Market Roundup
• Trump sets $50 bln in China tariffs with Beijing ready to strike back.
• China to impose 25 pct tariffs on 659 U.S. goods worth $50 bln.
• US May Industrial Production MM, -0.1%, 0.2% forecast, 0.7% previous.
• US May Capacity Utilization MM, 77.9%, 78.1% forecast, 78.0% previous.
• US May Manuf Output MM, -0.7%, 0.1% forecast, 0.5% previous.
• US Jun NY Fed Manufacturing, 25.00, 19.00 forecast, 20.10 previous.
• US Jun U Mich Sentiment Prelim, 99.3, 98.5 forecast, 98.0 previous.
• US w/e ECRI Weekly Index, 149.3, 148.7 previous.
• US w/e ECRI Weekly Annualized, 2.7%, 2.6% previous.
• CA Apr Manufacturing Sales MM, -1.3%, 0.6% forecast, 1.4% previous.
• CA Apr Securities Cdns C$, -0.65 bln, -1.90 bln previous.
• CA Apr Securities Foreign C$, 9.13 bln, 6.15 bln previous.
• Trump trade, immigration policy could hurt economy - Fed's Dudley.
• Fed's Kaplan says trade is an opportunity, not threat.
• Kaplan says he's open-minded to fourth 2018 rate hike.
• U.S. judge sends former Trump campaign head Manafort to jail.
Looking Ahead - Economic Data (GMT)
• 17 Jun 23:50 Japan May Exports YY, 7.5% forecast, 7.8% previous
• 17 Jun 23:50 Japan May Imports YY, 8.2% forecast, 5.9% previous
• 17 Jun 23:50 Japan May Trade Balance Total Yen, -235.0 bln, 626.0 bln previous
Looking Ahead - Events, Other Releases (GMT)
• N/A John Williams begins tenure as president of the Federal Reserve Bank of New York
• N/A OMFIF convenes a panel discussion to analyze the role of the ECB and the future of the euro area, in the context of the ECB's 20th anniversary in London
• N/A A lunch discussion with ECB's Jurgen Stark and Jose Manuel Gonzalez-Paramo, former members of ECB's executive board, in London
• 11:00 Riksbank general council meeting, in Stockholm
• 12:35 Retiring New York Fed President William Dudley to make opening remarks before the "Reforming Culture and Behavior in the Financial Services Industry: Progress, Challenges, and the Next Generation of Leaders" conference in New York
• 13:00 Retiring New York Fed President William Dudley participates in "Panel One: Finance, Culture and Society" before the "Reforming Culture and Behavior in the Financial Services Industry: Progress, Challenges, and the Next Generation of Leaders" conference in New York
• 16:30 ECB President Mario Draghi speaks at the ECB Forum on Central Banking in Sintra, Portugal
• 16:45 Speech by Bank of Canada Deputy Governor Lynn Patterson at Investment Industry Association of Canada and Institute of International Finance in Toronto
• 17:00 Atlanta Fed's President Raphael Bostic speaks on the economic outlook and monetary policy before the Rotary Club of Savannah, Georgia
• 20:00 Incoming New York Fed President John Williams to make closing remarks before the "Reforming Culture and Behavior in the Financial Services Industry: Progress, Challenges, and the Next Generation of Leaders" conference in New York
Currency Summaries
EUR/USD is likely to find support at 1.1541 levels and currently trading at 1.1608 levels. The pair has made session high at 1.1627 and hit lows at 1.1557 levels. Euro bounced higher against the dollar on Friday after suffering its worst day in nearly two years after ECB decided to end its 2.55 trillion euro ($3.02 trillion) bond-purchase program at the close of the year and said interest rates would stay unchanged until the summer of 2019. As a result, traders pushed back expectations for a rate hike to September 2019, three months later than they had previously anticipated. By that time the U.S. Federal Reserve is expected to have raised rates at least five times, making the dollar much more attractive than the single currency.The euro slumped nearly 1.9 percent on Thursday as markets dialed back expectations of a long-term euro rally despite the ECB signaling the end of its crisis-era stimulus of massive bond purchases. Its losses were so big partly because investors had expected the Fed to strike a more cautious stance than it did when it raised rates on Wednesday. On Friday, however, the outlook for the euro appeared somewhat brighter as banks adjusted their forecasts for interest rates to the ECB's guidance, removing some uncertainty from the market. The euro was up 0.3 percent at $1.1608 though still close to a ten-month low of $1.1510 hit on May 29.
