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Europe Roundup: Sterling consolidates within narrow ranges amid Brexit uncertainty, dollar index eases ahead of Fed Powell's testimony, European shares tumble - Tuesday, July 17th, 2018 

Market Roundup

  • EUR/USD 0.11%, USD/JPY 0.18%, GBP/USD 0.08%, EUR/GBP 0.01%
     
  • DXY -0.05%, DAX -0.16%, FTSE -0.19%, Brent -0.01%, Gold 0.15%
     
  • After reprieve, Britain's May faces Brexit battle in parliament on trade
     
  • BoE's Carney: no deal Brexit would be "material event" for interest rates
     
  • Russian establishment chalks up Trump summit as a win for Putin
     
  • China still confident of hitting 2018 growth target despite slowdown, trade risks
     
  • Great Britain Jun Claimant Count Unem Chng, 7.8k, -2.1k forecast, -7.7k previous, -3.0k revised
     
  • Great Britain May ILO Unemployment Rate, 4.2%, 4.2% forecast, 4.2% previous
     
  • Great Britain May Employment Change, 137k, 150k forecast, 146k previous
     
  • Great Britain May Avg Wk Earnings 3M YY, 2.5%, 2.5% forecast, 2.5% previous, 2.6% revised
     
  • Germany Jun Car Registration YY, 4.2%, -5.8% previous
     
  • Brent crude oil hits 3-month low as output rises
     
  • Gold edges up on softer dollar ahead of Fed testimony
     

Economic Data Ahead

  • (0830 ET/1230 GMT) Statistics Canada releases manufacturing shipments data for the month of May. Manufacturing sales are likely to have increased 0.6 percent after declining 1.3 percent in June.
     
  • (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production rose 0.5 percent in January, after decreasing 0.1 in the prior month.
     
  • (0915 ET/1315 GMT) The Federal Reserve Board is expected to report that capacity utilization edged up to 78.3 percent in June from 77.9 percent in May.
     
  • (1000 ET/1400 GMT) The National Association of Home Builders (NAHB) is expected to report that U.S. Housing Market Index rose to 69 in July from 68 in June.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (1000 ET/1400 GMT) Federal Reserve Chairman Jerome Powell will deliver his semiannual monetary policy report before the Senate Banking Committee, in Washington.

FX Beat

DXY: The dollar index eased as markets awaited the testimony from Federal Reserve Chairman Jerome Powell for possible clues on the outlook for U.S. interest rates. The greenback against a basket of currencies trades 0.05 percent down at 94.50, having touched a high of 95.24 on Friday, its highest since June 29. FxWirePro's Hourly Dollar Strength Index stood at -33.18 (Neutral) by 1000 GMT.

EUR/USD: The euro rallied to a 6-day peak as the greenback tumbled ahead of congressional testimony by Federal Reserve Chairman Jerome Powell. The European currency traded 0.1 percent up at 1.1719, having touched a high of 1.1790 last week, its highest since June 14. FxWirePro's Hourly Euro Strength Index stood at 18.61 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1750 (May 24 High), a break above targets 1.1801 (June 13 High). On the downside, support is seen at 1.1657 (21-DMA), a break below could drag it till 1.1630 (July 4 Low).

USD/JPY: The dollar hovered towards multi-month peaks, as investors expect Federal Reserve Chairman Jerome Powell to deliver an upbeat message on the outlook for growth and reaffirm the Fed's gradual monetary tightening policy before the U.S. Senate Banking Committee. The major was trading 0.2 percent up at 112.52, having hit a high of 112.80 on Friday, its highest since Jan 9. FxWirePro's Hourly Yen Strength Index stood at -83.91 (Slightly Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. industrial production, capacity utilization figures and Fed Powell testimony. Immediate resistance is located at 113.07 (Dec 19 High), a break above targets 113.38 (Dec 8 High). On the downside, support is seen at 111.91 (July 12 Low), a break below could take it lower 111.30 (10-DMA).

GBP/USD: Sterling consolidated within narrow ranges as investors turned cautious after a series of votes in parliament highlighted the growing rift within Prime Minister Theresa May's Conservative Party over a Brexit draft. Moreover, data showing British workers' pay growth slowed to its weakest in six months despite record employment further dented the bid tone around the British pound. The major traded 0.01 percent up at 1.3235, having hit a low of 1.3102 on Friday; it’s highest since July  2. FxWirePro's Hourly Sterling Strength Index stood at -8.11 (Neutral) 1000 GMT. Immediate resistance is located at 1.3274 (July 5 High), a break above could take it near 1.3362 (July 9 High). On the downside, support is seen at 1.3180 (July 12 Low), a break below targets 1.3114 (July 3). Against the euro, the pound was trading 0.1 percent up at 88.56 pence, having hit a low of 89.00 pence last week, it’s lowest since March 9.

