Market Roundup
• Trump threatens tariffs on all $500 bln of Chinese imports.
• Trump ratchets up criticism of Fed interest rate rises.
• Fed will be unaffected by Trump's comments – Bullard.
• CA Jun CPI Inflation YY, 2.5%, 2.4% forecast, 2.2% previous.
• CA Jun CPI Inflation MM, 0.1%, 0.1% forecast, 0.1% previous.
• CA Jun CPI BoC Core YY, 1.3%, 1.3% previous.
• CA Jun CPI Boc Core MM, 0.1%, -0.1% previous.
• CA May Retail Sales MM, 2.0%, 1.1% forecast, -1.2% previous.
• CA May Retail Sales Ex-Autos MM, 1.4%, 0.7% forecast, -0.1% previous, 0.2% revised.
• BOJ to debate policy change in July to make its stimulus sustainable - sources.
• UK's Brexit plans useful, but questions remain - Barnier.
• Brazil cuts 2018 GDP growth forecast to 1.6 pct.
Looking Ahead - Economic Data (GMT)
• No major data scheduled
Looking Ahead - Events, Other Releases (GMT)
• 17:00 BoE's Ben Broadbent speaks at Society of Professional Economists – London
Currency Summaries
EUR/USD is likely to find support at 1.1625 levels and currently trading at 1.1723 levels. The pair has made session high at 1.1736 and hit lows at 1.1659 levels. The euro strengthened against US dollar on Friday as dollar fell across the board on Friday, as the latest comments from U.S. President Donald Trump complaining about the strength of the greenback and the rise in U.S. interest rates squashed a rally that took it to a one-year high the previous session. Trump on Friday repeated his criticism of the Fed's interest rate policy and the strong dollar. He said on Twitter that the Fed's policy on raising interest rates takes away from the United States' "big competitive edge" and could hurt the U.S. economy. That followed CNBC's interview of Trump who said a strong dollar put the United States at a disadvantage and he was ready to place tariffs on $500 billion of imported goods from China. Some market participants though were skeptical of the long-term impact of Trump's remarks. Against a basket of other currencies, the dollar was 0.6 percent weaker at 94.565, just below the one-year high of 95.62 it reached in the previous session. Despite the ratcheting higher of trade tensions, the dollar was still up 3 percent over the last three months, supported by expectations the U.S. central bank will keep raising interest rates in the coming months. The euro firmed 0.6 percent at $1.1722.
GBP/USD is supported in the range of 1.3000 levels and currently trading at 1.3131 levels. It reached session high at 1.3139 and dropped to session low at 1.3029 levels. The pound rose towards the $1.31 mark on Friday as the dollar skidded lower and traders took stock at the end of a bruising week for the British currency. Weak economic data and more political uncertainty around the government's Brexit position have hammered sterling in recent sessions. But the pound rallied on Friday after U.S. President Donald Trump reinforced his criticism of the Federal Reserve's policy on raising interest rates and accused the European Union and China of manipulating their currencies. The pound rose 0.7 percent to as high as $1.3132, cutting its losses since Monday to one percent. It was unchanged versus the euro at 89.415 pence, close to four-month lows. Sterling had dropped to as low as $1.2958 on Thursday, its weakest since early September, after worse-than-forecast retail sales data and slower-than-expected inflation rises combined with a dollar rally. With no major economic news on Friday and the British parliament headed for the summer recess next week, traders are looking to the Bank of England meeting in early August. Despite the relatively weak run of economic news, the market is still pricing in a two-thirds chance of a 25 basis point rate rise in August, although that is down from nearly four-fifths at the start of the week.
