Market Roundup
- Fall in German business morale fuels recession fears
- French second-quarter jobless total declines to more than 5-year low
- ECB backs Lagarde's appointment as the new president
- Italy's economy minister
opposes central bank reform
- Spain's Podemos says wants to break coalition talks deadlock with the new proposal
Economic Data Ahead
- (0745 ET/1145 GMT) The European Central Bank will announce its interest rate decision.
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 3,000 to a seasonally adjusted 219,000 for the week ended Jul. 19, while continuing claims for the week ended Jul. 12 is expected to rise to 1.688 million from a previous reading of 1.686 million.
- (0830 ET/1230 GMT) The U.S. Census Bureau is likely to report that preliminary wholesale inventories rose 0.5 percent in June after posting a gain of 0.4 percent in May.
- (0830 ET/1230 GMT) The United States releases goods trade balance data for the month of June. The economy recorded a trade deficit of $75.05 billion in the previous month.
- (0830 ET/1230 GMT) The U.S. durable goods orders are expected to have increased 0.7 percent in June after declining 1.3 percent in May, while non-defense capital goods orders excluding aircraft are likely to have risen 0.2 percent after gaining 0.5 percent the prior month.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending July 19.
- (1100 ET/1500 GMT) Federal Reserve Bank of Kansas City issues manufacturing activity index for the month of July. The indicator stood at -3 in the previous month.
Key Events Ahead
- (0830 ET/1230 GMT) European Central Bank President releases the monetary policy statement and gives a press conference.
FX Beat
DXY: The dollar index consolidated near multi-week peaks, as investors await the meeting between the top U.S. and Chinese negotiators next week for progress in their trade dispute. The greenback against a basket of currencies traded flat at 97.68, having touched a high of 97.81 on Wednesday, its highest since May 31.
EUR/USD: The euro tumbled to a near 2-month low after data showed German business morale plunged in July to its lowest level in more than six years, in a further sign that a manufacturing crisis is dragging the German economy toward recession. Investors now await the European Central Bank to signal another round of monetary easing, including a possible rate cut and the resumption of bond purchases. The European currency traded down at 1.1139, having touched a low of 1.1122 earlier its lowest since May 30. Immediate resistance is located at 1.1160 (23.6% retracement of 1.1281 and 1.1122), a break above targets 1.1202 (50.0% retracement). On the downside, support is seen at 1.1116 (May 30 Low), a break below could drag it below 1.1100.
USD/JPY: The dollar plunged, extending losses from the previous session, as U.S. weak housing and manufacturing offset strong consumer spending, cementing hopes of a rate cut in the United States next week. However, the downside appears limited as lead negotiators for China and the United States will meet in Shanghai on Tuesday for two days in the next round of trade talks. The major was trading 0.1 percent down at 108.06, having hit a high of 108.29 on Tuesday, its highest since July 17. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims, preliminary wholesale inventories, good trade balance, and durable goods. Immediate resistance is located at 108.53 (July 1 High), a break above targets 108.96 (July 9 High). On the downside, support is seen at 107.76 (July 5 Low), a break below could take it lower at 107.21 (July 19 Low).
GBP/USD: Sterling rose but consolidated below the 1.2500 handle as new Prime Minister Boris Johnson assembled his largely Brexiteer cabinet. Additionally, data showing more overseas visitors travelled to Britain during the first three months of 2019 compared with a year ago supported the bid tone around the British pound. The major traded 0.1 percent up at 1.2494, having hit a low of 1.2417 on Tuesday, it’s lowest since July 17. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2520 (July 16 High), a break above could take it near 1.2578 (July 12 High). On the downside, support is seen at 1.2417 (July 23 Low), a break below targets 1.2396 (July 16 Low). Against the euro, the pound was trading 0.1 percent up 89.14 pence, having hit a high of 89.05 on Wednesday, it’s highest since June 21.
USD/CHF: The Swiss franc eased, reversing most of its previous session gains as the greenback held firm near multi-week peaks and on expectations that the Swiss could intervene to weaken the currency to protect their export-reliant economy. The major trades 0.1 percent up at 0.9843, having touched a low of 0.9803 on Monday; it’s lowest since July 1. On the higher side, near-term resistance is around 0.9894 (July 16 High) and any break above will take the pair to next level till 0.9932 (July 5 High). The near-term support is around 0.9778 (July 1 Low), and any close below that level will drag it till 0.9738 (June 28 Low).
Equities Recap
European shares advanced to a 1- year high, boosted by gains in luxury goods, while investor eye a highly-anticipated European Central Bank rate decision.
The pan-European STOXX 600 index rallied 0.1 percent at 392.14 points, while the FTSEurofirst 300 surged 0.2 percent to 1,542.48 points.
Britain's FTSE 100 trades 0.1 percent up at 7,505.29 points, while mid-cap FTSE 250 gained 0.2 to 19,833.70 points.
Germany's DAX eased 0.2 percent at 12,499.63 points; France's CAC 40 trades 0.3 percent lower at 5,621.42 point.
Commodities Recap
Crude oil prices rose by more than 1 percent amid Middle East tensions and on the EIA report that showed U.S. crude stocks fell by nearly 11 million barrels last week. International benchmark Brent crude was trading 1.2 percent higher at $63.89 per barrel by 1042 GMT, having hit a high of $64.64 on Wednesday, its highest since July 17. U.S. West Texas Intermediate was trading 1.1 percent up at $56.50 a barrel, after rising as high as $57.62 on Wednesday, its highest since the July 17.
Gold prices surged as the U.S. dollar hovered near multi-week highs, while investors awaited the European Central Bank meeting, where the bank is expected to provide clarity on its stance on monetary policy easing amid lukewarm EZ economic data. Spot gold was trading 0.1 percent at $1,426.26 per ounce by 1046 GMT, having touched a high of $1,452.80 on Friday, its highest since May 2013. U.S. gold futures were steady at $1,423.50 an ounce.
Treasuries Recap
The U.S. Treasuries jumped during the afternoon session, ahead of the country’s weekly initial jobless claims, scheduled to be released today by 12:30GMT and the 7-year auction, also due today at 17:00GMT. The yield on the benchmark 10-year Treasury yield slumped nearly 2 basis points to 2.032 percent, the super-long 30-year bond yields suffered nearly 1-1/2 basis points to 2.565 percent and the yield on the short-term 2-year too traded nearly 2 basis points lower at 1.808 percent.
The German bunds gained during European session after the country’s Ifo business climate index slipped during the month of July, as investors keep a close eye on the European Central Bank’s (ECB) monetary policy meeting, due to be held today by 11:45GMT for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, slipped 1 basis point to -0.388 percent, the yield on 30-year note also edged 1 basis point lower to 0.198 percent while the yield on short-term 2-year traded flat at -0.782 percent.
The Australian government bond yields plunged during Asian session on rising hopes of a Fed rate cut at its monetary policy meeting next week amid increasing risks of an economic slowdown, deepened by the ongoing U.S.-China trade war. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 5 basis points to 1.241 percent, the yield on the long-term 30-year bond suffered 3-1/2 basis points to 1.895 percent and the yield on short-term 2-year slumped 3 basis points to 0.879 percent.
