given that we previously were here after the initial Brexit shock, and the strength is a combination of a dovish BoE that was then reinforced by a stronger NFP. Decent tech resistance at 1.3100 area if looking for selling rallies, but a break of this tech resistance could lead to decent momentum upwards.
In AUD we still like AUDUSD higher in line with better risk sentiment, yields differentials and lack of guidance, but we prefer the break of 0.7675 for new momentum. As for NZD, the RBNZ is out tonight with expected cut of 0.25%, which should be priced in (more would be a surprise and lead for weaker NZD). If they cut by 0.25%, the market might find this opportunity for a supported NZD after the decision volatility (same logic as AUD). Tech support at 0.7062 (55-day moving average, and also around the 61% Fibo from the rally starting July 21).
EURUSD is still struggling to close day below its 200-day moving average at 1.1077 today, which would open us up for 1.100. Tech resistance lies at 1.1148 (55-day moving average). EURUSD looks contained in this range so far, with preference for lower on closing day below 1.1077 area. US July Retail Sales Friday could be a trigger for new moves.
FX Options volatilities
Demand for the three-month tenor in USD crosses is on the rise as this now covers the US election. EURUSD 3m is 8.35 today compared with 7.9 yesterday.
Besides this, the market continues to be supplied in frontend gamma so it's very hard to find a decent bid in the very short end. Best demand is around two- and three-month.
Paste fixed income text from email (they call it "rates")
European stocks nudged higher with the Stoxx Europe 600 picking up 0.2% to 342.12 as all sectors registered gains. Germany’s DAX 30 gained 0.4% to 10,469.34, and France’s CAC 40 rose 0.5% to 4,435.49. Like yesterday, oil and gas shares were the best-performing stocks on a sector basis, despite a small pullback in oil prices today.
Telecom stocks were also outperforming this morning with Altice NV shares rallying 11% after the telecommunications company said core earnings rose 2.7% in the second quarter. It said growth in the US and Portugal offset a slowdown in France. But French telecommunications company SFR Group SA said it is seeing signs of a better pricing environment in the mobile market in France; its shares surged 10%.
Legal & General Group PLC reported a 9.6% rise in first-half adjusted-operating profit, but its shares were down 5.7%.
Pandora A/S shares fell 4.5% after the Danish jeweler’s quarterly profit and sales came in below expectations. Sales rose 20% to 4.33 billion kroner, but the result missed the FactSet consensus of 4.52 billion kroner. The company did back its full-year sales view and said the Brexit vote didn’t hurt UK sales.
Randstad Holding NV was off 0.1% after the Dutch staffing provider said it plans to buy Monster Worldwide Inc. in a deal worth about $429 million.
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Oil is back on the recovery track after some early weakness. Pic: iStock
— Edited by Clare MacCarthy and Michael McKenna