Market Roundup
• US Consumer Confidence Jun 118.9, vs 116 forecast, 117.6 previous.
• US Richmond Fed Comp Index Jun +7.0, 1 previous.
• US Dallas Fed Services Revenue Jun 14.8, 15.9 previous.
• US Texas Serv Sect Out Jun 10.1, 7.7 previous.
• US CaseShiller 20 YY Apr +5.7%, vs 5.9% forecast, 5.9% previous.
• US Redbook YY w/e 2.2%, 2.8% prior.
• Fed's Yellen: We intend to very gradually and predictably shrink our balance sheet.
• Yellen says we believe appropriate to raise rates gradually.
• Yellen: Number of reasons to believe interest rates will remain low as we normalize policy.
• Fed's Harker: With another 25 bps rate hike we would still have accommodative policy.
• Harker: We have to continue to watch the dollar, but it is not high on my list of risks at the moment.
• IMF cuts US economic growth forecasts to 2.1% for 2017 and 2.1% for 2018.
• IMF: Trump administration unlikely to achieve the growth assumptions outlined in its budget, tax plans.
• ECB's Draghi: We will need to be gradual when adjusting our policy parameters.
• Draghi: All the signs now point to a strengthening and broadening recovery in the euro area.
• Draghi: A considerable degree of monetary accommodation is still needed for inflation dynamics to become durable and self-sustaining.
• BoE raises cyclical risk buffer for banks after 2016 cut.
• Low-interest rates pose threat to Germany's financial system-govt report.
Looking Ahead - Economic Data (GMT)
• No significant events
Looking Ahead - Events, Other Releases (GMT)
• 21:30 Minneapolis Fed President Neel Kashkari participates in a town hall moderated Q&A session in Houghton, Michigan
Currency Summaries
EUR/USD is likely to find support at 1.1234 levels and currently trading at 1.1339 levels. The pair has made session high at 1.1341 and hit lows at 1.1272 levels. Euro rose against the dollar on Tuesday as the single currency found buying interest after comments from European Central Bank President Mario Draghi highlighted a recovering economy. But any change in the bank's stance should be gradual, as "considerable" monetary support is still needed and the rebound in inflation will also depend on favorable global financing conditions, he added. The status of the ECB's bond-buying program has been a key driver of the euro's value in recent weeks. The dollar jumped against the euro earlier this month after the central bank said policymakers had not discussed scaling back its massive bond-buying program. The euro rose more than 1 percent against the greenback to $1.1344 in the U.S. session, marking its strongest level since Sept. 8, 2016.
GBP/USD is supported in the range of 1.2698 levels and currently trading at 1.2797 levels. It reached session high at 1.2802 and dropped to session low at 1.2756 levels. Sterling rose to three weeks high against the dollar on Tuesday as the dollar declined further after the healthcare bill was delayed in the U.S. Senate, raising fresh questions about President Trump's domestic agenda. The dollar slipped to session lows against basket of currencies after U.S. Senate Republican leader Mitch McConnell decided to put off a planned vote on a bill to dismantle the Affordable Care Act until after the Senate's July 4 recess, while Federal Reserve Chair Janet Yellen said asset valuations are somewhat rich. The delay in the healthcare vote sent U.S. dollar to session lows as it brought back worries about the timetable of President Donald Trump's business-friendly agenda. More time spent on healthcare pushes back the discussion on a tax reform eagerly eyed by investors. Sterling was last trading at $1.2830, up 0.84 percent on the day.
USD/CAD is supported at 1.3162 levels and is trading at 1.3169 levels. It has made session high at 1.3217 and lows at 1.3168 levels. The Canadian dollar strengthened against its U.S. counterpart on Tuesday as higher oil prices and weaker dollar across the board boosted the oil-correlated Canadian dollar. Prices of oil, one of Canada's major exports, rose for a fourth consecutive session but worries over persistent oversupply capped gains. The U.S. dollar was pressured by strength in the euro after European Central Bank President Mario Draghi opened the door to tweaks that might begin to reduce the central bank's emergency stimulus to the economy shortly. Gains for the Canadian dollar came ahead of remarks on Wednesday by Bank of Canada Governor Stephen Poloz, who will be participating in a panel discussion at the European Central Bank's Forum on Central Banking. The Canadian dollar was last trading at C$1.3153 to the greenback, up 1.3 percent. The currency's weakest level of the session was C$1.3221, while it touched its strongest since June 19 at C$1.3146.
USD/JPY is supported around 113.00 levels and currently trading at 113.86 levels. It peaked to hit session high at 114.78 and made session lows at 113.06 levels. The U.S. dollar initially strengthened against the Japanese yen on Tuesday but gave up some of earlier gains as greenback declined after the U.S. Senate postponed a planned healthcare vote. The dollar was already weak against basket of currencies after the European Central Bank president said he might begin to reduce the Bank's emergency economic stimulus, slipped further as healthcare bill vote in the U.S. Senate raised fresh questions about the timeline of President Trump's domestic agenda. The healthcare legislation, which has encountered resistance from several Republicans, is the first plank of Trump's domestic policy agenda, with investors eager for him to move onto his other plans including tax cuts, infrastructure spending and deregulation. The U.S. dollar index fell 1 percent, after a vote on healthcare legislation was delayed in the U.S. Senate. The dollar hit session high against Japanese yen at 112.47 per dollar before retreating back to trade at 112.12 in the late US session.
Equities Recap
Hawkish comments from European Central Bank President Mario Draghi hit interest rate-sensitive utilities shares on Tuesday, dragging down European indexes, while a warning from auto parts supplier Schaeffler hit the whole sector.
UK's benchmark FTSE 100 closed down 0.19 percent, the pan-European FTSEurofirst 300 ended the day down by 0.70 percent, Germany's Dax ended down 0.79 percent, France’s CAC finished the day down by 0.72 percent.
The tech-heavy Nasdaq led a broad Wall Street decline on Tuesday with stocks falling more sharply after a healthcare bill was delayed in the U.S. Senate, raising fresh questions about President Trump's domestic agenda.
Dow Jones closed down by 0.44 percent, S&P 500 ended down by 0.78 percent, Nasdaq finished the day down by 1.60 percent.
Treasuries Recap
U.S. Treasury yields rose on Tuesday in sympathy with European government debt weakness after European Central Bank President Mario Draghi fueled expectations that the ECB is closer to announcing a reduction of stimulus.
Benchmark 10-year notes dropped 18/32 in price to yield 2.20 percent, up from 2.14 percent late on Monday.
The Treasury yield curve between five-year notes and 30-year bonds steepened after earlier falling to 92.70 basis points, the flattest level since late 2007.
Commodities Recap
Gold rose on Tuesday after hitting a six-week low in the previous session as bargain hunting set in and the dollar slid sharply after the U.S. Senate postponed a planned healthcare vote.
Spot gold rose 0.5 percent to $1,249.51 per ounce by 3:28 p.m. EDT (1928 GMT). It slumped to a six-week low of $1,236.46 on Monday. U.S. gold futures for August settled up 0.04 percent at $1,246.90.
Oil prices rose nearly 2 percent and hit a one-week high on Tuesday, boosted by a weaker dollar, short covering and expectations that crude inventories in the United States may decline for a third consecutive week.
Brent crude futures, the international benchmark for oil prices, gained 82 cents, or 1.79 percent, to settle at $46.65 per barrel. U.S. crude futures ended the session up 86 cents, or about 1.98 percent, at $44.24 per barrel.
