Market Roundup
• US Federal budget, $ -88 bln v -86.50 bln forecast 182.0 bln –previous.
• Tumbling US inflation expectations another warning bell -NY Fed.
• Spot Palladium climbs more than 7% to highest since Feb 2001 at $914.70/Oz.
• Yields rise as traders await debt auctions, Fed meeting; Fed expected to hike interest rate by 25bps on Wednesday, future signaling uncertain.
• Sessions to testify publicly before senate intelligence committee on
Tuesday -committee chair.
• UK’s May to lawmakers: 'Keep me as long as you want me', seeks deal
with Northern Ireland's DUP.
• Euro zone, IMF eye compromise to unblock loans for Greece.
• Will assess need for low rates as growth picks up - BoC'S Wilkins.
• Brexit Minister Davis: We have looked at contingency plans around Brexit
without a deal.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Business survey index 1.1 -previous
• 01:30 Australia NAB Business confidence 13 - previous
Looking Ahead - Events, Other Releases (GMT)
• 18:00 US Federal Reserve's FOMC starts its two-day meeting on interest rates
Currency Summaries
EUR/USD is likely to find support at 1.1164 levels and currently trading at 1.1205 levels. The pair has made session high at 1.1219 and hit lows at 1.1190 levels. The euro declined against dollar on Monday as dollar gained against euro ahead of Wednesday's Federal Open Market Committee meeting at which the central bank is overwhelmingly expected to increase U.S. interest rates. Markets have priced in a 25-basis point rise in rates, investors' will be looking for any fresh hints on the pace of further tightening and for details on its plans for trimming its balance sheet. Mixed U.S. economic data and lower inflation expectations have created a division of opinion. Markets will also be looking out for any guidance on the vanishing normalisation policy from the FOMC meeting. The Fed concludes its two-day meeting on Wednesday, and the outcome will affect trade in early Asia on Thursday. The dollar had risen against a basket of currencies on Friday, helped by a sharp drop in the British pound after surprise results of the UK parliamentary elections. The dollar index, which tracks the greenback against six major currencies, was little changed at 97.24.
GBP/USD is supported in the range of 1.2600 levels and currently trading at 1.2654 levels. It reached session high at 1.2684 and dropped to session low at 1.2635 levels. Sterling declined against dollar on Monday as sterling came under selling pressure as investors worried a period of political uncertainty would further weaken an economy slowing sharply before the launch of talks on leaving the European Union next week. May reappointed most of her ministers on Sunday but brought a Brexit campaigner and party rival into government to try to unite her Conservatives. A number of leading Conservatives on Monday stressed that membership of the European Union's single market in exchange for freedom of movement for European workers was not on the table. The pound slid to its lowest for nearly two months on Friday after shock election results left Prime Minister Theresa May short of a parliamentary majority and facing calls to step down. It fell over half a percent against the dollar to $1.2659, just a quarter of a cent above intraday lows hit on Friday.
USD/CAD is supported at 1.3300 levels and is trading at 1.3329 levels. It has made session high at 1.3468 and lows at 1.3321 levels. The Canadian dollar strengthened sharply against its U.S. counterpart on Monday as higher oil prices and upbeat comments from Bank of Canada boosted Canadian dollar. Bank of Canada said it will assess whether it needs to keep interest rates at near-record lows as the economy continues to grow, raising the prospect a rate hike could come sooner than anticipated and lifting the Canadian dollar. In the bank's most upbeat comments on the economy, Senior Deputy Governor Carolyn Wilkins said first-quarter growth had been "pretty impressive," while the share of sectors adding jobs was growing. The comments sent the Canadian dollar to its strongest level against the greenback since April 18. The Canadian dollar was last trading at C$1.3332 to the greenback, up 1.02 percent. The currency traded in a range of C$1.3472 to C$1.3320.
USD/JPY is supported around 109.36 levels and currently trading at 109.80 levels. It peaked to hit session high at 110.02 and made session lows at 109.61 levels. The Japanese yen strengthened against the greenback on Monday as demand for safe heaven yen increased ahead of a spate of central bank meetings, starting with the U.S. Federal Open Market Committee on Wednesday. The dollar's losses were limited, however, as investors almost universally expect the Fed to increase U.S. interest rates this week while other central banks, including the Bank of England and Bank of Japan, which conclude policy meetings on Thursday and Friday, respectively, are expected to remain on hold. The Fed is widely anticipated to raise interest rates and investors will be looking for fresh clues on the pace of further tightening in the months to come and next year, and any details on its plans to trim its balance sheet. The yen rose 0.5 percent against the dollar, pushing its gains to more than 4 percent versus the greenback since mid-May.
Equities Recap
European stocks were hit on Monday by big falls in Apple suppliers and other tech shares, overshadowing well-received election results in France and Italy.
UK's benchmark FTSE 100 closed down by 0.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.85 percent, Germany's Dax ended down by 0.9 percent, France’s CAC finished the day down by 1.1 percent.
Apple shares added to last week's drop on Monday to lead a market downturn as tech, still, the best performing S&P 500 sector this year, succumbed under its own weight.
Dow Jones closed down by 0.17 percent, S&P 500 ended down by 0.09 percent, Nasdaq finished the day down by 0.53 percent.
Treasuries Recap
U.S. Treasury yields rose on Monday after tepid demand at a 10-year Treasury auction offset strong demand at a three-year auction, while uncertainty about the Federal Reserve's policy outlook on Wednesday limited the move higher in yields.
Benchmark 10-year Treasuries were last down 3/32 in price to yield 2.211 percent, from a yield of 2.199 percent late on Friday.
U.S. 30-year yields were last at 2.866 percent, compared to 2.853 percent late on Friday, ahead of Tuesday's auction.
Commodities Recap
Gold was little changed ahead of a U.S. Federal Reserve policy meeting on Tuesday and Wednesday, with analysts saying the U.S. central bank could take an aggressively hawkish posture of signaling a balance sheet reduction later this year and another interest rate increase in December.
Spot gold was up 0.08 percent at $1,266.92 an ounce by 2:54 p.m. EDT (1854 GMT), having shed 1 percent on Friday in its biggest one-day percentage fall since May 18. U.S. gold futures settled down 0.2 percent at $1,268.90.
Oil edged up on Monday on signs of inventory declines in the United States and news that Saudi Arabia will limit volumes of crude to some Asian buyers in July and deepen cuts to the United States.
Brent crude futures ended the session up 14 cents, or 0.3 percent at $48.29 a barrel, having risen as much as 2 percent to a session high of $49.15. U.S. West Texas Intermediate (WTI) crude futures gained 25 cents, or 0.6 percent, to settle at $46.08, having peaked at $46.71.