USD/CHF: The Swiss franc surged, extending gains for the third straight session, amid escalating and sustained trade conflicts between U.S. and China. The major trades 0.2 percent down at 0.9943, having touched a high of 1.0068 on Friday, it’s highest since May 2017. FxWirePro's Hourly Swiss Franc Strength Index stood at 58.02 (Bullish) by 1000 GMT. On the higher side, near-term resistance is around 0.9992 and any break above will take the pair to next level till 1.0040. The near-term support is around 0.9910 and any close below that level will drag it till 0.9880.

Equities Recap

European shares declined in early deals, weighed down by broader weakness among tech stocks, while the greenback steadied ahead of the Federal Reserve Chair Jerome Powell's testimony before the U.S. Congress.

The pan-European STOXX 600 index eased 0.2 percent at 383.41 points, while the FTSEurofirst 300 index declined 0.3 percent to 1,498.31 points.

Britain's FTSE 100 trades 0.2 percent down at 7,582.02 points, while mid-cap FTSE 250 rose 0.1 percent to 20,819.55 points.

Germany's DAX fell 0.1 percent at 12,544.13 points; France's CAC 40 trades 0.3 percent lower at 5,394.62 points.

Commodities Recap

Crude oil prices tumbled to fresh multi-month lows, amid worries over supply disruptions balanced signs of increasing production. International benchmark Brent crude was trading 0.3 percent down at $71.72 per barrel by 1032 GMT, having hit a low of $71.35 earlier, its lowest since April 17. U.S. West Texas Intermediate was trading 0.1 percent lower at $67.91 a barrel, after falling as low as $67.57 on Monday, its lowest since June 22.

Gold prices edged higher as the dollar remained subdued ahead of U.S. Federal Reserve Chairman Jerome Powell's first congressional testimony. Spot gold was 0.1 percent up at $1,241.94 an ounce at 1044 GMT after marking the lowest since Dec. 12 at $1,236.46 on Friday. U.S. gold futures for August delivery were up 0.3 percent at $1,243.20 an ounce.

Treasuries Recap

The U.S. 10-year Treasuries remained flat as investors wait to watch Federal Reserve Chair Jerome Powell’s testimony in front of the Congress, scheduled to be held today by 14:00GMT. The yield on the benchmark 10-year Treasuries traded flat at 2.85 percent, the super-long 30-year bond yields hovered around 2.96 percent and the yield on the short-term 2-year traded nearly 1 basis point lower at 2.59 percent.

The United Kingdom’s gilts remained tad higher during European session after the country’s employment report for the month of May showed mixed results. The yield on the benchmark 10-year gilts, slipped nearly 1 basis point to 1.27 percent, the super-long 30-year bond yields remained tad lower at 1.73 percent and the yield on the short-term 2-year too traded 1/2 basis point lower at 0.72 percent.

The New Zealand bonds slumped at close as investors have largely shrugged-off the disappointment from the country’s consumer price inflation (CPI) for the second quarter of this year. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped 4-1/2 basis points to 2.90 percent, the yield on the long-term 20-year note also surged 4-1/2 basis points to 3.22 percent and the yield on short-term 2-year closed 4 basis points higher at 1.87 percent.

The Japanese government bonds remained flat during Asian session after returning from a long weekend as investors wait to watch the country’s trade balance data for the month of June and national consumer price inflation data for the same period, scheduled to be released on July 18 and 19 by 23:50GMT and 23:30GMT respectively. The yield on Japan’s benchmark 10-year bond, which moves inversely to its price, remained flat at 0.04 percent, the yield on the long-term 30-year hovered around 0.68 percent and the yield on short-term 2-year too traded steady at -0.12 percent.

The Australian government bonds traded narrowly mixed in subdued session as markets receive no major economic data. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, traded nearly flat 2.636 percent, the yield on the long-term 30-year Note almost steady at 3.112 percent and the yield on short-term 2-year down 1/2 basis point to 2.013 percent.

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