Market Roundup
- EUR/USD -0.64%, USD/JPY -0.59%, GBP/USD -0.6%, EUR/GBP flat
- DXY 0.41%, DAX -1.26%, FTSE -0.42%, Brent -0.42%, Gold 0.11%
- ECB patient and gradual with rate hikes, Draghi says
- EU Current Account NSA, EUR, 26.2 bln, 40.6 bln previous
- EU Current Account SA, EUR, 28.4 bln, 32 bln previous
- China slams U.S. "blackmailing" as Trump issues new trade threat
- Germany's Ifo sees euro crisis 2.0, trade war slashing growth
- Japan steel lobby fears US-China spat may prompt global trade order 'collapse'
- N.Korea's Kim visits Beijing; S.Korea, U.S. halt military drill
- Flexible wage setting may increase inequality, researchers tell ECB
- White House defends immigration policy as outrage grows over children
- OPEC sees strong oil market, possible need for more output
- Gold prices gain as U.S.-China trade spat stokes safe-haven buying
- Oil falls as flaring U.S.-China trade dispute blunts risk appetite
Economic Data Preview
- (0830 ET/1230 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to an annualized rate of 1.317 million units in May from 1.287 million units in April.
- (0830 ET/1230 GMT) The U.S. building permits are likely to have decreased to a 1.350 million-unit pace in May from a 1.352 million-unit pace in April.
- (1500 ET/1900 GMT) Argentina will release gross domestic product figures for the first quarter. The economy's GDP is likely to come in at 3.50 percent, down from 3.90 percent in the fourth quarter.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
Key Events Ahead
- (0900 ET/1300 GMT) Introductory statement by European Central Bank's Daniele Nouy at European Parliament - Brussels
FX Beat
DXY: The dollar index surged to an over 11-month peak after U.S. President Donald Trump's threat to impose a 10 percent tariff on another $200 billion of Chinese goods drew warnings from Beijing about $50 billion of retaliatory penalties on U.S. goods. The greenback against a basket of currencies trades 0.4 percent up at 95.18, having touched a high of 95.27, its highest since July 2017. FxWirePro's Hourly Dollar Strength Index stood at 72.45 (Bullish) by 1000 GMT.
EUR/USD: The euro tumbled to a near 3-week low after the European Central Bank President Mario Draghi stated that the central bank will exercise patience over its first interest rate hike and plans to adjust policy only gradually as inflation needs to increase further. Moreover, a dispute in Germany's governing coalition and expectations the ECB will hold interest rates steady into 2019 dented euro bulls’ sentiment. The European currency traded 0.6 percent down at 1.1558, having touched a low of 1.1531, its lowest since May 30. FxWirePro's Hourly Euro Strength Index stood at -77.76 (Slightly Bearish) by 1000 GMT. Immediate resistance is located at 1.1650, a break above targets 1.1699 (21-DMA). On the downside, support is seen at 1.1510 (May 29 Low), a break below could drag it till 1.1434 (July 2017 Low).
USD/JPY: The dollar plunged to a 1-week low as hostility over trade between the U.S. and China intensified after U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods. The major was trading 0.6 percent down at 109.91, having hit a low of 109.55 earlier, its lowest since June 11. FxWirePro's Hourly Yen Strength Index stood at 102.64 (Highly Bullish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. building permits and housing starts. Immediate resistance is located at 110.01 (June 6 High), a break above targets 110.49 (June 6 High). On the downside, support is seen at 109.37 (June 4 Low), a break below could take it lower 109.19 (June 8 Low).
GBP/USD: Sterling slumped below the 1.3200 handle to hit a fresh 7-month low amid overall cautious sentiment after the U.S. announced they were seeking further retaliatory tariffs on China. Investors now await the Bank of England policy meeting, where it is expected to keep interest rates steady for the time being, however, markets will be looking for changes in the central bank's outlook. The major traded 0.6 percent up at 1.3164, having hit a low of 1.3163 earlier; it’s lowest since Nov 16. FxWirePro's Hourly Sterling Strength Index stood at -41.35 (Neutral) 0400 GMT. Immediate resistance is located at 1.3305 (5-DMA), a break above could take it near 1.3439 (June 8 High). On the downside, support is seen at 1.3130 (Nov.15 Low), a break below targets 1.3110 (Oct. 25 Low). Against the euro, the pound was trading flat at 87.74 pence, having hit a high of 87.17 pence on Friday, it’s highest since May 30.