USD/CAD is supported at 1.3097 levels and is trading at 1.3126 levels. It has made session high at 1.3168 and lows at 1.3112 levels. The Canadian dollar strengthened against its U.S. counterpart on Friday as strong inflation and retail sales data reinforced expectations for another interest rate hike by the Bank of Canada this year. The loonie was on track to post its largest one-day gain versus the U.S. dollar in three weeks. Canada’s annual inflation rose last month to its highest in more than six years, while retail sales in May posted their biggest increase in seven months. The annual inflation rate rose to 2.5 percent in June, exceeding market expectations. Annual inflation has now exceeded the Bank of Canada's 2.0 percent target for the fifth straight month. Canadian retail sales in May rose 2.0 percent, the biggest increase in seven months, pushed up by sales at auto dealers and gasoline stations. The loonie's rise has also been helped by the drop in the U.S. dollar after President Donald Trump on Thursday and Friday complained about a strong greenback and the rise in U.S. interest rates. Against a basket of six major currencies, the U.S. dollar fell 0.6 percent to 94.578, way below the one-year high of 95.62 reached in the previous session. The U.S. dollar fell 1.1 percent against the Canadian currency to C$1.3133.
USD/JPY is supported around 110.74 levels and currently trading at 111.41 levels. It peaked to hit session high at 112.29 and made session lows at 111.38 levels. The dollar dipped against Japanese yen on Friday after U.S. President Donald Trump spoke out against a strong dollar and higher interest rates. In a CNBC interview on Thursday, Trump criticized the Federal Reserve's policy on raising interest rates, saying it eroded the United States' competitive edge, as did a strong dollar. His remarks drove profit-taking on the dollar across financial markets, sending other major currencies up. Trump repeated his criticism a day earlier of the Federal Reserve's policy on raising interest rates, saying it takes away from the United States' "big competitive edge." He also lamented the strength of the dollar and accused the European Union and China of manipulating their currencies. Trump on Thursday criticized Fed's policy even though most economists believe the highest inflation in seven years and lowest unemployment in 40 years justify recent interest rate rises and a strong U.S. dollar. This comes after Fed Chairman Jerome Powell's two-day congressional testimony where he said the U.S. was on course for years more of steady growth and reaffirmed expectations for more interest rate rises. The dollar index, a measure of its value against a basket of six major currencies, erased three days of gains. Against the yen, the dollar recorded its largest daily fall since February.
Equities Recap
European shares fell on Friday as earnings updates disappointed, with auto stocks bearing the brunt of trade tensions that caused a selloff in the Chinese yuan overnight.
UK's benchmark FTSE 100 closed down by 0.4 percent, the pan-European FTSEurofirst 300 ended the day down by 0.11 percent, Germany's Dax ended down by 0.89 percent, France’s CAC finished the day down by 0.25 percent.
U.S. stocks were largely unchanged on Friday as escalating trade anxieties driven by U.S. President Donald Trump's latest tariff threats against China offset a string of robust earnings led by Microsoft Corp.
Dow Jones closed down by 0.03 percent, S&P 500 ended down by 0.09 percent, Nasdaq finished the day down by 0.08 percent.
Treasuries Recap
The U.S. yield curve reached its steepest level in more than three weeks on Friday afternoon as President Donald Trump criticized the speed of the Federal Reserve's pace of interest rate hikes.
The 30-year Treasury bond yield was up 6.6 basis points from Thursday's close to a session high of 3.03 percent. The yield on the benchmark 10-year note was as high as 2.90 percent, up 5 basis points from its last close.
At the short end of the curve, the 2-year note yield increased by 1.2 basis points from Thursday's close at 2.60 percent.
Commodities Recap
Gold prices rose on Friday from one-year lows hit the previous day and spot platinum increased more than 3 percent after U.S. President Donald Trump criticized the strength of the dollar and interest rate increases by the Federal Reserve, pushing the greenback sharply lower.
Spot gold gained 0.7 percent at $1,230.89 per ounce by 1:40 p.m. EDT (1740 GMT) and U.S. gold futures settled up $7.10, or 0.6 percent, at $1,231.10 per ounce.
Oil prices rose on Friday as a weakening dollar and lower expected August crude exports from Saudi Arabia supported the market, offsetting concerns about U.S.-China trade tensions and supply increases.
The expiring U.S. West Texas Intermediate (WTI) crude for August delivery settled up $1.00 at $70.46 a barrel, while the more liquid September contract rose 2 cents to $68.26 a barrel. U.S. crude ended the week down nearly 1 percent.
Brent crude settled up 49 cents at $73.07 a barrel. Brent fell 3.1 percent in the week.
