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Europe Roundup: Sterling off 2-month low on BoE Haldane's comments, dollar falls against yen on risk off sentiment, commodity currencies ease as crude oil hits 7-month low - Wednesday, June 21st, 2017

Market Roundup

  • EUR/USD +0.11%, USD/JPY -0.29%, GBP/USD -0.07%, EUR/GBP +0.18%
     
  • DXY -0.11%, DAX -0.59%, FTSE -0.27%, Brent -0.43%, Gold +0.37%
     
  • Bank of England reports consumer squeeze, solid business investment
  • UK budget deficit narrows in May, bringing brief respite to Hammond
     
  • Great Britain May PSNB ex-banks 6.7b vs previous 10.4b revised 9.4b
     
  • MSCI says will add 222 China stocks to EM Index next year
     
  • Global growth risks easing, but new ones emerging: ECB
     
  • Saudi Arabia's Mohammed bin Salman elevated to Crown Prince
     
  • France's Macron faces balancing act after losing MoDem allies
     
  • Czech central bank chief: crown firming can slow rate hikes -CTK
     
  • Qatar rift risks raising cost for Gulf debt issuers and slowing Saudi reforms
     
  • Oil falls as bulls discount OPEC cuts, set for worst H1 since 1997
     
  • BOJ Apr 26-27 Policy Board minutes – Affirms even-keel policy
     
  • BOJ: Fluctuations in JGBs normal under YCC, no guidance problems
     
  • Japan Inc concerned over shrinking domestic market, worker shortage

Economic Data Ahead

  • (1000 ET/1400 GMT) Swiss National Bank releases its Quarterly Bulletin.
     
  • (1000 ET/1400 GMT) National Association of Realtors is likely to report that U.S. existing home sales declined 0.5 percent in May after falling 2.3 percent in April.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending June 16.
     
  • (1700 ET/2100 GMT) The Reserve Bank of New Zealand will announce its interest rate decision.
     
  • (1745 ET/2145 GMT)The Statistics New Zealand will release visitor arrivals report for the month of May. The indicator posted an annualized gain of 21.5 percent in the prior month.
     
  • (1950 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending June 16.
     
  • (1950 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending June 16.

Key Events Ahead

  • (1145 ET/1545 GMT) FedTrade operation 15-year Fannie Mae / Freddie Mac securities (max $700 mn)
     
  • (1430 ET/1830 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac securities (max $1.35 bn)

FX Beat

DXY: The dollar slumped against the Japanese yen on global political uncertainties including Brexit negotiations, concerns over U.S. President Donald Trump's ability to carry out financial reforms and the Middle East turmoil. The greenback against a basket of currencies traded 0.1 percent down at 97.66, having touched a high of 97.87 the day before, it’s highest since May 19. FxWirePro's Hourly Dollar Strength Index stood at -6.56 (Neutral) by 1000 GMT.

EUR/USD: The euro rose, rebounding from a 3-week low touched in the previous session, as subdued trading activity seen behind U.S. Treasury yields renewed dollar selling across the board. The European currency traded 0.1 percent up at 1.1145, having touched a low of 1.1119 on Tuesday, its lowest since May 30. FxWirePro's Hourly Euro Strength Index stood at -39.50 (Neutral) by 1000 GMT. Intraday major resistance is around 1.11525 (trend line joining 1.12958 and 1.12129) and any break above will take the pair till 1.118 (55&89 EMA) in the 4 hours chart/1.12075 (100 MA)/1.1230/1.12950. On the lower side, any break below 1.1100 confirms minor weakness, a decline till 1.1050/1.1000 likely.

USD/JPY: The dollar declined, extending previous session losses as a sell-off in oil markets and bearish trading sentiment around equity markets triggered a fresh wave of global risk-aversion. The major traded 0.2 percent down at 111.21, having hit a high of 111.78 the day before, its highest since May 26. FxWirePro's Hourly Yen Strength Index stood at 87.95 (Slightly Bullish) by 1000 GMT. The pair is facing support at 108 and any break below will drag it down till 106.80. On the higher side, near term resistance is around 111.85 (100 -MA) will take it to next level till 112.12/113 likely.

GBP/USD: Sterling rose above the 1.2700 handle, retreating from a 2-month low hit earlier in the session after Bank of England's Chief Economist Andy Haldane refueled expectations for a relatively sooner rate-hike action. The major traded 0.5 percent up at 1.2688, having hit a low of 1.2589, its weakest since Apr 18. FxWirePro's Hourly Sterling Strength Index stood at -67.41 (Bearish) by 1000 GMT. On the lower side, the major support is around 1.2565 (200- day MA) and any break below will drag the pair till 1.2470 (61.8% retracement of 1.21088 and 1.30470)/1.2400 likely. The near-term minor resistance is around 1.2700 (23.6% retracement of 1.30475 and 1.25890) and any break above will take it till 1.2770 (55- day EMA)/1.2820. Against the euro, the pound traded 0.4 percent up at 87.81 pence, having hit a 1-week high of 87.19 on Friday.

