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America's Roundup: Dollar retreats from year high vs major currencies after Trump comment, Wall Street falls, Gold dips to one-year low, Brent slips as focus returns to oversupply-July 20th, 2018

Market Roundup

• Trump says 'not thrilled' about U.S. interest rate hikes.


• Fed's Quarles says Libor-alternative, SOFR, should be used more widely.


• Trade war won't hurt sovereign ratings, but dollar might – Fitch.

• US Initial Jobless Claims w/e, 207k, 220k forecast, 214k previous, 215k revised.

• US Jobless Claims 4-Wk Avg w/e, 220.50k, 223.0k previous, 223.25k revised.

• US Continued Jobless Claims w/e, 1.751 mln, 1.730 mln forecast, 1.739 mln previous, 1.743 mln revised.

• US Jul Philly Fed Business Index, 25.7, 21.5 forecast, 19.9 previous.

• Trade war could knock 3 pct off global GDP - Bank of France study.

• Euro zone growth risks serious, could lead to hard landing, IMF warn.

• No-deal Brexit would cost European Union 1.5 pct of GDP - IMF.

• Canada plays down Trump comments on NAFTA, sees trilateral deal.

Looking Ahead - Economic Data (GMT)

• 19 Jul 23:30 Japan Jun CPI, Core Nationwide YY, 0.8% forecast, 0.7% previous

• 19 Jul 23:30 Japan Jun CPI, Overall Nationwide, 0.7% previous

• 19 Jul 23:50 Japan 14 Jul w/e Foreign Bond Investment JPY, 817.9 bln previous

• 19 Jul 23:50 Japan 14 Jul w/e Foreign Invest JP Stock JPY, 74.3 bln previous

Looking Ahead - Events, Other Releases (GMT)

• 12:20 Fed's James Bullard gives presentation on U.S. economy and monetary policy - Glasgow 

Currency Summaries

EUR/USD is likely to find support at 1.1571 levels and currently trading at 1.1647 levels. The pair has made session high at 1.1678 and hit lows at 1.1582 levels. The euro edged higher against US dollar on Thursday as dollar weakened after U.S. President Donald Trump expressed concern about a strong currency, which he said puts the United States at a disadvantage. This is not the first time that Trump voiced his displeasure with a strong dollar. He told the Wall Street Journal on three separate occasions last year that the dollar was "too strong." Following his remarks, the dollar index, a gauge of its value against a basket of six major currencies , fell 0.1 percent to 94.9552, after earlier touching a one-year high at 95.652. Thursday's readings on unemployment and regional business conditions strengthened the case for Fed policymakers to continue their rate-hike campaign. U.S. workers filed the fewest first-time claims for jobless benefits in more than 48-1/2 years last week, the Labor Department said. Meanwhile, the Philadelphia Fed's barometer on business activity in the U.S. Mid-Atlantic region increased more than expected in July. Still, trade tension remains a top worry among investors. The European Union's trade commissioner, Cecilia Malmstrom, said on Thursday she hopes an EU mission to Washington will ease a trans-Atlantic trade dispute but said the bloc is preparing a list of U.S. imports to hit if the United States imposes tariffs on EU-built cars.

GBP/USD is supported in the range of 1.2955 levels and currently trading at 1.3017 levels. It reached session high at 1.3048 and dropped to session low at 1.2957 levels. Britain's pound declined against the dollar on Thursday as weak economic data and uncertainty about how Britain's approaching exit from the European Union will play out weighed on pound. Lacklustre retail sales data for June painted a picture of an economy struggling against the backdrop of stagnating wage growth, steady inflation figures and difficult Brexit negotiations. The weak data comes at a time when the dollar has rallied seven percent against a basket of developed G10 nations' currencies in the last three months. Escalating trade tensions, robust U.S. economic growth and a confident Federal Reserve have all boosted the greenback's appeal. Britain's June retail sales declined 0.5 percent, defying expectations of a 0.2 percent increase on a monthly basis. On a quarterly basis British retail sales rose the most in over a decade, up 2.1 percent on the first three months of 2018, but investors focused on the June decline. That saw sterling extending recent falls, touching an early-September 2017 low of $1.2958 and down 0.7 percent on the day. Many reckon the retail sales numbers should give the BoE some confidence about raising rates next month bets on a hike remain fairly entrenched, with expectations for a 25 basis point around 70 percent, down from nearly 80 percent earlier this week.

