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Europe Roundup: Sterling rebounds on upbeat employment report, dollar index eases ahead of Fed Yellen's testimony, European shares gain - Wednesday, July 12th, 2017

Market Roundup

  • EUR/USD -0.06%, USD/JPY -0.44%, GBP/USD +0.08%, EUR/GBP -0.11%
     
  • DXY +0.05%, DAX +0.66%, FTSE +0.96%, Brent +1.47%, Gold +0.09%
     
  • EZ May Industrial production y/y, 4.0% vs forecast 3.6%, previous 1.4% revised 1.2%
     
  • Great Britain May ILO unemployment rate, 4.5% vs forecast 4.6%, previous 4.6%
     
  • Great Britain Average weekly earnings 3m y/y, +1.8% vs forecast 1.8%, previous 2.1%
     
  • BoE's Broadbent says not ready to hike rates - Press and Journal newspaper
     
  • Germany Jun Wholesale price index y/y, 2.5%, previous 3.1%
     
  • Germany tightens rules to shield businesses from foreign takeovers
     
  • Trump Jr. emails suggest he welcomed Russian help against Clinton
     
  • Top US diplomat faces tough Gulf talks on ending Qatar row
     
  • Bank of Canada seen raising rates, first to follow the Fed higher
     
  • China's battle against debt to slow Q2 GDP growth to 6.8 pct
     
  • China June new yuan loans rise, but credit growth seen slowing
     
  • Saudis to cut Aug oil exports to lowest level this year - source
     
  • Global sovereign credit cycle seen improving - Fitch
     
  • Oil rises above $48 as API reports drop in U.S. fuel stocks
     
  • Gold edges higher as investors await Fed testimony
     
  • Japan June domestic CGPI unch m/m, +2.1% y/y, May +0.2% and +2.1%.
     
  • Fearing leaks, Japan to set new rules on foreign investment - Nikkei.
     
  • Japan retailers’ profit growth slows to 0.6% in March-May – Nikkei.

Economic Data Ahead

  • (0900 ET/1300 GMT) Mexico will release its industrial output data for the month of May. The economy's industrial production is expected to rise 0.7 percent compared with a fall of 4.40 percent in April.
     
  • (1000 ET/1400 GMT) Bank of Canada will meet to announce its benchmark interest rate, where it is expected to raise interest rates to 0.75 percent.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending July 7.
     
  • (1400 ET/1800 GMT) The Fed issues its Beige Book, a summary of anecdotes on the health of the economy.
     
  • (1845 ET/2245 GMT) Statistics New Zealand will release food price index for the month of June. The indicator posted a rise of 2.4 percent in the prior month.
     
  • (1901 ET/2301 GMT) The Royal Institution of Chartered Surveyors (RICS) will report Britain's Housing Price Balance for the month June. The indicator is expected to have increased to 15 percent after rising to 17 percent in May.
     
  • (1950 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending July 3.
     
  • (1950 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending July 3.

Key Events Ahead

  • (0945 ET/1345 GMT) Executive Vice President at the Federal Reserve Bank of New York Simon Potter speaks on "The Foreign Exchange Global Code" before the 14th Annual FX Week USA Conference, in New York.
     
  • (1000 ET/1400 GMT) The Federal Reserve Chair Janet Yellen delivers semiannual monetary policy testimony before the House Financial Services Committee, in Washington.
     
  • (1115 ET/1515 GMT) Bank of Canada Governor Stephen S. Poloz's presser.
     
  • (1415 ET/1815 GMT) The Federal Reserve Bank of Kansas City President Esther George speaks on the economic outlook and the Fed's balance sheet before an economic forum hosted by the Federal Reserve Bank of Kansas City-Denver Branch, in Denver, Colorado.
     

FX Beat

DXY: The dollar declined to a 14-month low against the euro as investors awaited Fed Chair Janet Yellen's semi-annual monetary policy testimony before Congress for clues on when the Fed will start reducing its $4.5 trillion balance sheet. The greenback against a basket of currencies traded down at 95.70, having touched a low of 95.53 earlier, it’s lowest since Jun. 30. FxWirePro's Hourly Dollar Strength Index stood at -25.03 (Neutral) by 1000 GMT.

EUR/USD: The euro eased after rising to a 14-month high earlier in the session as the greenback attempted a minor recovery across the board. Markets seem to have ignored stronger-than-expected Eurozone industrial production figures as investors focus shifted on the Fed Chair Yellen’s testimony before the House Financial Services Committee. The European currency traded 0.1 percent down at 1.1455, having touched a high of 1.1489 earlier, its highest since May 5, 2016. FxWirePro's Hourly Euro Strength Index stood at 30.38 (Neutral) by 1000 GMT. Technically minor intraday weakness can be seen only below 1.1380 level and any break below that level will drag the pair down till 1.1344 (89- 4H EMA)/1.1300. On the higher side, 1.1500 will be acting as major resistance and any violation above targets 1.1566.

USD/JPY: The dollar declined, extending previous session losses, as renewed geopolitical tensions in U.S. triggered a fresh wave of global risk aversion providing an additional boost to the Japanese Yen's safe-haven appeal. Moreover, Federal Reserve Governor Lael Brainard's cautious approach towards raising interest rates seems to have dampened the likelihood of another Fed rate hike action this year. The major traded 0.4 percent down at 113.47, having hit a high of 114.49 on Tuesday, its highest since Mar 15. FxWirePro's Hourly Yen Strength Index stood at 86.79 (Slightly Bullish) by 1000 GMT. The near term resistance is around 114.50 and any break above targets 115.50. The pair is facing minor support at 113.15 (10- day MA) and any break below will drag it till 112.70/111.75 (100- day MA).

