Market Roundup
• Shock as Trump backs Putin on election meddling at summit.
• Fed's Kashkari, citing yield curve, wants rate hike pause.
• IMF warns of growing damage from trade fight, says U.S. vulnerable.
• U.S. launches five WTO challenges to retaliatory tariffs.
• EU pushes China on trade, saying it could open up if it wanted.
• US Jun Retail Sales MM, 0.5%, 0.5% forecast, 0.8% previous, 1.3% revised.
• US Jun Retail Sales Ex-Autos MM, 0.4%, 0.4% forecast, 0.9% previous, 1.4% revised.
• US Jun Retail Control, 0.0%, 0.4% forecast, 0.5% previous, 0.8% revised.
• US Jul NY Fed Manufacturing, 22.60, 22.0 forecast, 25.0 previous.
• US May Business Inventories MM, 0.4%, 0.4% forecast, 0.3% previous.
• Canadian home re-sales recover in June but remain below average-CREA.
• CA May Securities Cdns C$, 5.69 bln, -0.65 bln previous, -0.71 bln revised.
• CA May Securities Foreign C$, 2.18 bln, 9.13 bln previous, 9.09 bln revised.
• Mnuchin says U.S. will consider some waivers on Iran sanctions.
• Britain's May bows to Brexit pressure in parliament.
Looking Ahead - Economic Data (GMT)
• 16 Jul 22:45 New Zealand Q2 CPI YY, 1.6% forecast, 1.1% previous
• 16 Jul 22:45 New Zealand Q2 CPI QQ, 0.5% forecast, 0.5% previous
• 17 Jul 01:30 China Jun House Prices YY, 4.7% previous
• 17 Jul 03:00 New Zealand Jun RBNZ Offshore Holdings, 56.7% previous
Looking Ahead - Events, Other Releases (GMT)
• 08:00 BoE's Mark Carney and FCA's Andrew Bailey appear before Treasury Committee to discuss BoE's Financial Stability Report - Farnborough
• 12:30 BoE's Michael Sheren speaks at Green Finance Summit - London
• 14:00 Fed's Jerome Powell gives testimony on economy and monetary policy before Senate Banking Committee - Washington
Currency Summaries
EUR/USD is likely to find support at 1.1627 levels and currently trading at 1.1713 levels. The pair has made session high at 1.1724 and hit lows at 1.1692 levels. The euro strengthened against the U.S. dollar on Monday as investors pared back their long bets on the greenback and rebalanced their positions ahead of Federal Reserve Chairman Jerome Powell's first congressional testimony. Investors are awaiting Powell's semiannual testimony on the economy and monetary policy before the U.S. Senate Banking Committee on Tuesday. Powell is likely to reiterate the Fed's gradual monetary policy tightening, but any suggestion of caution on trade could unravel the market's appetite for risk again. The dollar has benefited from expectations of further interest rate increases this year as well as a growing belief that the United States is better placed than it major rivals to withstand a potential disruption in global trade. On the data front, U.S. retail sales rose solidly in June as households boosted purchases of automobiles and a range of other goods, cementing expectations for robust economic growth in the second quarter. In late trading, the dollar fell 0.2 percent against a basket of six major currencies to 94.526, sliding for a second straight session. The euro, rose 0.2 percent against the dollar, to $1.1713, after weakening half a percent last week.
GBP/USD is supported in the range of 1.3166 levels and currently trading at 1.3239 levels. It reached session high at 1.3291 and dropped to session low at 1.3215 levels. Britain's pound declined against the dollar on Monday as a debate in Britain's parliament exposed the level of dissatisfaction within British Prime Minister Theresa May's governing Conservative Party over her plans for Brexit. The pound fell to an intraday low of $1.3215 on news that May had bowed to pressure from Brexit supporters and accepted their changes to a customs bill that underpins Britain's exit from the EU. May is expected to survive Monday's debate on a customs law but the debate risks undermining the government and increasing the chances of an early election which would hurt the pound. Sterling has struggled to capitalise in recent weeks on signs that the economy is improving because of mounting uncertainty over whether Britain can secure a trade deal with the EU before it leaves the bloc next March. Markets expect the Bank of England to hike interest rates in August but the British currency has fallen 9 percent since April partly because of the wrangling within May's party. The pound was trading down 0.1 percent versus the dollar at $1.3224 and down 0.3 percent against the euro at 88.52 pence.