USD/CHF: The Swiss franc edged up, extending previous session gains, as declining oil prices boosted safe-haven assets demand. The major trades 0.1 percent down at 0.9742, having touched a high of 0.9770 on Thursday, its highest since May 30.  FxWirePro's Hourly Swiss Franc Strength Index stood at 102.09 (Highly Bullish) by 1000 GMT. Technically the pair has been facing strong resistance around 0.9808 (May 30 high) and any close above will take it till 0.9845/0.9900. On the lower side, major support is around 0.9615 and any break below will drag it down till 0.9580/0.9520 (161.8% retracement of 0.9614 and 0.97393).

AUD/USD: The Australian dollar fell to a one-week low as crude oil prices held near multi-month lows. The Aussie trades 0.2 percent down at 0.7566, having hit a low of 0.7549 earlier, it’s weakest since June 14. FxWirePro's Hourly Aussie Strength Index stood at -33.17 (Neutral) by 1000 GMT. On the lower side, near term support is around 0.7530 (200- day MA) and any break below will drag the pair till 0.7485 (21 – EMA)/0.7385 (61.8% retracement of 0.71599 and 0.77493) /0.7325/0.7300. The near term resistance is around 0.7650 and any break above targets 0.7700/0.7745.

Equities Recap

European shares declined, weighed down by weakness among financial and retail stocks, while sterling rebounded from two-month lows on BoE Haldane's comments. 

The pan-European STOXX 600 index dropped 0.7 percent to 386.61 points, while the FTSEurofirst 300 index lost 0.7 percent to 1,520.01 points.

Britain's FTSE 100 trades 0.3 percent down at 7,447.78 points, while mid-cap FTSE 250 declined 0.4 percent to 19,685.21 points.

Germany's DAX fell 0.6 percent at 12,741.53 points; France's CAC 40 trades 0.9 percent lower at 5,243.75 points.

Commodities Recap

Crude oil prices declined to seven-month lows and were set for its largest fall in the first half of any year for the past two decades, as investors discounted evidence of strong compliance by producers with a deal to cut global output. International benchmark Brent crude was trading 0.1 percent down at $45.75 per barrel by 1010 GMT, having hit a low of $45.42 earlier, its weakest since Nov. 15. U.S. West Texas Intermediate traded down at $43.34 a barrel, after falling as low as $42.92 on Tuesday, its lowest since Nov 15.

Gold prices steadied after hitting its lowest in five weeks in the previous session, as equities fell and the dollar eased from 1-month highs following a fall in crude oil prices. Spot gold was 0.3 percent up at $1,246.93 per ounce by 1014 GMT, after falling as low as $1,241.20 on Tuesday, its lowest since May 17. U.S. gold futures for August delivery climbed 0.3 percent to $1,246.7 per ounce.

Treasuries Recap

The U.S. Treasuries gained as investors remain geared up to witness a host of speeches by the Federal Open Market Committee (FOMC) members throughout this week, besides, the country’s initial jobless claims, due on Thursday. The yield on the benchmark 10-year Treasury, fell 1 basis point to 2.14 percent, the super-long 30-year bond yields slumped nearly 1-1/2 basis points to 2.72 percent and the yield on short-term 2-year note traded flat at 1.34 percent.

The UK gilts rallied ahead of the Brexit negotiations in Brussels with an unstable political situation. Also, the country’s 30-year auction, due on June 22, will provide detailed direction to the debt market. The yield on the benchmark 10-year gilts slumped over 2 basis points to 0.97 percent, the super-long 30-year bond yields surged 1-1/2 basis points to 1.66 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.12 percent.

The Eurozone periphery bonds trended higher on expectations of a rise in the country’s manufacturing PMI for the month of June, due for release on June 23. The benchmark German 10-year bond yields, fell 1-1/2 basis points to 0.24 percent, the French 10-year bond yields, also slipped nearly 1 basis point to 0.59 percent, Irish 10-year bond yield plunged nearly 7-1/2 basis points to 0.64 percent, Italian equivalent slumped 1-1/2 basis points to 1.90 percent, Netherlands 10-year bonds yield traded nearly 2 basis points lower at 0.45 percent, Portuguese equivalents remained almost flat at 2.87 percent and the Spanish 10-year yields traded 2-1/2 basis points lower at 1.36 percent.

The Japanese government bonds traded flat after reading the Bank of Japan’s (BoJ) April 26-27 monetary policy meeting minutes. The benchmark 10-year bond yield, hovered around 0.05 percent, the long-term 30-year bond yields traded tad lower at 0.79 percent and the yield on the short-term 2-year note traded steady at -0.10 percent.

 The New Zealand bonds closed on the upside after reading a drop in the country’s latest GlobalDairyTrade (GDT) price auction, held overnight. In addition, the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, due late today will add further direction to the debt market. At the time of closing, the yield on the benchmark 10-year bond, slumped 1-1/2 basis points to 2.80 percent, the yield on 7-year note slipped 1 basis point to 2.69 percent and the yield on short-term 2-year note traded 1 basis point lower at 1.99 percent.

The Australian bonds rebounded as investors poured into safe-haven instruments amid losses in riskier assets including equities and oil. The yield on the benchmark 10-year Treasury note, slumped nearly 3 basis points to 2.41 percent, the yield on 15-year note also plunged 3 basis points to 2.77 percent and the yield on short-term 2-year traded 2-1/2 basis point lower at 1.68 percent.

 

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