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Europe Roundup: Euro slumps on downbeat German economic data, dollar index off 3-week lows as investors eye G7 summit, European shares trade in red - Friday, June 8th, 2018

Market Roundup

  • EUR/USD -0.42%, USD/JPY -0.37%, GBP/USD -0.06%, EUR/GBP -0.33%
     
  • DXY 0.31%, DAX -0.84%, FTSE -0.72%, Brent -0.93%, Gold 0.18%

  • Germany Industrial Output MM, -1%, 0.3% forecast, 1% previous
     
  • Germany Trade Balance, EUR, SA, 19.4 bln, 21 bln forecast, 22 bln previous
     
  • G7 leaders set to clash with combative Trump over tariffs, trade
     
  • Germany urges European unity in face of trade tensions with U.S.
     
  • For high-stakes summit with Kim, Trump trusts his gut over note cards
     
  • Brace for a possible "Brexit meltdown" but don't panic, UK's Johnson cautions - BuzzFeed
     
  • China's export growth steady in May, import growth faster but not from US
     
  • France calls for more German ambition on the euro zone
     
  • It's up to Italy to tackle its debt pile - German FinMin
     
  • Gold edges up ahead of G7, but dollar recovery caps gains
     
  • Oil prices fall on dip in China demand, surging U.S. output

Economic Data Ahead

  • (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp is expected to report that housing starts for May slightly increased at a seasonally adjusted annualized rate of 218,000, compared with 214,000 in April.
     
  • (0830 ET/1230 GMT) Canada's releases industrial capacity utilization data for the first quarter. The indicator stood at 86.0 percent in the previous quarter.
     
  • (0830 ET/1230 GMT) The Statistics Canada releases employment report for the month May. The economy probably added 17,500 jobs from a previous 1,100 decline, while the participation rate stood at 65.4 percent in the previous month.
     
  • (0830 ET/1330 GMT) Canada's unemployment rate is expected to stay unchanged at 5.8 percent for the month of May.
     
  • (1000 ET/1400 GMT) The U.S. Census Bureau is likely to report that wholesale inventories remained unchanged in April.
     
  • (1000 ET/1400 GMT) The Investor's Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of June. The indicator rose to 53.6 in May.
     
  • (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count. 
     

Key Events Ahead

  • N/A Canadian Prime Minister Justin Trudeau will host a summit of leaders from the Group of Seven leading industrialized nations in the province of Quebec.

FX Beat

DXY: The dollar index rose after falling to a 3-week low in the previous session, ahead of the G7 summit in Quebec, where the mounting risk of a tariff war between the United States and its major trade partners will be under the limelight.  The greenback against a basket of currencies trades 0.4 percent up at 93.78, having touched a low of 93.21 the day before, its lowest since May 17. FxWirePro's Hourly Dollar Strength Index stood at -43.42 (Neutral) by 1000 GMT.

EUR/USD: The euro declined below the 1.1800 handle after data showed German Industrial Production contracted more than expected 1.0 percent MoM in April and the trade deficit shrunk to €19.4 billion during the same period. The European currency traded 0.4 percent down at 1.1749, having touched a high of 1.1839 the day before, its highest since May 16. FxWirePro's Hourly Euro Strength Index stood at -12.00 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1839 (Jun. 7 High), a break above targets 1.1896 (May 5 High). On the downside, support is seen at 1.1729 (5-DMA), a break below could drag it till 1.1681 (10-DMA).

USD/JPY: The dollar tumbled to a 1-week low against the Japanese yen, as investors remained cautious awaited ahead of the G-7 summit in Quebec, Canada. Moreover, concerns towards next week's political and policy fixtures, such as the Federal Open Market Committee (FOMC) meeting and the U.S.-North Korea summit dented markets risk sentiment. The major was trading 0.4 percent down at 109.28, having hit a high of 110.26 on Wednesday, its highest since May 23. FxWirePro's Hourly Yen Strength Index stood at 98.71 (Slightly Bullish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. wholesale inventories data. Immediate resistance is located at 110.28, a break above targets 110.85 (May 17 Low). On the downside, support is seen at 108.95 (May 24 Low), a break below could take it lower 108.64 (May 4 Low).

