· The dollar rose broadly on Monday after strong U.S. jobs growth in June suggested the Federal Reserve will not aggressively cut interest rates later this month.
U.S. nonfarm payrolls rebounded in June to 224,000, the most in five months, data showed on Friday, beating economists’ consensus estimate of 160,000.
· The solid outcome virtually wipes out chances for a half point Fed rate cut at the end of July, but modest wage gains and other data showing the world’s largest economy was losing steam could still encourage the central bank to cut rates by 25 basis points.
· The dollar index climbed to as high as 97.443 on Friday, its highest level since June 19, as U.S. Treasury yields rose across the board.
The index, which measures the greenback against a basket of major currencies, was last quoted at 97.215, almost flat in Asian trade on Monday, while the euro traded at $1.1226.
· The common currency came under pressure on Friday after data showed that German industrial orders fell far more than expected in May and the Economy Ministry warned that this sector of Europe’s largest economy was likely to remain weak in the coming months.
· Going by the lead indicators, the probability of industrial production printing below estimates is high. A bigger-than-expected contraction will only strengthen the case for an early stimulus by the ECB and send the EUR/USD pair lower toward the support at 1.1181 (June 18 high).
Technical Levels
OVERVIEW
Today last price 1.1228
Today Daily Change 0.0002
Today Daily Change % 0.02
Today daily open 1.1226
TRENDS
Daily SMA20 1.1251
Daily SMA50 1.1221
Daily SMA100 1.1261
Daily SMA200 1.1351
Germany, the manufacturing power house of Europe, will publish industrial production figures for the month of May at 06:00 GMT today.
The data is expected to show the factory activity contracted at a seasonally adjusted rate of 0.4% month-on-month in May, having dropped 1.9% in the preceding month. In annualized terms, the industrial production is seen contracting 1.1% in May, following a 1.8% slide in the previous month.
German factory orders plunged 8.6% year-on-year in May, the biggest slide in almost a decade, underscoring the negative impact of trade tensions on the Eurozone’s biggest economy.
· A new ECB chief may become Bitcoin friend
Sustainable growth of cryptocurrencies has made some officials to change their mind about Bitcoin and digital money as a whole. Thus, Christine Lagarde, a former chief of the International Monetary Fund and a nominee to replace Mario Draghi as president of the European Central Bank (ECB) might take a crypto friendly position, which would support the development of the industry.
She mentioned that blockchain technologies should not be dismissed and advocated for state-backed cryptocurrencies =, which is a big step forward for a person in such a position. No wonder that the crypto community was enthusiastic about Laggard's nomination as a head of ECB. Her openness to cryptocurrencies is seen as a good signal for the industry.
Meanwhile, the outgoing ECB president Mario Draghi said that cryptocurrencies were not currencies, but "highly risky" assets. Thus he distanced the ECB from dealing with cryptocurrencies and creating regulation for them.
BTC/USD is changing hands at $11,456, off the Sunday's low registered at $11,145. However, in the short run, the recovery is capped by $11,600. This barrier is strengthened by the upper line of the 1-hour Bollinger Band. Once it is out of the way, the upside may be extended towards $12,000.
· German exports rebounded more strongly than expected in May but failed to fully recover from a slump a month earlier as trade conflicts and Britain’s expected departure from the European Union cool Europe’s largest economy.
Exports grew by 1.1% on the month in May, data from the Federal Statistics Office showed on Monday, surpassing the 0.5% rise forecast in a Reuters poll. In April, exports fell by 3.4%.
Imports fell 0.5% on the month in May. The upshot was a rise in the trade balance to 18.7 billion euros ($20.99 billion) from 16.9 billion in the prior month.
· Market watchers, however, believe the People’s Bank of China (PBOC) is more likely to follow any U.S. rate cut by lowering its key short-term money market rates.
It would not be the first time the PBOC has followed the Fed’s lead. In 2017 and 2018, the bank raised short-term money rates hours after U.S. hikes, although in more modest and symbolic moves of 5 to 10 basis points.
While Chinese officials continue to downplay the likelihood of more aggressive easing, the economy has been slow to respond to a host of earlier stimulus measures, while the U.S.-China trade war is growing longer and costlier.
