Sample Category Title

At today's meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to its aim over the medium term.

The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

The Governing Council also underlined the need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, have been persistently below levels that are in line with its aim. Accordingly, if the medium-term inflation outlook continues to fall short of its aim, the Governing Council is determined to act, in line with its commitment to symmetry in the inflation aim. It therefore stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.

In this context, the Governing Council has tasked the relevant Eurosystem Committees with examining options, including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

It's a bit of a mixed start to trading as attention shifts to Brussels where the ECB will deliver its latest policy decision.

In the lead up to the meeting, the focus has generally been on how strong a signal it will send on cutting interest rates in September and possibly what other tools it has at its disposal to unleash in the months after. But that has changed in recent days as traders have increasingly priced in a 10 basis point cut today, with the market now pricing it at around 50%.

I still think the ECB will hold off for now but in order to avoid too much disappointment, there will need to be a clear nod to the meeting in September. The PMIs on Wednesday were a stark reminder of the weakness across the region, particularly in the manufacturing sector which saw its largest contraction in more than six years, worse in Germany.

With markets so reliant on central bank stimulus at the moment, perhaps investors are just waiting patiently for Draghi and his colleagues to give them what they want. The ECB President has a tendency to be rather dovish so while they may disappoint on the rate cut, I'm sure he'll deliver in the press conference.

During the past week, the Australian Dollar has depreciated about 1.04% in value against the Japanese Yen. A breakout occurred through the lower boundary of an ascending channel pattern on July 23.

Given that a breakout had occurred, it is likely that the currency exchange rate will edge lower during the following trading sessions. The potential target will be near the monthly S1 at 74.47.

Furthermore, technical indicators demonstrate that a decline is imminent during the coming days.

The Pound Sterling has appreciated about 1.03% in value against the Japanese Yen since last week trading sessions. The surge was stopped by a resistance level formed by the 100-hour SMA at 135.23.

As for the near future, it is likely that the GBP/JPY currency pair will aim for a resistance level formed by the 200-hour simple moving average at 138.07 in the coming days.

However, the 100-hour SMA, the monthly S1 and the weekly R1 near the 135.53 regions could provide resistance for the currency exchange rate during the following trading sessions.

Despite a plethora of macro and micro risks, positive sentiment has become entrenched today. The likely catalyst for the broad risk-on environment is an expectation for ECB policy easing. Wall Street was stronger and Asia followed with gains across the board. EURUSD is back to year lows at 1.1130. Our view is that Draghi & gang will hold back but signal to ease as early as September. Yet, markets are pricing in approximately 50% for a rate cut of 10bp. Data continued to weaken as the headline IFO business climate index in Germany fell to 95.7 in July, from a revised 97.5 in June. German 10yr real yield dropped below resistance at -1.38% last week highlights the market's concern.

Global growth is slowing. The primary culprit is the effect that geopolitical uncertainty, specifically trade tensions, is weighing on business sentiment. The drag has materialized in weakening in global capex growth and unsettled Asia supply chains. Cloudy business outlook, whether real or imaged, equates into managers slowing production resulting in softer factory output. Global manufacturing PMI suggests to a complete halt in factory output in June. The knockdown effect is now being felt globally. It has been estimated that US-China trade war has lowered annualized growth by 1%. In our view, what comes next for global growth depends entirely on the direction of trade tensions, among other geopolitical issues.

Central banks are now at a crossroads. Should they deal with the deceleration already occurring or come out with “both guns blazing” to halt any intensification. On 31st July the Fed will communicate its strategy to the world. The recent Fed’s dovish language indicates that members are concerned. However, how that manifests itself into policy action is far from certain. Fed Chairman Powell recently pledged to the Fed will “act as appropriate to sustain the expansion.” Market has priced in 30bp interest rate cuts.

Notes/Observations

• German July IFO Survey misses expectations and highlights the concerns over the Euro Area economy. Business Climate at lowest level since early 2010; German 10-year and 30-year yields back at fresh record lows
• ECB likely to prepare the markets for an interest rate cut at its next meeting in Sept
• Markets shrugged off reports that North Korea fired unidentified projectiles

Asia:

• RBA Gov Lowe reiterated stance that was prepared to ease policy further if needed; unlikely to seek rate hike until CPI was within intended target range
• South Korea Q2 Preliminary GDP Q/Q: 1.1% v 0.9%e; Y/Y: 2.1% v 1.9%e
• Japan confirmed North Korea launched short range ballistic missiles but did not reach Japan's EEZ

