Article / 26 July 2016 at 7:00 GMT

Morning Markets: Yen traders take aim at BoJ doves

Editor / Saxo Bank

Morning Markets: Prices


  • US: Services PMI (1345 GMT)
  • US: New Home Sales (1400 GMT)
  • US: Consumer Confidence (1400 GMT)

Crude oil futures are sitting at a three-month low as ongoing fears related to slowing global demand growth and oversupply have reasserted themselves in the absence of any shorter-term bullish driver.

Asian equities were lower on the day as well with the Nikkei 225 plunging by over 200 points as the Japanese yen gained 1.3% against the US dollar in the run-up to the Federal Open Market Committee meeting tomorrow and the Bank of Japan meeting Friday. 

It would appear at this juncture that yen traders regard the yen declines that followed the re-election of prime minister Shinzo Abe as excessive and the large-scale stimulus expected from the new government as either priced in or unlikely to materialise. 

Today's calendar shows a host of US data releases ahead of the FOMC event, with a services PMI release at 1345 GMT and a new home sales number at 1400 GMT likely in the Fed's crosshairs. 

Can relatively strong data push the US back on track towards rate normalisation and a resumption of the policy divergence trend between EUR and USD? The ambient political confusion and uncertainty stateside make it difficult to isolate monetary policy from the greater national trajectory, but it is worth noting that the chances of a 2016 rate hike have risen to nearly 50% of late.

Finally, Apple is due to report its Q2 earnings today and while expectations are soft, Saxo Bank head of equity strategy Peter Garnry says sentiment may have become too bearish, opening the window for a "not as bad as we thought"-type upside swing.

Market signals

Asian session

  • Crude oil is trading at close to a three-month low on oversupply and slowing growth fears
  • Commodity stocks drove declines in much of Asia today
  • Nikkei posts 237-point decline as yen surges in value
  • Korea's Kospi Composite posts 0.75% gain
  • Shanghai Composite up by a robust 0.88% to 3,042.356 at 0630 GMT
  • Hong Kong's Hang Seng index rebounded from Monday's drop, helped by gaming stocks
  • Hang Seng gains 1.04% in bullish Tuesday session
  • Australia's S&P/ASX200 struggles to stay green, closes up 0.07%
  • A US/Indian expedition has found a major deposit of natural gas, reports Bloomberg
  • The Indian Ocean find could boost energy output in a region that is now a big importer:

Forex ahead

  • USDJPY plunges to 104.25 ahead of European session
  • EURGBP posts strong rebound from post-UK PMI lows last Friday
  • USDCAD fails to reflect oil woes overnight, but pair climbing into London open
  • Falling crude prices hit the Malaysian ringgit; it was worth just 0.2458 at 0517 GMT
  • GBPUSD spikes lower as post-Brexit data weigh on UK
  • AUDUSD spikes higher overnight; pair trading around 0.7525

From the Floor

Blank round?The market now seems to doubt we will get the big bazooka [by the Bank of Japan] on Friday,” says Moltke-Leth

Apples and bears.We agree on the negative view on Apple, but the sentiment might be too negative and Apple could surprise to the upside,” says Garnry

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1... 2... 3
US home sales and US confidence are looking up, but it could be that the US services sector is the laggard, says James Picerno

Oil slip
A drop in the oil price has affected all markets, even the ASX, which is normally buoyed by rising iron ore prices, says Saxo's Sydney team

Can the G20 deliver?
Free trade is on the ideological ropes at the moment, but the G20 retains the opportunity to make globalisation work for its members writes Stephen Pope.

EURGBP in focus
Euro/pound is trading around its 13-day moving average with the technical signals for today showing the possibility of a bullish rally says Alan Collins.
 Bay of Bengal boost: the discovery of a large offshore deposit of natural gas is likely to give India's energy business a much-needed lift . Photo: iStock

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