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Europe Roundup: Sterling slumps on weaker-than-expected factory output, euro rallies on EBC stimulus speculation, European shares surge- Monday, June 11th, 2018

Market Roundup

  • EUR/USD 0.24%, USD/JPY 0.42%, GBP/USD -0.31%, EUR/GBP 0.55%

  • DXY 0.01%, DAX 0.48%, FTSE 0.7%, Brent -0.94%, Gold -0.18%
     
  • N.Korean, U.S. officials air differences on eve of summit; Trump stays positive
     
  • "Fair trade, fool trade", Trump's tweets spew ire on NATO allies, Trudeau
     
  • Great Britain Apr Industrial Output YY, 1.8%, 2.7% forecast, 2.9% previous
     
  • Great Britain Apr Manufacturing Output MM, -1.4%, 0.3% forecast, -0.1% previous
     
  • Great Britain Apr Manufacturing Output YY, 1.4%, 3.1% forecast, 2.9% previous
     
  • Great Britain Apr Goods Trade Balance (GBP), -14.04 bln, -11.35 bln forecast, -12.29 bln previous
     
  • Britain's May to urge Conservative unity before parliament's votes
     
  • Mexico minister calls for 'flexibility' in reworking NAFTA
     
  • Bitcoin tumbles as hackers hit S.Korean exchange Coinrail
     
  • Oil prices slip as U.S. and Russian supplies grow
     
  • Gold dips on uncertainty about Fed, U.S.-N.Korea summit

Economic Data Preview

  • (0900 ET/1300 GMT) Mexico will release its industrial output data for the month of April. The economy's industrial production was flat in March, while on a year-over-year basis it declined 3.7 percent.
     
  • (1100 ET/1500 GMT) New York Fed Survey of Consumer Expectations (May)

Key Events Ahead

  • (1100 ET/1500 GMT) Angela Merkel meets heads of the IMF, WTO, World Bank, ILO and OECD for talks - Berlin
     
  • (1145 ET/1545 GMT) FedTrade operation taking 30-year Ginnie Mae (max $510 mn)
     
  • (1320 ET/1720 GMT) German Minister for Economic Affairs Peter Altmaier speaks at opening of CEBIT Business Fair – Hanover

FX Beat

DXY: The dollar index surged following a rise in the U.S. Treasury yields, while investors awaited Federal Reserve and European Central Bank's policy meeting outcomes and the United States-North Korea summit this week. The greenback against a basket of currencies trades 0.1 percent up at 93.66, having touched a low of 93.21 on Thursday, its lowest since May 17. FxWirePro's Hourly Dollar Strength Index stood at 73.54 (Bullish) by 1000 GMT.

EUR/USD: The euro rose towards a 3-week peak after Italian Economy Minister Giovanni Tria promised that his new coalition government has no intention of leaving the euro and plans to focus on cutting debt levels. Investors shifted their attention on the European Central Bank policy meeting that could signal the beginning of the unwinding of the massive bond-purchasing programme. The European currency traded 0.1 percent up at 1.1779, having touched a high of 1.1839 on Friday, its highest since May 16. FxWirePro's Hourly Euro Strength Index stood at 148.52 (Highly Bullish) by 1000 GMT. Immediate resistance is located at 1.1839 (Jun. 7 High), a break above targets 1.1896 (May 5 High). On the downside, support is seen at 1.1744 (5-DMA), a break below could drag it till 1.1693 (10-DMA).

USD/JPY: The dollar regained the 110.00 handle as the U.S. Treasury 10-year benchmark yield rose around 3bps points to 2.966 percent. Moreover, expectations that the Fed would certainly hike rates again on Wednesday and inch closer to a neutral policy stance supported the strong bid tone surrounding the major. The major was trading 0.5 percent up at 110.01, having hit a high of 110.26 on Wednesday, its highest since May 23. FxWirePro's Hourly Yen Strength Index stood at -113.52 (Highly Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, as U.S. economic calendar remains absolutely data empty. Immediate resistance is located at 110.28, a break above targets 110.85 (May 17 Low). On the downside, support is seen at 108.95 (May 24 Low), a break below could take it lower 108.50.

GBP/USD: Sterling slumped to a 6-day low after data showed British factory output unexpectedly declined in April at the fastest pace since 2012, underlining that economic momentum in the UK remains fragile. The economy's manufacturing output dropped by 1.4 percent month-on-month in April after a 0.1 percent decline in March. The major traded 0.4 percent down at 1.3357, having hit a high of 1.3471 on Thursday, it’s highest since May 22. FxWirePro's Hourly Sterling Strength Index stood at -74.40 (Bearish) by 1000 GMT. Immediate resistance is located at 1.3483 (May 21 High), a break above could take it near 1.3527 (May 18 High). On the downside, support is seen at 1.3343 (10-DMA), a break below targets 1.3305 (May 23 Low). Against the euro, the pound was trading 0.6 percent down at 88.20 pence, having hit a low of 88.37 pence on Thursday, it’s lowest since May 7.