Europe/Mideast:

• Spain's Socialist Party reportedly saw coalition talks with Podemos as broken off; Podemos source saw govt coalition talks continuing in Sept
• UK Cabinet Top Jobs in PM Johnson new govt saw Chancellor of Exchequer go to Sajid Javid; Home Sec to Priti Patel; Foreign Sec to Dominic Rabb; Brexit Sec retained by Stephen Barclay

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.23% at 392.64, FTSE +0.05% at 7,505.32, DAX +0.03% at 12,527.10, CAC-40 %+0.48 at 5,632.66, IBEX-35 +0.29% at 9,356.35, FTSE MIB +0.15% at 22,114.50, SMI +0.38% at 9,945.50, S&P 500 Futures +0.05%]

Market Focal Points/Key Themes:

• European Indices trade mostly higher after mixed Indices in Asia and mixed US Index futures; as European Macro data continues to disappoint ahead of today’s ECB rate meeting.
• On a busy morning for corporate earnings, German Chemical giant trades lower after results which were slightly better than expected and affirmation of their previously cut guidance, but lower free cash flow weighing on the stock ; German Automaker Volkswagen trades little changed on earnings; STMicro trades lower after cutting their full year revenue outlook; AnheiserBusch Inbev gains over 5% on an earnings beat while Astrazeneca also is a notable gainer on a top and bottom line beat and raised product sales guidance.
• Other notable gainers on earnings include Danone, Orange, Vallourec, Technicolor, and Anglo American, while Metro Bank, Diageo, Rallye and Neste are notable decliners.
• Elsewhere Cobham gains over 30% as Advent International confirmed to acquire the company at 165p/shr.
• Looking ahead notable earners include Raytheon, 3M, Bristol-Myers, Comcast and Southwest among others.

Equities

• Consumer discretionary: Cobham [COB.UK] +35% (to be acquired), AB InBev [ABI.BE] +5% (earnings), Wizz Air [WIZZ.UK] +5% (earnings), Unilever [UNA.NL] -1% (earnings), Danone [BN.FR] +1.5% (earnings)
• Energy: Total [FP.FR] -0.5% (earnings)
• Materials: Clariant [CLN.CH] -9.5% (earnings; suspends JV)
• Healthcare: Roche [ROG.CH] +1.5% (earnings), Astrazeneca [AZN.UK] +5% (earnings; raised outlook)
• Industrials: Volkswagen [VOW3.DE] +0.5% (earnings; affirms outlook), ABB [ABBN.CH] -0.5% (earnings), Anglo American [AAL.UK] +1.5% (earnings)
• Technology: STMicroelectronics [STM.FR] -1.5% (earnings; outlook cut), Sage Group [SGE.UK] -9% (trading update),
• Telecom: Nokia [NOKIA.FI] +6% (earnings), Telefonica [TEF.ES] -1.5% (earnings)

Speakers

• ECB said to have no objections to appointing Lagarde as President to succeed Draghi
• UK Treasury Sec Sunak: Cabinet team committed to delivering Brexit by Oct 31st. EU has shown it would change its mind on Brexit issues
• Czech Central Bank's Nidetzky: Steady policy most likely ahead
• German IFO economists stated that the domesticeconomy faced a turbulent time ahead and that recession was spreading in all important sectors of industry. They did see a slightly positive growth rate in H2
• China Commerce Ministry (MOFCOM) spokesperson Gao again urged US to implement Huawei commitment. US should stop using state power to punish Chinese companies

Currencies/ Fixed Income

• EUR remained on soft footing ahead of the ECB rate decision. Draghi was expected to signal more easing before his term ended in Oct. Most believe that today’s ECB meeting would set the table for easing at the September 12th meeting, when new staff forecasts would be released. EUR/USD at 2-month lows of 1.1125 as a string of weaker data had some analysts believe the central bank could prompt a more dovish than expected response. Markets currently see roughly 40% chance of a rate cut today.
• GBP: The Cable traded higher yesterday before giving back some of its gains. Trade desks note this could be some shorts taking profits after Boris Johnson was elected head of the Tory party. We still look to the downside at the level 1.1380 the 2 year low. Should this get breached the next level is in the 1.21 handle.