Some analysts believe GDP growth is nearing the lower end of the government’s 2019 target range of 6-6.5%, reinforcing expectations that more support is needed soon.
· The Bank of Japan on Monday maintained its view that regional economies were expanding or recovering, but warned that more companies were feeling the pinch from the U.S.-China trade war.
In a quarterly report on regional Japan, the central bank kept intact its economic assessment of all nine areas as solid domestic demand offset some weak signs in exports and output. But it acknowledged heightening risks to the export-reliant economy.
Markets are watching for any change in the central bank’s tone on the economy to gauge whether it could ease policy further as early as this month’s rate review.
· Japan’s economy expanded by an annualized 2.1% in the first quarter but many analysts predict growth will slow in the coming months as the U.S.-China tariff row hurts exports. A scheduled sales tax hike in October may also curb consumption, they warn.
· Japan’s core machinery orders fell by the most in eight months in a worrying sign that global trade tensions are taking a toll on corporate investment, casting doubt that solid domestic demand can help offset external pressure on the export-reliant economy.
Any downturn in business spending will hurt prospects for stronger wage growth and dampen the central bank’s hopes a sustained economic recovery will prod firms to boost prices and wages, helping to reach its 2 percent inflation goal.
· China’s foreign exchange reserves rose more than expected in June, as growing hopes for a trade war truce with the United States helped ease downward pressure on the yuan currency.
The yuan CNY=CFXS has been very sensitive to developments in the year-long Sino-U.S. trade dispute, which has heightened pressure on China's already slowing economy.
The country’s foreign exchange reserves - the world’s largest - rose $18.23 billion in June to $3.119 trillion, data from the People’s Bank of China (PBOC) showed on Monday.
· A new analysis of CVs of Huawei staff appeared to reveal deeper links between the technology giant and China’s military and intelligence bodies than had been previously acknowledged by the firm.
The paper, which looks at employment records of Huawei employees, concluded that “key mid-level technical personnel employed by Huawei have strong backgrounds in work closely associated with intelligence gathering and military activities.” Some employees can be linked “to specific instances of hacking or industrial espionage conducted against Western firms,” it claimed.
The study, conducted by Christopher Balding, an associate professor at Fulbright University Vietnam, and London-based think tank Henry Jackson Society, looked through CVs of Huawei employees that were leaked online from unsecured databases and websites run by recruitment firms.
· South Korea’s President Moon Jae-in has urged Japan to withdraw export controls on high-tech materials bound for South Korea as a row over forced wartime labor threatened to disrupt global supplies of South Korean memory chips and smartphones.
South Korea’s tech giant Samsung Electronics Co (005930.KS) and SK Hynix Inc (000660.KS) - the world’s top memory chipmakers, and suppliers to Apple (AAPL.O) and China’s Huawei Technologies [HWT.UL] - could face delays if the Japanese measures, which took effect on Thursday, drag on.
Japan tightened restrictions on the export of the high-tech materials to South Korea in connection with a dispute over compensation for forced wartime labor.
· Crude prices were little changed on Monday as traders weighed geopolitical risks against the impact of the Sino-U.S. trade war on the global economy, although last week’s better-than-expected U.S. jobs data offered some supprt.
Brent crude futures were down 3 cents by 0300 GMT at $64.20. U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.
“A very cautious open this morning supported by a better than expected (non-farm payrolls),” said Stephen Innes, managing partner at Vanguard Markets in Bangkok. “Traders remain incredibly cautious about the dimmer global economic overhang.”
Both oil benchmarks fell last week as concerns about a slowing global economy outweighed risks to supply. Brent fell more than 3% and WTI shed more than 1.5%.
· Iran has announced it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, a major breach likely to draw a tougher reaction from US President Donald Trump, who has pressured Tehran to renegotiate the pact.
In a live news conference on Sunday, senior Iranian officials threatened further violations, saying Tehran would keep reducing its commitments every 60 days, unless European signatories protect it from US sanctions imposed by Mr Trump.
· CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are retesting support-turned-resistance at 57.88. A daily close above this barrier sets the stage to challenge the 60.39-95 zone anew. The lower bound of immediate support is at 54.55, with a breach below that targeting the 50.31-51.33 region thereafter.
Reference: Reuters, CNBC, FX Street, Daily FX
Thai
Eng