GBP/USD: Sterling rebounded from a 2-week low after data showed the UK unemployment rate in the period between March and May fell to its lowest since 1975 at 4.5 percent. However, total earnings rose by an annual 1.8 percent, the weakest increase since the three months to November 2014. Sterling traded 0.1 percent up at 1.2859, having hit a low of 1.2812 earlier, its lowest since Jun. 28. FxWirePro's Hourly Sterling Strength Index stood at -56.01 (Bearish) by 1000 GMT. The near term resistance is around 1.2875 (89- 4H EMA) and any break above will take the pair till 1.29268/1.2980. On the lower side, near-term minor support is around 1.2820 and any break below will drag it down till 1.2758 (61.8% retracement of 1.2589  and /1.2700. Against the euro, the pound traded 0.2 percent up at 89.06 pence, having hit an 8-month low of 89.48 earlier.

USD/CHF: The Swiss franc retreated from a 2-week low hit in the previous session as the greenback eased across the board amid risk-off market sentiment. The major trades 0.1 percent down at 0.9683, having touched a high of 0.9696 on Tuesday, it’s highest since Jul. 7. FxWirePro's Hourly Swiss Franc Strength Index stood at 35.63 (Neutral) by 1000 GMT. Any break above 0.9770 will take the pair till 0.9845 (38% retracement of 1.03435 and 0.9550) /0.9887 (100- day MA)/0.9950 (200- day MA). On the lower side, near term support is around 0.9600 and any violation below will drag it till 0.9580/0.9546 in the short term.

AUD/USD: The Australian dollar advanced, extending gains for the fourth straight session as upbeat domestic data showed improving consumer confidence, with Westpac’s index rising rose by 0.4 percent in July from -1.8 percent in May. The Aussie trades 0.2 percent up at 0.7652, having hit a high of 0.7664 earlier, it’s highest since Jul. 4. FxWirePro's Hourly Aussie Strength Index stood at 118.11 (Highly Bullish) by 1000 GMT. On the lower side, near term support is around 0.7560 (38.2% retracement of 0.77120 and 0.75711) and any break below will drag the pair till 0.7530 (200- MA). The near term resistance is around 0.7750 and any break above targets 0.7800/0.7835.

Equities Recap

European shares rallied following gains in energy shares and miners, while the dollar touched more than a year low against the euro ahead of Fed Chair Janet Yellen's testimony to Congress.

The pan-European STOXX 600 index added 0.8 percent to 382.12 points, while the FTSEurofirst 300 index advanced 0.8 percent to 1,503.15 points.

Britain's FTSE 100 trades 0.9 percent up at 7,397.41 points, while mid-cap FTSE 250 rallied 0.1 percent to 19,244.02 points.

Germany's DAX rose 0.7 percent at 12,520.55 points; France's CAC 40 trades 0.9 percent higher at 5,187.79 points.

Commodities Recap

Crude oil rose, extending previous session gains, as a fall in U.S. fuel inventories and a cut in the U.S. government's forecast for crude output next year boosted optimism that a supply glut is easing. International benchmark Brent crude was trading 0.1 percent up at $48.17 per barrel by 1016 GMT, having hit a low of $46.09 on Monday, its weakest since Jun. 27. U.S. West Texas Intermediate traded 0.02 percent up at $45.75 a barrel, after falling as low as $43.63 on Monday, its weakest since Jun 27.

Gold prices advanced, extending gains for the third consecutive session as investors’ awaited testimony from U.S. Federal Reserve Chair Janet Yellen. Spot gold rose 0.2 percent to $1,218.28 per ounce at 1019 GMT, having hit a low of $1,204.69 on Monday, the lowest since March 15. U.S. gold futures for August delivery rose 0.3 percent to $1,217.70 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.349 percent lower by 0.012 bps, while 5-year yield was 0.017 down at 1.902 percent.

The Portugal's 10-year borrowing costs rose in a bond auction, where the country also sold 28-year bonds. The 10-year bond yield rose to 3.085 percent from 2.851 percent at the previous auction last month.

The Japanese government bonds were mostly higher, with sentiment bolstered by the Bank of Japan's move to increase its purchases of three- to five-year JGBs. The 10-year cash JGB yield was flat on the day at 0.090 percent, while the September 10-year JGB futures contract finished up 0.10 point at 149.88. In the superlong zone, the 20-year JGB yield fell one basis point to 0.625 percent, while the 30-year JGB yield also fell one basis point to 0.895 percent. The 5-year JGB yield was flat on the day at minus 0.040 percent. The five-year yield on Monday rose to minus 0.035 percent, its highest rate in nearly 1-1/2-years.

The Australian government bond futures also gained, with the three-year and 10-year contracts both up 2 ticks at 97.980 and 97.2700 respectively.

The New Zealand government bond prices were higher across the curve, with yields down 1.5 basis points.

The Canadian government bond prices were higher across the yield curve. The two-year rose 6.5 Canadian cents to yield 1.124 percent and the 10-year climbed 29 Canadian cents to yield 1.860 percent. The 2-year yield fell 3.1 basis further below its U.S. equivalent to a spread of -25.82 basis points. The spread had touched its narrowest on Tuesday since October at -22.7 basis points.

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