Economic Data

• (FI) Finland Jun Preliminary Retail Sales Volume Y/Y: 4.4% v 0.0% prior
• (NO) Norway May AKU Unemployment Rate: 3.4% v 3.2%e
• (SE) Sweden July Consumer Confidence: 97.7 v 93.8e; Manufacturing Confidence: 96.9 v 99.0e; Economic Tendency Survey: 96.9 v 97.9e
• (ES) Spain Jun PPI M/M: -0.8% v 0.0% prior; Y/Y: -0.6% v +1.1% prior
• (ES) Spain QA2 Unemployment Rate: 14.0% v 13.8%e
• (TR) Turkey July Real Sector Confidence (Seasonally Adj): 96.6 v 99.6 prior; Real Sector Confidence NSA (unadj): 98.3 v 102.5 prior
• (TR) Turkey July Capacity Utilization: 76.2% v 77.1% prior
• (AT) Austria May Industrial Production M/M: -1.0% v -2.0% prior; Y/Y: -0.3% v 3.8% prior
• (SE) Sweden Jun Unemployment Rate: 7.6% v 6.8%; Unemployment Rate (Seasonally Adj): 6.6% v 6.2%e; Trend Unemployment Rate: 6.3% v 6.3% prior
• (SE) Sweden Jun Household Lending Y/Y: 4.9% v 5.0% prior
• (SE) Sweden Jun PPI M/M: -0.2% v 0.0% prior; Y/Y: 2.5% v 3.5% prior
• (DE) Germany July IFO Business Climate: 95.7 v 97.2e; Current Assessment: 99.4 v 100.4e; Expectations Survey: 92.2 v 94.0e
• (HK) Hong Kong Jun Trade Balance (HKD): -55.2B v -49.1Be; Exports Y/Y: -9.0% v -2.3%e; Imports Y/Y: -7.5% v -3.0%e

Fixed Income Issuance

• None seen

Looking Ahead

• (BR) Brazil Jun Total Federal Debt (BRL): No est v 3.891T prior
• (AR) Argentina July Consumer Confidence Index: No est v 40.6 prior
• 05:30 (ZA) South Africa Jun PPI M/M: 0.4%e v 0.5% prior; Y/Y: 5.8%e v 6.4% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills- 06:00 (FR) France Q2 Total Jobseekers: No est v 3.392M prior
• 06:00 (UK) July CBI Retailing Reported Sales: -15e v -42 prior; Distribution Reported Sales: No est v -22 prior
• 06:00 (CA) Canada July CFIB Business Barometer: No est v 61.5 prior
• 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to cut One-Week Repo by 250bps to 21.50%
• 07:00 (MX) Mexico May Retail Sales M/M: 0.0%e v +0.7% prior; Y/Y: 1.4%e v 1.6% prior
• 07:45 (EU) ECB Interest Rate Decision: expected to leave Main 7-Day Refinancing Rate unchanged at 0.00%; Expected to leave Marginal Lending Facility unchanged at 0.25%; Expected to leave Deposit Facility Rate unchanged at -0.40%
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) May Preliminary Durable Goods Orders: +0.8%e v -1.3% prior; Durables (ex-transportation): 0.2%e v 0.4% prior; Capital Goods Orders (Non-defense/ex-aircraft): 0.2%e v 0.5% prior Capital Goods Shipments (Non-defense/ex-aircraft): -0.2%e v +0.6% prior
• 08:30 (US) Jun Advance Goods Trade Balance: -$72.5Be v -$74.5B prior
• 08:30 (US) Initial Jobless Claims: 218Ke v 216K prior; Continuing Claims: 1.69Me v 1.686M prior
• 08:30 (US) Jun Preliminary Wholesale Inventories M/M: 0.5%e v 0.4% prior; Retail Inventories M/M: 0.2%e v 0.5% prior
• 08:30 (US) Weekly USDA Net Export sales
• 09:00 (RU) Russia Gold and Forex Reserve w/e July 19th: No est v $B prior
• 08:30 (US) Weekly Crop Progress Report
• 08:30 (EU) ECB's Draghi post rate decision press conference
• 09:30 (BR) Brazil Jun Current Account Balance: -$1.5Be v +$0.7B prior; Foreign Direct Investment (FDI): $5.8Be v $.1B prior
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (US) July Kansas City Fed Manufacturing Activity Index: 3e v 0 (flat) prior
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
• 13:00 (US) Treasury to sell 7-year Bonds
• 15:00 (AR) Argentina May Economic Activity Index (Monthly GDP) M/M: No est v 0.8% prior; Y/Y: +0.3%e v -1.3% prior
• 15:00 (AR) Argentina Jun Trade Balance: $1.0Be v $1.4B prior

The AUDUSD fell to new two-week low Thursday, extending weakness into fifth straight day, following comments from RBA Governor Lowe, who said that it was reasonable to expect an extended period of low interest rates.

