Market Roundup
- Eurozone economic sentiment declines as expected in July
- GfK: German consumer morale drops as recession fears spread
- French second-quarter growth slows unexpectedly to 0.2%
- Bank of Japan commits to easing further if inflation sputters, keeps policy steady
- Japan government to earmark $40 billion to boost growth in FY2020/21 budget: sources
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department releases personal income figures for June, which is expected to rise 0.4 percent, after increasing 0.5 percent in the previous month.
- (0830 ET/1230 GMT) The U.S. Commerce Department releases the personal consumption expenditures (PCE) price index for the month of June. The index rose at an annualized rate of 1.5 percent in the prior month, while core PCE is likely to have increased 0.2 percent after posting similar gains in May.
- (0830 ET/1230 GMT) The U.S. Personal spending is likely to rise 0.3 percent in the month of June, after surging 0.4 percent in November.
- (0900 ET/1300 GMT) The S&P/Case-Shiller is expected to report that U.S. home price index of 20 metropolitan areas rose at an annualized rate of 2.5 percent in May, after rising 2.5 percent in the previous month.
- (1000 ET/1400 GMT) The National Association of Realtors is likely to report that U.S. pending home sales increased 1.4 percent in June after declining 0.7 percent in May.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
Key Events Ahead
- No significant event scheduled
FX Beat
DXY: The dollar index advanced to a 2-month peak, as the U.S. Federal Reserve begins its two-day policy meeting later in the day, at which it is widely expected to lower interest rates by 25 basis points (bps). The greenback against a basket of currencies traded 0.1 percent up at 98.11, having touched a high of 98.21 earlier, its highest since May 30.
EUR/USD: The euro declined after data showed Eurozone's economic sentiment continued to worsen as expected in July on less optimistic industry, services, retail trade and construction. Moreover, European Central Bank President Mario Draghi's pledge to ease policy further amid the deteriorating growth outlook further dented the bid tone around the major. The European currency traded 0.05 percent down at 1.1140, having touched a low of 1.1101 on Thursday, its lowest since May 2017. Immediate resistance is located at 1.1171 (23.6% retracement of 1.1281 and 1.1101), a break above targets 1.1213 (61.8% retracement). On the downside, support is seen at 1.1101 (July 25 Low), a break below could drag it below 1.1070.
USD/JPY: The yen rallied, halting a 3-day losing streak after the Bank of Japan left its massive asset purchase program and forward guidance unchanged at a monetary policy meeting today, but signalled its readiness to expand stimulus without hesitation if a global slowdown dented the country’s economic recovery. The major was trading 0.2 percent down at 108.59, having hit a high of 108.94 earlier, its highest since July 10. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. personal consumption expenditure- price index, consumer confidence and pending home sales. Immediate resistance is located at 109.08 (Jan. 8 High), a break above targets 109.54 (Jan. 29 High). On the downside, support is seen at 108.28 (61.8% retracement of 107.21 and 108.94), a break below could take it lower at 108.08 (50% retracement).
GBP/USD: Sterling slumped to a 28-month low below the 1.2200 handle as investors grew increasingly nervous about the prospects of a no-deal Brexit under new British Prime Minister Boris Johnson. The major traded 0.4 percent down at 1.2169, having hit a low of 1.2118 earlier, it’s lowest since March 2017. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2274 (38.2% retracement of 1.2522 and 1.2118), a break above could take it near 1.2322 (50% retracement). On the downside, support is seen at 1.2108 (March 14, 2017, Low), a break below targets 1.2037 (Jan 11, 2017, Low). Against the euro, the pound was trading 0.4 percent down at 91.56 pence, having hit a low of 91.90 earlier, it’s lowest since Sept 2017.
USD/CHF: The Swiss franc rose, extending previous session gains, as investors turned cautious ahead of a two-day U.S. Federal Reserve policy meeting, which is expected to result in a cut in interest rates. The major trades 0.1 percent down at 0.9901, having touched a high of 0.9946 on Friday; it’s highest since July 9. On the higher side, near-term resistance is around 0.9951 (July 9 High) and any break above will take the pair to next level till 0.9999 (June 17 High). The near-term support is around 0.9890 (5-DMA), and any close below that level will drag it till 0.9817 (July 23 Low).
Equities Recap
European shares plunged, weighed down by losses in travel and leisure index, while sterling slumped below the 1.2200 handle on no-deal Brexit fears.
The pan-European STOXX 600 index slumped 0.9 percent at 387.30 points, while the FTSEurofirst 300 declined 0.8 percent to 1,525.68 points.
Britain's FTSE 100 trades 0.05 percent up at 7,689.63 points, while mid-cap FTSE 250 fell 0.1 to 19,862.19 points.
Germany's DAX eased 1.4 percent at 12,228.71 points; France's CAC 40 trades 0.8 percent lower at 5,556.45 point.
Commodities Recap
Crude oil prices surged, extending gains for the third straight session on optimism the U.S. Federal Reserve will this week cut interest rates for the first time in more than 10 years, supporting fuel consumption. International benchmark Brent crude was trading 0.9 percent higher at $64.43 per barrel by 1028 GMT, having hit a high of $64.64 last week, its highest since July 17. U.S. West Texas Intermediate was trading 0.7 percent up at $57.44 a barrel, after rising as high as $57.62 last week, its highest since the July 17.
Gold prices consolidated as the dollar surged to a 2-month high, while investors awaited the outcome of a two-day U.S. Federal Reserve policy meeting, where it is expected to cut in interest rates. Spot gold was trading 0.05 up at $1,427.71 per ounce by 1031 GMT, having touched a low of $1,410.77 on Thursday, its lowest since July 17. U.S. gold futures rose 0.3 percent to $1,425.10 an ounce.
Treasuries Recap
The U.S. Treasuries remained flat during the afternoon session, ahead of the Federal Reserve’s monetary policy meeting, scheduled to be concluded on July 31 by 23:30GMT, where the federal funds rate is widely expected to be slashed by 25 basis points to 2.00-2.25 percent, accompanied by Chair Jerome Powell’s detailed speech. The yield on the benchmark 10-year Treasury yield hovered around 2.053 percent, the super-long 30-year bond yields remained flat at 2.578 percent and the yield on the short-term 2-year also traded nearly stable at 1.842 percent.
The United Kingdom’s gilts remained narrowly mixed during European trading hours ahead of the country’s manufacturing PMI for the month of July, scheduled to be released on August 1 by 14:00GMT and the Bank of England’s (BoE) monetary policy meeting, due on the same day by 16:30GMT for further direction in the debt market. The yield on the benchmark 10-year gilts, slipped 1 basis point to 0.644 percent, the 30-year yield rose 1 basis point to 1.350 percent and the yield on the short-term 2-year traded flat at 0.462 percent.
The Australian government bonds jumped during Asian session of the second trading day of the week amid a muted session that barely witnessed data of any major economic significance as investors wait to watch the country’s consumer price inflation (CPI) for the second quarter of this year, scheduled to be released on July 31 by 07:00GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, remained tad lower at 1.208 percent, the yield on the long-term 30-year bond plunged slipped nearly 1 basis point to 1.870 percent and the yield on short-term 2-year hovered around 0.853 percent.
