· The Australian dollar strengthened on stronger-than-expected economic data from China, which some analysts saw as signalling that moves aimed at reviving spending in the world’s second biggest economy are having some success.
The Aussie gained against the U.S. dollar, which advanced against the safe-haven yen and the Swiss franc.
· China’s industrial output bounced in June from a 17-year low in the previous month. June retail sales surged 9.8% from a year earlier, compared with the 8.3% - a slowing from May’s tepid figures - that polled analysts expected.
The Australian dollar rose almost 0.2% to $0.7024 after China’s data release. The yuan strengthened against the dollar to touch its highest since last week.
· The U.S. dollar, meanwhile, remains under pressure on expectations of a Federal Reserve rate cut. Comments last week from Fed Chair Jerome Powell and Chicago Fed president Charles Evans indicated U.S. rate cuts are needed to boost inflation.
In the U.S., a 25 basis-point rate cut in July is priced in, along with an almost 20% chance of a 50 basis point cut.
· Investors will be looking to U.S. retail sales figures due Tuesday and company earnings for signs of how shoppers and businesses are weathering the slowdown.
Against a basket of currencies the dollar held near a 10-day low at 96.865.
It gained against the yen to break 108.00, though still remains underneath resistance at 108.98. Monday is a national holiday in Japan and dollar-yen trading volumes were thin.
· The EUR/USD pair continues to consolidate Friday’s bounce from near 1.1240 region, as the bears guard the 1.1275 barrier amid a broad US dollar rebound following last week’s declines.
Levels to watch
OVERVIEW
Today last price 1.1271
Today Daily Change 0.0002
Today Daily Change % 0.02
Today daily open 1.1269
TRENDS
Daily SMA20 1.1287
Daily SMA50 1.1243
Daily SMA100 1.1256
Daily SMA200 1.1326
· Despite being short on catalysts to direct near-term moves, GBP/USD manages to remain strong around 10-day highs, still below 1.2600, ahead of the London open on Monday.
Buyers need to conquer 1.2579/82 resistance confluence, including 100-bar exponential moving average (4H 100EMA) and a 20-day descending trend-line, in order to aim for 1.2590 and 50% Fibonacci retracement of late-June to early-July downpour around 1.2612. Alternatively, a downside break of 1.2540 highlights 23.6% Fibonacci retracement level of 1.2520 and early-month extremes close to 1.2480/77.
· The International Monetary Fund (IMF) will soon start the process of choosing a new managing director, with Christine Lagarde set to leave the organization in a few months’ time.
EU ministers have made it clear they want to see someone from their continent take the job — which will be a five-year term — and continue the tradition of having a European at the helm of the Washington-based institution. Since the IMF’s formation back in 1945, the managing director has always been from Europe.
However, there are already a couple of names floating around, which include:
Mark Carney, the current governor of the Bank of England — a Canadian citizen who also has Irish and English passports.
Kristalina Georgieva, from Bulgaria, who is currently serving as chief executive of the World Bank.
Jeroen Dijsselbloem, former Dutch finance minister and president of the Eurogroup (which brings together the 19-euro zone finance ministers).
Mario Draghi, the outgoing president of the European Central Bank (ECB) and an Italian national.
Benoit Coeure, currently a member of the ECB executive board, but whose mandate ends in December.
Wolfgang Schaeuble, former finance minister of Germany and currently speaker of the German parliament.
Euclid Tsakalotos, former Greek finance minister who implemented the country’s third bailout program.
· There are fears of an economic slowdown globally if the U.S.-China trade war persists.
Weak second quarter Chinese economic growth “may cause wobbles in the rest of Asia if the slowdown ignites worries of trade tensions,” said Vishnu Varathan, head of Asia and Oceania economics and strategy at Mizuho Bank.
With China’s exports slowing, “what’s more worrying is an even sharper slowdown in China’s imports flags risks of supply-chain effects hurting rest of Asia for which China remain a major market,” Varathan said in a note on Monday.
· Bitcoin fell sharply on Monday, following President Donald Trump’s criticism of cryptocurrencies.
The world’s most valuable virtual currency dropped about 10% to $10,175, according to CoinDesk data. It briefly dived below $10,000, dropping as low as $9,872.
The reason for the downward move wasn’t immediately clear. But it arrives after President Trump said last week that he was “not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.”
“Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity,” Trump added.
· U.S. manufacturers are shifting production to countries outside of China as trade tensions between the world’s two biggest economies stretch into a second year.
Companies that make Crocs shoes, Yeti beer coolers, Roomba vacuums and GoPro cameras are producing goods in other countries to avoid U.S. tariffs of as much as 25% on some $250 billion of imports from China. Apple Inc. also is considering shifting final assembly of some of its devices out of China to avoid U.S. tariffs.
Furniture-maker Lovesac Co. is making about 60% of its furniture in China, down from 75% at the start of the year. “We have been shifting production to Vietnam very aggressively,” said Shawn Nelson, chief executive of the Stamford, Conn., company. Mr. Nelson said he plans to have no production in China by the end of next year.
· China released second-quarter figures on Monday showing that its economy slowed to 6.2% — the weakest rate in at least 27 years, as the country’s trade war with the U.S. took its toll.
From April to June, China’s economy grew 6.2% from a year ago, the country’s statistics bureau said on Monday. That was in line with the expectations of analysts polled by Reuters, and lower than the 6.4% year-on-year growth in the first quarter of 2019.
Graham said there is room for the People’s Bank of China to introduce more fiscal stimulus in the months ahead to steady the economy.
“They have room to make sure the economy doesn’t slow too quickly,” Graham told CNBC’s “Street Signs” on Monday after the GDP numbers were released. He said he expected China’s 2019 full-year GDP growth to be flat at between 6.2% and 6.3% from a year ago.
· South Korean President Moon Jae-in said on Monday Japan’s reported accusations that South Korea has violated international sanctions by exporting banned goods to North Korea posed a “grave challenge” to Seoul.
Moon warned at a meeting with senior aides that Japan’s recent imposition of curbs on exports of high-tech materials to South Korea would inflict greater damage on the Japanese economy and urged Tokyo to return to talks.
· Tens of thousands of ships sailing the world’s oceans burn more than 3 million barrels of sludge-like high-sulfur fuel every single day. But, starting next year, the shipping industry will have to comply with rules that should dramatically reduce sulfur emissions.
On January 1, 2020, the International Maritime Organization (IMO) will enforce new emissions standards designed to significantly curb pollution produced by the world’s ships.
“It is the biggest change in oil market history,” Steve Sawyer, senior analyst at energy consultant Facts Global Energy, told CNBC.
The forthcoming measures are widely expected to create an oversupply of high-sulfur fuel oil while sparking demand for IMO-compliant products.
Analysts estimate the container industry — which transports consumer goods such as sofas, designer clothes and bananas — is likely to be among those hit the hardest, with additional costs of approximately $10 billion, according to a Reuters report.
· CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are struggling to make good on a break of trend resistance set from late April, idling at resistance in the 60.04-84 area. A break higher from here initially targets the 63.59-64.43 congestion zone. A series of back-to-back support levels extending down through 54.84 caps the downside for now.
Reference: Reuters, CNBC, Daily FX
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