Fresh weakness cracked bull-channel support line (0.6964) after Wednesday’s break and close below 0.6986 pivot (Fibo 38.2% of 0.6831/0.7082) generated strong bearish signal.

Break below the trendline and 0.6956 (50% retracement / 55DMA) would spark further weakness and unmask supports at 0.6927/10 (Fibo 61.8% of 0.6831/0.7082 / 10 July trough).

Meanwhile, bears may take a breather as stochastic is oversold and momentum reversed higher, with upticks to offer better selling opportunities while holding below 20DMA (0.7000).

Only lift and break above broken 10DMA (0.7017) would sideline bears.

ECB meeting and US durable goods data today and US GDP on Friday are the key events which are expected to provide fresh signals.

Res: 0.6986, 0.7000, 0.7017, 0.7035
Sup: 0.6964, 0.6956, 0.6927, 0.6910

The US dollar is changing slightly against a basket of major currencies. The US dollar index (#DX) closed with a slight increase (+0.03%). Yesterday, mixed economic data from the US were published. Thus, the manufacturing PMI counted to 50.0 in July instead of the expected value of 51.0. New home sales increased from 604K to 646K in June. At the same time, market expectations were at the level of 660K.

Investors are focused on the ECB meeting. It is expected that the European Central Bank will not change the key marks of monetary policy following the meeting results, but will give signals to cut interest rates at the next meeting in September.

The US-China trade negotiations are also in the spotlight. The White House announced that a delegation led by US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer would go to China on Tuesday, July 30 for the next round of talks. Mnuchin expects progress and believes that more meetings will be needed, which are likely to take place later in Washington.

Yesterday, new UK Prime Minister Boris Johnson delivered a keynote speech and announced his readiness to exit the country from the European Union before October 31. He noted that he intended to conclude a new and better agreement with the EU. The official believes that the deal with the union, which developed Theresa May, is dead.

The "black gold" prices have been recovering after a sharp collapse the day before. At the moment, futures for the WTI crude oil are testing the mark of $56.25 per barrel.

Market Indicators

• Yesterday, there was a variety of trends in the US stock markets: #SPY (+0.47%), #DIA (-0.27%), #QQQ (+0.70%).
• The 10-year US government bonds yield has fallen. Currently, the indicator is at the level of 2.03-2.04%.

The news feed for 2019.07.25:

• German IFO business climate index at 11:00 (GMT+3:00);
• ECB interest rate decision at 14:45 (GMT+3:00);
• Statistics on durable goods orders in the US at 15:30 (GMT+3:00).

Silver advanced fiercely from July 9, towards a thirteen-month high of 16.635 and currently stands at a temporary stall, while buyers try to regain the reins in the short-term.

Price is way over the Ichimoku cloud, and its Tenkan-sen average points north confirming the positive bias, whereas the Kijun-sen indicates the present stall. The 50-day simple moving average (SMA) has just crossed above the 200-day SMA. The MACD has soared above its trigger in the positive region, whereas the RSI trades in the overbought area. The ADX exhibits a very strong trend, and all the above are signaling the bullish bias.

Keeping the climb, a possible short-term pullback to congested support areas around 16.20 – 16.08 would need to hold, before a revisit to eliminate the newly formed thirteen-month high of 16.635. Next, the highs of 17.30 – 17.34 observed back in June 14 and April 19 of last year could be seen.

Downwards, a hold at resistance of 16.57 would tumble the price to test the area of congested supports, before the 38.2% Fibonacci retracement level of the up move from 14.28 to 16.635, of 15.73 can unfold. A tackle through support of 15.55 and Fibonacci levels could see the long-term SMAs become the next barrier before the support of 14.88.

Overall, short- to medium-term bullish bias is prevailing, and only a close below the 14.88 support could turn the bias neutral to negative.

The US dollar is trapped in a narrow range against the Japanese yen as bulls and bears continue to battle for control of the pair around the 108.00 level. US data later is likely to set the tone for the USDJPY pair alongside the next move in US stocks. Overall, the USDJPY pair is being supported by positive sentiment surrounding Sino-U.S trade talks next week.

The USDJPY pair is only bearish while trading below the 108.00 level, key support remains at the 107.77 and 107.60 levels.

The USDJPY pair is bullish while trading above the 108.00 level, key technical resistance remains at the 108.23 and 108.37 levels.