GBP/USD is supported in the range of 1.3208 levels and currently trading at 1.3279 levels. It reached session high at 1.3297 and dropped to session low at 1.3257 levels. The British pound was little changed against greenback on Friday as strong U.S. data and a hawkish Federal Reserve prompted investors to buy the greenback, while the Bank of England is expected to strike a cautious note at a review next week after some weak data. The pound edged up to $1.3279, still near to seven-month lows of $1.3205 touched late last month. Against the euro, sterling dropped 0.2 percent to 87.43 pence but remained above the 88-pence range it had traded at before the euro's selloff on Thursday. Focus shifts to the Bank of England's meeting next week and Prime Minister Theresa May's ongoing efforts to convince her colleagues about her plans for Brexit. Markets expect the BoE to keep rates on hold next week, but will be looking for any signs that the central bank is more comfortable with how the economy is performing after a difficult first quarter. Swap markets expect the Bank of England to raise interest rates one more time before the end of 2018 with most participants leaning towards a hike in August. Data this week was mixed. UK retail sales this week assuaged concerns about a slowdown in the second quarter, although weaker-than-expected wage growth and industrial production numbers indicated the economy remains fragile.
USD/CAD is supported at 1.3072 levels and is trading at 1.3186 levels. It has made session high at 1.3201 and lows at 1.3120 levels. The Canadian dollar weakened to approach a one-year low against its U.S. counterpart on Friday as a trade spat between the U.S. and China intensified and domestic data showed a surprise drop in manufacturing sales. Canadian manufacturing sales fell 1.3 percent in April from March as maintenance shutdowns cut output at oil refineries, Statistics Canada data indicated. Analysts in a had forecast a 0.6 percent increase. Separate data from the Canadian Real Estate Association showed that resales of Canadian homes fell 0.1 percent in May from April to the lowest level in more than five years. Canada runs a current account deficit, so its currency tends to weaken when risk appetite sours. The country has its own trade feud with the United States and is also in slow-moving talks with the U.S. and Mexico to revamp the North American Free Trade Agreement. The price of oil, one of Canada's major exports, fell ahead of an OPEC meeting in Vienna next week as two of the world's biggest producers, Saudi Arabia and Russia, indicated they were prepared to increase output. The Canadian dollar was last trading 0.4 percent lower at C$1.3188 to the greenback. The currency touched its weakest level since June 28, 2017 at C$1.3201.
USD/JPY is supported around 109.89 levels and currently trading at 110.59 levels. It peaked to hit session high at 110.73 and made session lows at 110.34 levels. The U.S. dollar edged lower against the Japanese yen on Friday, as President Donald Trump announced hefty tariffs on $50 billion of Chinese imports and Beijing threatened to respond in kind, raising tensions between the world's two largest economies. The dollar slipped 0.05 percent to 110.57 yen, retreating from a three-week high of 110.9 yen. The yen, a perceived safe haven often sought in times of geopolitical tensions and market turmoil, had touched a more than three-week low against the greenback earlier in the session. Trump, whose hardline stance on trade has seen him wrangle with allies, said in a statement a 25 percent tariff would be imposed on a list of strategically key imports from China. He also vowed further measures if Beijing struck back. China will impose an additional 25 percent tariff on 659 U.S. goods worth $50 billion, the official Xinhua news agency reported on Saturday, citing the Tariff Commission of the State Council .The dollar index , which measures the greenback against a basket of six major currencies, was little changed on the day at 94.761. For the week, the index was up 1.3 percent, its best weekly performance in seven weeks.
Equities Recap
European shares sank on Friday as a tariff dispute between the United States and China escalated, triggering a sharp selloff in trade-sensitive commodities stocks.
UK's benchmark FTSE 100 closed down by 1.5 percent, the pan-European FTSEurofirst 300 ended the day down by 0.82 percent, Germany's Dax ended down by 0.6 percent, France’s CAC finished the day down by 0.3 percent.
Wall Street stocks were down marginally on Friday after the United States announced hefty tariffs on Chinese imports and China vowed to respond in kind, stoking investor worries over an escalating tit-for-tat trade dispute.
Dow Jones closed down by 0.36 percent, S&P 500 ended down by 0.12 percent, Nasdaq finished the day down by 0.19 percent.
Treasuries Recap
U.S. Treasury yields fell to their lowest levels in a week on Friday after the U.S. imposed trade sanctions on China, raising fears about trade wars that could weigh on economic growth.
Benchmark 10-year notes gained 10/32 in price to yield 2.910 percent, down from 2.946 percent on Thursday.
Commodities Recap
Gold prices slumped to a 5-1/2-month low on Friday, as investors from China jittery about trade skirmishes with the United States unloaded bullion, and others joined the selling spree after prices breached below technical support of $1,290 per ounce.
Spot gold lost 1.8 percent to trade at $1,278.80 per ounce by 2:02 p.m. EDT (1802 GMT),its weakest since late December. It was on track for its biggest daily drop since November 2016. U.S. gold futures for August delivery settled down $29.80, or 2.3 percent, at $1,278.50 per ounce.
Oil prices fell more than $2 a barrel Friday after two of the world's biggest producers indicated they might increase output at next week's OPEC meeting, while U.S. exports were threatened by potential Chinese tariffs on crude oil and refined products.
Brent crude oil fell $2.50, or 3.29 percent to settle at $73.44 a barrel. U.S. crude settled $1.83 lower at $65.06 a barrel. In post-settlement trading, U.S. crude retreated further, falling 2.25, or 3.4 percent, to $64.64 a barrel.
