Forex - Rates Highlights - 17 July 2017


 05:07 (GMT) 17 Jul

  [Forex Highlights]

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Rates Highlights - 17 July 2017 (0100-QSQC-C01)

T. Bonds: Limited data calendar should reduce volatility but that Fed is seen moving on balance sheet before rates can sustain steepeners.

Bunds and Gilts: EGBs still very whippy, though better buying of yield spikes on periphery still. ECB meeting the highlight, Draghi seen avoiding rocking the boat into summer holiday.

JGB: Markets closed for Marine Day.

DJIA and S&P: Fresh record highs but 22,000 and 2500 will be tough hurdles near term.

US Overview:

US CPI and retail sales data both underperformed expectations, lifting bonds though gains were corrected as equities hit fresh record highs. The USD took a hit, with GBP particularly strong.

US Highlights:

- Jun CPI 0.0% vs +0.1% exp, ex food and energy +0.1% vs +0.2% exp.

- Jun retail sales -0.2% vs +0.1% exp, ex autos -0.2% vs +0.2% exp.

- Jun industrial production +0.4% vs +0.3% exp, manufacturing +0.2% as exp.

- Jul prelim Michigan CSI 93.1 vs 95.1 Jun final and 95.0 exp.

- May business inventories +0.3% as exp, sales -0.2%.

- Fed's Evans said low inflation a serious policy outcome miss.

Asia-Pacific Highlights:

- BBG: China's monetary condition should curb risks, Xing Zhihong, spokesman for National Bureau of Statistics, says at a briefing.

- BBG: RBNZ Deputy Governor Geoff Bascand says a lower exchange rate would help rebalance growth towards the tradables sector.

- BBG: China Gross domestic product increased 6.9 percent in the second quarter from a year earlier, compared with a 6.8 percent median estimate in a Bloomberg survey

- BBG: China industrial output rose 7.6 percent in June from a year earlier, compared with an estimated 6.5 percent increase. Fixed-asset investment climbed 8.6 percent in the first half of this year.

- BBG: China retail sales jumped 11 percent from a year earlier in June, compared with a median estimate of 10.6 percent in a Bloomberg survey.

- Brent Oil: $48.91, +$0.49; Asia: $49.04, +$0.13

- T. Notes: 125.625, unchanged

- Treasuries bounced on the soft CPI and retail sales data, yields on 2s below 1.32%, 10s below 2.28%. However with equities firm the moves saw a significant correction, with 2s and 20s returning to pre-data levels, if still up on the day. The belly sustained more of its post-data gains. 2s -1.2bps @ 1.35%, 5s -3.1bps @ 1.86%, 10s -2.5bps @ 2.32%, 30s -0.6bps @ 2.91%.

- Equities struggled for direction initially but were modestly positive by mid-morning before accelerating to fresh record highs in the afternoon. Financials significantly underperformed as rate expectations were pared back, but gains elsewhere were solid. S&P closed +0.47%.

- Europe: Decent bounce for EGBs after yesterday's Draghi-Jackson-Hole setback. Bunds bounce off 161 to around 161 ½. Periphery chopping in tandem, IT10s -4.5bp back towards 2 ¼ % again. Little of note as the market waits for US data, headlined by CPI. ECB 'sources' on Reuters say ECB reluctant to specify an end date to QE, likely to seek flexibility in cuts to programme.

- Australia: Aussie bonds marginally drifted higher at the start of the week but the gains were soon pared as prices slipped. 3s opened at 98.000 and soon rose to 98.03 before easing to 97.990 later on. Similarly, 10s opened at 97.280 and sneaked higher to 97.310 before falling to 97.265 subsequently.

- Japan: Markets closed for Marine Day.

Rates Highlights - 17 July 2017 (0100-QSQB-C01)

Still To Be Released:

Data:

12:30 GMT - US: Empire State Survey (Jul) (Mkt: 15 Prev: 19.8)

22:45 GMT - NZ: CPI (Q2) (Mkt: 1.9 Prev: 2.2)

Events & Auctions:

JP: Market Holiday - Marine Day


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