Market Roundup
• British eurosceptic ministers quit in blow to May's Brexit plan.
• Brexit could hurt euro zone economies - ECB's Nowotny.
• Sea of red in Treasury market may signal bond boom is over.
• US Jun Employment Trends, 108.9, 107.7 previous.
• With raft of deals, China and Germany swear to keep trade free.
• BOJ keeps upbeat view on regional Japan, labour shortages cloud outlook.
• German exports power through trade tensions in May.
• ECB's Draghi renews plea for euro area deposit insurance.
• ECB in "wait and see" mode about rate hikes – Nowotny.
• As anti-money laundering reform kicks in, EU seeks to close new gaps.
Looking Ahead - Economic Data (GMT)
• 9 Jul 22:45 New Zealand Jun Electronic Card Retail Sales MM, 0.4% previous.
• 9 Jul 22:45 New Zealand Jun Elec Card Retail Sales YY, 4.2% previous.
• 10 Jul 01:30 China Jun PPI YY, 4.5% forecast, 4.1% previous.
• 10 Jul 01:30 China Jun CPI YY, 1.9% forecast, 1.8% previous.
• 10 Jul 01:30 China Jun CPI MM, 0.1% forecast, -0.2% previous.
• 10 Jul 01:30 Australia Jun NAB Business Conditions, 15 previous.
Looking Ahead - Events, Other Releases (GMT)
• 17:00 Sabine Lautenschlager, member of the ECB's executive board, speaks at 9th ECB Statistics Conference "20 years of ESCB statistics: What's next?" in Frankfurt
• 22:00 Fed's Mary Daly speaks on the economic outlook and the economy before the Chartered Financial Analysts Society of San Francisco
Currency Summaries
EUR/USD is likely to find support at 1.1730 levels and currently trading at 1.1750 levels. The pair has made session high at 1.1789 and hit lows at 1.1730 levels. The euro declined against US dollar on Monday as sellers stepped in following the announcement that UK Foreign Secretary Boris Johnson resigned from the government. Johnson decided to walk just hours after May's Brexit minister, David Davis, did the same over her EU plans. The euro initially strengthened in the European session as traders focused on the increased likelihood of a "soft Brexit" in which the UK and EU retain close trade ties. But the second exit provoked a risk-off response in the market. The dollar index rose 0.4 percent against a basket of six major currencies to a daily high of 94.068. Against the euro, the dollar strengthened to $1.173. Earlier in the trading day, the dollar index had fallen 0.4 percent from Friday to 93.713, its lowest since June 14, after U.S. wages indicators disappointed dollar bulls while boosting risk appetite. Friday's data showed average U.S. hourly earnings gained five cents, or 0.2 percent, in June after rising 0.3 percent in May. This suggested moderate inflation pressures, creating doubt that the Federal Reserve would raise interest rates a total of four times in 2018. Investors appear to be ignoring the worsening trade conflict between the United States and China after the two countries imposed tariffs on $34 billion worth of each other’s goods on Friday.
GBP/USD is supported in the range of 1.3154 levels and currently trading at 1.3255 levels. It reached session high at 1.3350 and dropped to session low at 1.3187 levels. Sterling declined against the dollar on Monday after the resignation of the British foreign minister heaped pressure on Prime Minister Theresa May, but its losses were expected to be contained unless a full-blown leadership challenge materialised. Boris Johnson followed Brexit minister David Davis in resigning in opposition to May's hard-fought blueprint for how Britain is to structure its relationship with the European Union after its leaves the bloc in March. That plan announced on Friday has been welcomed by markets, which believe it made the "soft Brexit" favoured by businesses and investors more likely. Under May's Brexit plan, Britain and the EU would retain close trade ties. But Davis said he believed this would hand too much power to Brussels in the exit talks. While Davis has said he would not seek to challenge May's leadership, Johnson's ambitions appear less clear. Sterling had traded higher before Johnson's resignation as investors speculated May would find it easier to negotiate with Brussels without opponents to her vision of Brexit inside her cabinet. The British currency fell as low as $1.3182 following Johnson's departure, after earlier trading as high as $1.3363, its strongest since June 14.
