28 Aug: Bond markets & commodities see big moves, as safe haven demand attracts. Thin calendar today.

By | August 28, 2019

FX markets have ended mixed, generally moving within a range as consolidation continues following the gyrations seen on Monday. The main interest today lay in Sterling, which rallied on the news that the UK opposition MPs are moving to seek a Brexit delay in order to avoid a “no-deal” divorce from the EU. The Chf was also weaker partly due to the same reason as safe haven demand diminished. Note that UsdCnh is trading at 7.17, about 10 big figures above yesterday’s PBOC fix for UsdCny, and suggests that concerns over the US-China trade talks are not going away. There are now plenty of analysts suggesting that we are heading to 7.50 in the next few months.

Stocks finished lower , down by around 0.4% after a choppy session as traders digested the latest twists in the trade talks between the US and China, while US Treasuries rose. Banks led the stock market lower as the US10Y yield fell sharply below 1.50%, currently at 1.475%. Yields for all time frames moved lower, with the yield curve inverting further and therefore increasing concerns of an impending recession. The 2Y/10Y spread is at -5.04 bps while the 3 month/30 year spread went inverted as well, at -0.04bp.

Aside from the moves in the bond markets, the real interest on Tuesday lay in the commodities sector, which saw good moves higher in both Gold and Silver (+1.0%/+2.85%) and in oil (WTI +3.5%), with Silver hitting a 2 year high. The metals were the beneficiary   of uncertainty over future developments in the US-China trade conflict, as well as worries over the global economy, which continue to boost demand for safe-haven precious metals. WTI rallied strongly on Tuesday, clawing back losses from a day earlier following a bullish report pointing to deeper OPEC production cuts, and came ahead of the API Weekly Crude Oil Stock Inventory data, released late in the day. This saw the biggest drawdown on inventories since June, a much larger than expected 11.1 barrels (exp -2.25mio barrels), and caused the rally to continue, with WTI heading to 55.50 by the end of the session. The Energy Information Administration (EIA) is due to release its weekly petroleum data later today, and is expected to report that crude stockpiles fell by 2.1 million barrels for the week ended Aug. 23.

Wednesday will begin with the Australian Q2 Construction Work Done (exp -1.0%qq) although that will be it for Asia apart from the usual game of watching the CNY Fix. It will be pretty much empty for the rest of the session too, although the German 10 Bond auction may provide some interest, while the US has a couple of Fed speakers (Barkin/Daly), with the EIA Crude Oil Stocks Weekly Change being the only data on the calendar. Have a good day.

Economic data highlights will include:

Wed: Australian Q2 Construction Work Done, German Consumer Confidence, Swiss ZEW Survey, EIA Crude Oil Stocks Weekly Change

Market moves, in brief:

FX: DXY 98.04 (-0.01%)

Bonds: US10Y; 1.476% (-4.50%), German 10Y; -0.695% (-4.43%), UK 10Y; +0.427% (-12.54%), Australian 10Y; 0.918% (+2.23%), NZ 10Y; 1.095% (+3.79 %), China 10Y; 3.073% (-0.62%)

Stock Indices: DJI; -0.47%, S+P; -0.32%, NASDAQ; -0.34%, EUStoxx50; +0.65%, FTSE100; -0.08%, Shanghai Composite; +1.35%,

Metals: Gold $1545 oz (+1.00%), Silver $18.17 oz (+2.86%), Copper $2.5495 lb (+0.24%), Iron Ore $83.00 per tonne (-3.0%)

Oil: WTI $55.50 pb (+3.50%)

CURRENCIES
EURUSD: 1.1090
Res  1.1115  1.1140  1.1165
Sup  1.1070  1.1050  1.1025
USDJPY: 105.78
Res  106.00  106.25  106.45
Sup  105.60  105.40  105.15
GBPUSD: 1.2287
Res  1.2310  1.2340  1.2370
Sup  1.2255  1.2225  1.2195
USDCHF: 0.9812
Res  0.9820  0.9835  0.9855
Sup  0.9800  0.9785  0.9770
AUDUSD: 0.6751
Res  0.6765  0.6780  0.6795
Sup  0.6745  0.6730  0.6715
NZDUSD: 0.6365
Res  0.6380  0.6400  0.6420
Sup  0.6340  0.6320  0.6300
INDICES / COMMODITIES
S&P.fs: 2866.53
Res  2880.00  2895.00  2910.00
Sup  2855.00  2840.00  2825.00
DJ30.fs: 25762.00
Res  25825.00  25940.00  26060.00
Sup  25700.00  25610.00  25505.00
SPI200.fs: 6418
Res  6425  6440  6455
Sup  6405  6390  6375
XAUUSD: 1542.41
Res  1545.00  1565.00  1555.00
Sup  1535.00  1525.00  1515.00
XAGUSD: 18.19
Res  18.30  18.60  18.95
Sup  17.95  17.65  17.35
WTI.fs: 55.59
Res  55.90  56.45  57.10
Sup  55.25  54.75  54.15

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