USD/CHF: The Swiss franc eased, extending previous session losses, as the greenback rebounded following a rise in the U.S. Treasury yields. The major trades 0.3 percent up at 0.9869, having touched a low of 0.9788 on Thursday, it’s lowest since Apr. 25. FxWirePro's Hourly Swiss Franc Strength Index stood at -62.86 (Bearish) by 1000 GMT. On the higher side, near-term resistance is around 0.9887 (Jun. 8 High) and any break above will take the pair to next level till 0.9935 (May 30 High). The near-term support is around 0.9782 (Apr. 25 Low) and any close below that level will drag it till 0.9739 (Apr. 23 Low).

Equities Recap

European shares surged, while the euro hovered towards a 3-week peak on reports the new Italian economy minister promised to keep the country in the Eurozone, receding investors' fears of a eurozone separation.

The pan-European STOXX 600 index advanced 0.4 percent at 386.76 points, while the FTSEurofirst 300 index surged 0.5 percent to 1,512.57 points.

Britain's FTSE 100 trades 0.8 percent up at 7,740.25 points, while mid-cap FTSE 250 rallied 0.7 percent to 21,306.52 points.

Germany's DAX rose 0.5 percent at 12,825.29 points; France's CAC 40 trades 0.1 percent higher at 5,457.47 points.

Commodities Recap

Crude oil prices declined, weighed down by rising Russian production and the highest U.S. drilling activity in more than three years. International benchmark Brent crude was trading 0.9 percent down at $75.69 per barrel by 1015 GMT, having hit a low of $73.80 on Tuesday, its lowest since May 8. U.S. West Texas Intermediate was trading 0.9 percent down at $64.97 a barrel, after falling as low as $64.26 on Tuesday, its lowest since Apr. 10.

Gold prices declined, as the dollar steadied, while investors awaited key central bank policy meetings and the United States-North Korea summit this week. Spot gold was trading 0.3 percent down at $1,294.94 per ounce at 1020 GMT, having hit a high of $1,303.09 on Thursday, its highest price level since May 31. U.S. gold futures for August delivery were 0.1 percent lower at $1,301.60 per ounce.

Treasuries Recap

The U.S. Treasuries plunged, as investors wait to watch the country’s 3-year and 10-year Note auction, both scheduled to be held today by 17:00GMT. The yield on the benchmark 10-year Treasuries jumped nearly 3 basis points to 2.96 percent, the super-long 30-year bond yields surged nearly 2-1/2 basis points to 3.10 percent and the yield on the short-term 2-year traded 2 basis points higher at 2.51 percent.

The United Kingdom’s gilts plunged as investors have largely shrugged-off the lower-than-expected manufacturing production for the month of April. The yield on the benchmark 10-year gilts, rose 1 basis point to 1.39 percent, the super-long 30-year bond yields remained tad higher at 1.85 percent and the yield on the short-term 2-year hovered around 0.74 percent

The German bunds slumped during European session as investors wait to watch the country’s ZEW economic sentiment index for the month of June and the 10-year auction, scheduled for June 12 and 13 by 09:00GMT and 09:40GMT respectively. The German 10-year bond yields, which move inversely to its price, jumped 2 basis points to 0.46 percent, the yield on 30-year note climbed nearly 2-1/2 basis points to 1.15 percent and the yield on short-term 2-year too traded nearly 2-1/2 basis points higher at -0.65 percent.

The New Zealand bonds remained mixed at the time of closing as investors wait to watch the Federal Open Market Committee’s (FOMC) monetary policy decision, scheduled to be unveiled on June 13 at 18:00GMT, followed by the press conference. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, slid 1/2 basis point to 3.01 percent, the yield on the long-term rose 1/2 basis point to 3.33 percent and the yield on short-term 2-year closed 1 basis point lower at 1.91 percent

The Japanese government bonds traded range-bound at the start of the week as investors await the global central banks’ monetary policy decisions this week. The yield on the benchmark 10-year JGB note, which moves inversely to its price, traded 1/2 basis point lower at 0.046 percent, the yield on the long-term 30-year note remained steady at 0.719 percent and the yield on short-term 1-year moved 1/2 basis point down to -0.127 percent.

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