USD/CAD is supported at 1.3062 levels and is trading at 1.3137 levels. It has made session high at 1.3156 and lows at 1.3107 levels. The Canadian dollar edged higher against the U.S. currency on Monday, benefiting from the greenback's overall weakness, but the outlook remained skewed to the downside amid global trade tensions with the United States and the European Union. The U.S. dollar was down 0.2 percent against a basket of currencies at 94.52, following a slight rebound in risk appetite that prompted investors to modestly reduce their long bets on the greenback. Last Friday, Italian Deputy Prime Minister Luigi Di Maio said Italy will not ratify the European Union's free trade agreement with Canada. The Comprehensive Economic and Trade Agreement needs to be approved by all 28 EU member states to take full effect. Canada is also embroiled in its own trade dispute with the United States amid protracted talks to revamp the North American Free Trade Agreement. After the Bank of Canada raised interest rates last week, investors are looking to this week's inflation and retail sales data to gauge whether one more rate hike is possible this year. The U.S. dollar was down 0.1 percent at C$1.3142 against the Canadian dollar. So far this year, the Canadian dollar has been down 4.3 percent against what has been a resurgent greenback.
AUD/USD is supported around 0.7358 levels and currently trading at 0.7418 levels. It hit session high at 0.7441 and made session lows at 0.7407 levels. The Australian dollar eased against dollar on Monday as tepid Chinese economic data weighed on Australian dollar. The Australian dollar, often played as a liquid proxy for the Chinese yuan, slipped 0.2 percent to $0.7410 after two consecutive sessions of gains. Monday's data showed China's economy grew 6.7 percent in the second quarter of 2018, in line with market expectations, and cooling a bit from the 6.8 percent growth registered in each of the previous three quarters. Taken with a decline in industrial output, the figures point to an economy continuing to slow under the influence of a multi-year crackdown on excessive financial risk, now compounded by the gathering headwinds of a trade war. Australia's open export-dependent economy is heavily exposed to China's fortunes so a slowdown there is bad news for the Aussie which is also traded as a liquid hedge against risk. The U.S. dollar fell as investors pared back long bets on the greenback and rebalanced their positions ahead of Fed Chairman Jerome Powell's first congressional testimony on Tuesday. He is expected to reiterate the Fed's gradual monetary policy tightening.
Equities Recap
European shares fell on Monday, led lower by commodity stocks as an upbeat update from Deutsche Bank and expectations of a strong earnings season kept a lid on losses.
UK's benchmark FTSE 100 closed down 0.83 percent, the pan-European FTSEurofirst 300 ended the day down by 0.29 percent, Germany's Dax ended up by 0.27 percent, France’s CAC finished the day down by 0.29 percent.
U.S. stocks edged lower on Monday following a drop in oil prices that weighed on energy shares and offset a jump in financials as Bank of America's results reinforced expectations of a strong U.S. earnings season.
Dow Jones closed up by 0.17 percent, S&P 500 ended down by 0.12 percent, Nasdaq finished the day down by 0.28 percent.
Treasuries Recap
U.S. Treasury yields increased on Monday with the two-year yield hitting a near decade peak as domestic retail sales recorded growth for a fifth straight month in June, supporting the view of solid economic growth in the second quarter.
On light summer volume, the benchmark 10-year Treasury yield was 2.7 basis points higher at 2.858 percent after hitting its highest in more than a week.
The 2-year yield notched up nearly 2 basis points at 2.603 percent after touching its highest level since August 2008.
Commodities Recap
Gold steadied on Monday as weak physical demand in top-consuming regions and the expectation of higher U.S. interest rates weigh, despite the bullion-priced U.S. dollar losing steam.
Spot gold lost 0.2 percent at $1,239.11 per ounce by 1:33 p.m. EDT (1733 GMT).U.S. gold futures for August delivery settled down $1.50, or 0.1 percent, at $1,239.70 per ounce.
Oil prices slumped more than 4 percent on Monday, with Brent reaching a three-month low, as Libyan ports reopened and traders eyed potential supply increases by Russia and other producers.
Brent crude futures fell $3.49 to settle at $71.84 a barrel, a 4.63 percent loss, while U.S. West Texas Intermediate (WTI) crude futures fell $2.95 to settle at $68.06 a barrel, a 4.15 percent loss.