GBP/USD: Sterling eased after rising to a 2-week peak in the prior session, ahead of the UK's lower house vote on proposed amendments to the government's EU withdrawal bill on June 12. The major traded 0.1 percent up at 1.3409, having hit a high of 1.3471 on Thursday, it’s highest since May 22. FxWirePro's Hourly Sterling Strength Index stood at 70.29 (Bullish) by 1000 GMT. Immediate resistance is located at 1.3483 (May 21 High), a break above could take it near 1.3527 (May 18 High). On the downside, support is seen at 1.3331 (10-DMA), a break below targets 1.3305 (May 23 Low). Against the euro, the pound was trading 0.3 percent up at 87.64 pence, having hit a low of 88.37 pence on Thursday, it’s lowest since May 7.

USD/CHF: The Swiss franc edged down after rising to an over 1-month peak in the prior session, as the greenback rebounded from recent lows ahead of the G7 meeting this week. The major trades 0.3 percent up at 0.9836, having touched a low of 0.9788 the day before, it’s lowest since Apr. 25. FxWirePro's Hourly Swiss Franc Strength Index stood at 51.65 (Bullish) by 1000 GMT. On the higher side, near-term resistance is around 0.9875 (10-DMA) and any break above will take the pair to next level till 0.9935 (May 30 High). The near-term support is around 0.9782 (Apr. 25 Low) and any close below that level will drag it till 0.9739 (Apr. 23 Low).

Equities Recap

European slumped in a broad-based sell-off ahead of this weekend's summit of G7 countries, and United States Federal Reserve policy meeting and a U.S.-North Korea summit next week.

The pan-European STOXX 600 index declined 0.6 percent at 383.83 points, while the FTSEurofirst 300 index plunged 0.6 percent to 1,500.29 points.

Britain's FTSE 100 trades 0.8 percent down at 7,643.60 points, while mid-cap FTSE 250 fell 0.5 percent to 21,058.61 points.

Germany's DAX fell 1.2 percent at 12,663.61 points; France's CAC 40 trades 0.4 percent lower at 5,426.91 points.

Commodities Recap

Crude oil prices declined after rising to a 1-week peek earlier in the day, as signs of weakening demand in China and surging U.S. output weighed on markets sentiment. International benchmark Brent crude was trading 0.3 percent down at $77.05 per barrel by 0933 GMT, having hit a low of $73.80 on Tuesday, its lowest since May 8. U.S. West Texas Intermediate was trading 0.4 percent down at $65.68 a barrel, after falling as low as $64.26 on Tuesday, its lowest since Apr. 10.

Gold prices rose, extending gains for the fourth straight session as the investors remained cautious ahead of a G7 meeting later in the day and United States Federal Reserve policy meeting and a U.S.-North Korea summit next week. Spot gold was 0.2 percent higher at $1,299.52 per ounce by 0937 GMT, having hit a high of $1,302.97 the prior day, its highest price level since May 31 and has risen about 0.2 percent so far this week. U.S. gold futures for August delivery fell 0.3 percent to $1,298.70 per ounce.

Treasuries Recap

The U.S. Treasuries surged, as investors wait to watch the G-7 summit in Quebec, Canada. President Donald Trump is scheduled to appear at the meeting, alongside other major leaders, including those who currently govern nations that Trump has inflicted tariffs upon. The yield on the benchmark 10-year Treasuries slumped 3 basis points to 2.90 percent, the super-long 30-year bond yields suffered 2-1/2 basis points to 3.05 percent and the yield on the short-term 2-year traded nearly 4 basis points lower at 2.46 percent.

The German bunds jumped during European session after Italy’s political woes calmed down, following the formation of a new government, which weighed on debt prices. The German 10-year bond yields, which move inversely to its price, plunged 7 basis points to 0.42 percent, the yield on 30-year note slumped 6 basis points to 1.11 percent and the yield on short-term 2-year traded nearly 3-1/2 basis points lower at -0.67 percent.

The Japanese government bonds gained slightly during late Asian session after the country’s first quarter 2018 final gross domestic product (GDP) data, released early today disappointed market participants, also remaining unchanged from the preliminary reading. The yield on the benchmark 10-year JGB note, which moves inversely to its price, remained tad lower at 0.04 percent, the yield on the long-term 30-year note slid 1/2 basis point to 0.71 percent and the yield on short-term 2-year hovered around -0.12 percent.

The Australian government bonds jumped on the last trading day of the week as investors covered previous short positions ahead of the long weekend in the country, with markets being closed on Monday on account of Queen’s Birthday. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, jumped nearly 3-1/2 basis points to 2.80 percent, the yield on the long-term 30-year Note also surged 3-1/2 basis points to 3.33 percent and the yield on short-term 2-year traded 2 basis points lower at 2.08 percent.

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