USD/CAD is supported at 1.3041 levels and is trading at 1.3110 levels. It has made session high at 1.3122 and lows at 1.3063 levels. The Canadian dollar weakened against its U.S. counterpart on Monday as investors weighed whether cautious language might accompany an expected Bank of Canada interest rate hike this week. The Bank of Canada will hike interest rates on Wednesday as strong job growth and rising inflation pressures override concerns about a deepening trade rift with the United States. Money markets see a roughly 90 percent chance of a rate increase. Bets for a hike were boosted by domestic data on Friday showing a stronger-than-expected jobs gain. Canada is engaged in a trade feud with the United States and is also in slow-moving talks with the United States and Mexico to revamp the North American Free Trade Agreement. The currency earlier touched its strongest intraday level since June 14 at C$1.3066.The price of oil was supported by increased global demand and U.S. efforts to shut out Iranian output using sanctions. U.S. crude oil futures settled 0.1 percent higher at $73.85 a barrel. The U.S. dollar recovered from its lowest point in more than three weeks to edge higher against a basket of major currencies. The Canadian dollar was trading 0.2 percent lower at C$1.3110 to the greenback, or 72.26 U.S.
cents.
USD/JPY is supported around 110.25 levels and currently trading at 110.79 levels. It peaked to hit session high at 110.90 and made session lows at 110.39 levels. The U.S. dollar strengthened against the yen on Monday as dollar recouped its earlier losses after British foreign minister resigned. Prime Minister Theresa May's foreign minister and Brexit negotiator quit on Monday in protest at her plans to keep close trade ties with the European Union after Britain leaves the bloc, stirring rebellion in her party's ranks. Foreign Secretary Boris Johnson, the face of Brexit for many, resigned just hours after Brexit minister David Davis, emboldening some in her Conservative Party to mull a plot to unseat her less than nine months before Britain exits in March next year. Riskier assets globally, took some respite from an escalation of the Sino-U.S. trade dispute after both countries on Friday slapped tit-for-tat tariffs on each other’s goods. The United States and China exchanged the first salvos in what could become a protracted trade war on Friday, slapping tariffs on $34 billion worth of each other’s’ goods and giving no sign of willingness to start talks aimed at a reaching a truce. U.S. Secretary of State Mike Pompeo brushed off North Korean charges that he used "gangster-like" diplomacy in negotiations in Pyongyang, saying on Sunday after meeting his Japanese and South Korean counterparts that he would keep pursuing denuclearization talks with North Korea.
Equities Recap
A wave of optimism about the resilience of the global economy helped European shares make gains despite the escalation of the U.S.-China trade dispute and renewed divisions in the British government around Brexit.
The UK's benchmark FTSE 100 closed up by 1 percent, FTSEurofirst 300 ended the day up by 0.67 percent, Germany's Dax ended up by 0.5 percent, and France’s CAC finished the up by 0.6 percent.
U.S. stocks rose on Monday, helped by bank, industrial and energy shares, as investors looked ahead to a strong quarterly earnings season.
Dow Jones closed up by 1.32 percent, S&P 500 ended up 0.89 percent, Nasdaq finished the day up by 0.89 percent.
Treasuries Recap
Treasuries yields rose on Monday as investors moved into equities and freed up cash for new Treasuries auctions this week, following a strong U.S. jobs report on Friday and a muted response to the start of U.S. tariffs on Chinese imports.
The benchmark U.S 10-year note yielded 2.858 percent at 3:24 p.m. EDT (1924 GMT), up 2.7 basis points from Friday.
The yield spread between 2-year and 10-year notes was at 29.50 basis points. Five-year and 30-year Treasuries were 21.50 basis points apart.
Commodities Recap
Gold rose on Monday, touching its highest in two weeks as the dollar weakened and the Chinese yuan recovered from June's lows, and gold stayed higher even as the dollar bounced up, as some investors bought bullion to cover short positions.
Spot gold increased 0.3 percent to $1,258.52 per ounce by 1:36 p.m. EDT (1736 GMT). The session high of 1,265.87 was its highest since June 26.
U.S. gold futures for August delivery settled up $3.80, or 0.3 percent, at $1,259.60 per ounce.
Oil prices gained on Monday, with U.S. crude ending a choppy session higher on expectations for a Canadian production outage lasting until September, while global benchmark Brent gained on looming sanctions on Iran and falling output in Libya.
U.S. light crude futures gained 5 cents to settle at $73.85 a barrel. Brent jumped 96 cents at $78.07.