USD/CAD is supported at 1.3158 levels and is trading at 1.3254 levels. It has made session high at 1.3289 and lows at 1.3225 levels. The Canadian dollar fell to a three-week low against U.S. dollar on Thursday, hammered by weaker commodity prices and lingering uncertainty about global trade after President Donald Trump said the United States wants to negotiate bilateral deals with Canada and Mexico. Lower commodity prices weighed on the commodity-based Canadian currency. Metal prices were down with gold and silver on the defensive. Global trade issues, meanwhile, remained a headwind for the Canadian dollar. A day after Trump said he may negotiate separate trade deals with North American Free Trade Partners Mexico and Canada, David MacNaughton, Canada's ambassador to the United States, said he was confident that talks to modernize NAFTA would maintain the trilateral nature of the pact. This was not the first time that Trump had suggested bilateral deals with Mexico and Canada, as he vowed to deliver on his campaign promise to revamp NAFTA. The U.S. dollar rose 0.7 percent against the Canadian currency to C$1.3254, after earlier hitting a three-week peak of $1.3290. So far this year, the Canadian dollar has struggled, down 5.4 percent against the greenback. The Canadian dollar, also fell against the euro, which rose 0.4 percent to C$1.5383. It also slipped against sterling, which gained 0.1 percent to C$1.7226.

USD/JPY is supported around 111.86 levels and currently trading at 112.39 levels. It peaked to hit session high at 113.07 and made session lows at 112.01 levels. The U.S. dollar weakened against the yen on Thursday as dollar declined after U.S. President Donald Trump expressed concerns about interest rate hikes and the strong dollar. Dollar weakened across the board following Trump's comments to CNBC television, in which he said the strong dollar "puts us at a disadvantage" and expressed dismay with the Federal Reserve's decision to hike interest rates. Markets also digested data showing the number of Americans filing for unemployment benefits unexpectedly fell last week, hitting its lowest in more than 48-1/2 years, as the labor market continued to strengthen. China took issue with U.S. comments blaming China's president for blocking a trade deal, while the European Union may retaliate if the United States imposes tariffs on EU cars. Chinese policymakers are pumping more liquidity into the financial system, and Beijing looks set to further loosen monetary conditions to mitigate threats to growth from a heated Sino-U.S. trade war. China's yuan bounced back against the dollar after Trump's comments, after it earlier fell to a one-year low. The dollar index, a gauge of its value against a basket of six major currencies, fell 0.1 percent to 94.9552, after earlier touching a one-year high at 95.652.The dollar fell to a one-week low vs the yen, last trading down 0.6 percent at 112.39 yen.

Equities Recap

A rally in European stocks fizzled out on Thursday as poor results drove down advertising agency Publicis and a slide in metals prices dragged on the market.

UK's benchmark FTSE 100 closed up 0.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.23 percent, Germany's Dax ended down by 0.6 percent, France’s CAC finished the day down by 0.6 percent.

U.S. stocks dropped on Thursday after earnings disappointed and trade jitters escalated over worries that the European Union could slap retaliatory tariffs on goods imported from the United States.

Dow Jones closed down by 0.55 percent, S&P 500 ended down by 0.41 percent, Nasdaq finished the day down by 0.36 percent.

Treasuries Recap

The U.S. yield curve flattened, close to levels not seen in 11 years, on Thursday as upbeat data on the jobs market and business activity reinforced the view of further interest rate increases from the Federal Reserve.

The spread between 2-year and 10-year Treasury yields narrowed to 25.10 basis points. This was within striking distance of 23.40 basis points, which was the flattest level since July 2007.

The benchmark 10-year note yield reached a three-week peak at 2.897 percent before retreating to 2.845 percent, down 3 basis points from Wednesday.

Two-year yield touched 2.632 percent earlier on Thursday, which was the highest since August 2008. It was last at 2.595 percent, down 1.6 basis points on the day.

Commodities Recap

Gold sank to a one-year low on Thursday as the dollar rose after comments from Federal Reserve Chairman Jerome Powell that reaffirmed expectations more U.S. interest rate increases are on the way this year.

Spot gold was down 0.3 percent at $1,223.15 per ounce by 2:15 p.m. EDT (1815 GMT), having earlier touched $1,211.08, its lowest since July 2017. U.S. gold futures for August delivery settled down $3.90, or 0.3 percent, at $1,224 per ounce.

Global benchmark Brent crude dipped on Thursday as concerns about mounting supply returned after a brief rally earlier in the session on comments that Saudi Arabia's exports would fall in August.

Brent oil fell 32 cents, to settle at $72.58 per barrel, previously reaching a session high of $73.79. U.S. West Texas Intermediate (WTI) was 70 cents higher, or 1 percent, settling at $69.46. U.S. crude prices had reached a session high of $70.17 earlier in the session before paring gains.

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