Risk appetite continued overnight with US equities extending the record run. DJIA rose 134.29 pts or 0.73% to close at 18506.41 while S&P 500 rose 11.32 pts, or 0.53% to close at 2163.75. Both were at new record high. It should also be noted that US yields also extended this week's rebound with 10 year yield closing at 1.531%, up from prior day's 1.468%. Dollar, however, stays in range with the dollar index hovering around 96 handle as markets are still unsure on the chance of another rate hike by Fed in near term. Fed fund futures are only pricing in around 38% chance of hike by December. Atlanta Fed president Dennis Lockhart said that "I still can imagine circumstances in which at least one policy move could take place and possibly two." But he insisted that Fed should remains "cautious and patient" with rate hike until the impacts of Brexit become clear.
Asian markets are additionally boosted by positive economic data from China. Q2 GDP grew 6.7% yoy versus expectation of 6.6%, unchanged from Q1's 6.7%> Industrial production grew 6.2% yoy in June versus expectation of 5.9% and prior month's 6.0%. Retail sales rose 10.6% yoy versus expectation of 9.9% and prior month's 10.0%. Fixed assets investments, though, rose 9.0% yoy versus expectation of 9.4% and prior month's 9.6%. The set up data gives Aussie an extra lift today with AUD/USD hitting 0.767 so far. But strength is limited on speculations that RBA could cut interest rate again later in August.
Yesterday, against market expectations which had priced in almost 80% of a rate cut in July, BOE decided to leave the Bank rate unchanged at 0.5%. We find it surprising also to see the 8-1 split (Gertjan Vlieghe voted for rate cut) amongst the members. Indeed, we had thought more members to favor easing this month. The members voted unanimously to keep the asset purchase program at 375B pound. However, the central bank sent strong hint that there would be a move in coming months. More in BOE Votes 8-1 to Keep Rate Unchanged at 0.5%.
Elsewhere, Eurozone will release CPI final and trade balance in European session. US will release CPI, retail sales, Empire state manufacturing, industrial production business inventories and U of Michigan sentiments later in the day.