USD/CHF: The Swiss franc rallied to a 1-week peak as U.S. President Donald Trump's threats of more tariffs on China heightened fears that an escalating trade dispute could damage global growth. The major trades 0.1 percent down at 0.9959, having touched a high of 0.9990 on Monday, it’s highest since May. 21. FxWirePro's Hourly Swiss Franc Strength Index stood at 72.45 (Slightly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 1.0001 (May 21 High) and any break above will take the pair to next level till 1.0033 (May 17 High). The near-term support is around 0.9897 (21-DMA) and any close below that level will drag it till 0.9870.
Equities Recap
European shares plunged amid an escalating protectionist war between the United States and China, while euro tumbled to a near 3-week low on European Central Bank President Mario Draghi's comments.
The pan-European STOXX 600 index plunged 1.1 percent at 381.64 points, while the FTSEurofirst 300 index eased 0.7 percent to 1,498.05 points.
Britain's FTSE 100 trades 0.5 percent down at 7,593.49 points, while mid-cap FTSE 250 fell 0.6 percent to 20,885.14 points.
Germany's DAX declined 1.4 percent at 12,657.11 points; France's CAC 40 trades 1.2 percent lower at 5,387.69 points.
Commodities Recap
Crude oil prices slumped as an escalating trade dispute between the United States and China triggered a sharp selloff in global markets. Moreover, expectations that producer group OPEC and partner Russia will gradually increase output weighed on market sentiment. International benchmark Brent crude was trading 0.7 percent up at $74.82 per barrel by 1007 GMT, having hit a low of $72.44 the day before, its lowest since May 2. U.S. West Texas Intermediate was trading 1.3 percent down at $64.94 a barrel, after falling as low as $63.62 on Monday, its lowest since April 10.
Gold prices rallied, boosted by safe-haven buying as an escalating trade war between the United States and China triggered a sell-off in equity markets. Spot gold was 0.1 percent up at $1,279.44 an ounce by 1009 GMT, having touched its weakest since late December at $1,275.01 an ounce on Friday. U.S. gold futures for August delivery were 0.2 percent higher at $1,282.60 per ounce.
Treasuries Recap
The 10-year U.S Treasury yield stood at 2.878 percent lower by 0.048 bps, while 5-year yield was 0.051 bps down at 2.798 percent.
The Euro zone government bond yields dropped across the board, as an escalating trade conflict between the United States and China fuelled demand for safe-haven assets. The German 10-year government bond hit a 2-week low of 0.363 percent, while most other high-grade euro zone government bond yields were also 2-3 bps lower on the day.
The Japanese government bonds gained after U.S. President Donald Trump terrorizes additional tariffs on Chinese goods in an escalating trade war between the world's two biggest economies. The yield on the benchmark 10-year JGB note, which moves inversely to its price, fell 1/2 basis point lower at 0.034 percent, the yield on the long-term 30-year note also dipped 1/2 basis point to 0.714 percent and the yield on short-term 2-year moved 1/2 basis point down to -0.135 percent.
The Australian government bonds rallied as investors moved to safe-haven buying after U.S. President Donald Trump threatened to hit China with new tariffs on $200 billion. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 4 basis points to 2.629 percent (nearly 3-week low), the yield on the long-term 30-year Note dipped 4 basis points to 3.138 percent and the yield on short-term 2-year down 1/2 basis point to 1.997 percent.
The New Zealand government bonds ended Tuesday’s session on a higher note after U.S. President Donald Trump threatens with extra tariffs on $200bln of Chinese goods, intensifying trade war fear among investors. At the time of closing, the yield on the New Zealand benchmark 10-year note, which moves inversely to its price, slumped 4 basis points to 2.880 percent, the yield on the long-term 20-year fell 5 basis points to 3.195 percent and the yield on short-term 2-year too closed nearly flat at 1.890 percent.
