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Euro Roundup: Sterling plunges on mounting no deal Brexit fears, euro slumps as EZ factory activity shrinks, European shares rally after U.S.-China trade truce - Monday, July 1st, 2019

Market Roundup

  • EUR/USD -0.32%, USD/JPY 0.35%, GBP/USD -0.39%, EUR/GBP 0.08%
     
  • DXY 0.42%, DAX 1.33%, FTSE 1.16%, Brent 2.43%, Gold -1.36%
     
  • Trump says China trade talks 'back on track,' new tariffs on hold
     
  • OPEC set to extend oil supply cut as Iran endorses pact
     
  • ECB stands ready to act but should study deeper challenges: Rehn
     
  • ECB can provide more stimulus if needed: Lane
     
  • EU leaders close in on top jobs deal after longest-ever talks
     
  • EZ Jun Markit Mfg Final PMI, 47.6, 47.8 f'cast, 47.8 prev
     
  • EZ May Unemployment Rate, 7.5%, 7.6% f'cast, 7.6% prev
     
  • Germany Jun Unemployment Chg SA, -1k, -3k f'cast, 60k prev
     
  • Germany Jun Unemployment Rate SA, 5.0%, 5.0% f'cast, 5.0% prev
     
  • Germany Jun Markit/BME Mfg PMI, 45, 45.4 f'cast, 45.4 prev
     
  • UK Jun Markit/CIPS Mfg PMI, 48.0, 49.2 f'cast, 49.4 prev
     
  • France Jun Markit Mfg PMI, 51.9, 52.0 f'cast, 52.0 prev
     

Economic Data Ahead

  • (0945 ET/1345 GMT) Financial firm Markit releases U.S. Manufacturing PMI for the month of June. The index is likely to show a final reading of 50.1 after posting similar gains in the previous month.
     
  • (1000 ET/1400 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. manufacturing Purchasing Managers' index eased to 51.0 in June from 52.1 in May.
     
  • (1000 ET/1400 GMT) The Commerce Department is likely to report that U.S. construction spending increased 0.2 percent in May, after a flat reading in April.
     

Key Events Ahead

  • (1700 ET/2100 GMT) Reserve Bank of New Zealand Assistant Governor Geoff Bascand delivers a speech entitled "macroprudential policy: past, present and future" in Wellington

FX Beat

DXY: The dollar index surged as the yield on the benchmark 10-year Treasury yield rose 1-1/2 basis points to 2.014 percent.  The greenback against a basket of currencies traded 0.3 percent up at 96.40, having touched a low of 95.84 on Tuesday, its lowest since Mar. 21. FxWirePro's Hourly Dollar Strength Index stood at 47.04 (Neutral) by 1000 GMT.

EUR/USD: The euro slumped to a fresh 1-week low after data showed Eurozone factory activity shrank faster last month than previously thought in a broad-based downturn, indicating there would be no quick rebound. The European currency traded 0.2 percent down at 1.1331, having touched a high of 1.1412 on Tuesday, its highest since Mar. 21. FxWirePro's Hourly Euro Strength Index stood at -62.04 (Bearish) by 1000 GMT. Immediate resistance is located at 1.1437 (Mar. 21 High), a break above targets 1.1474 (Dec. 21 High). On the downside, support is seen at 1.1290 (June 10 Low), a break below could drag it below 1.1251 (June 7 Low).

USD/JPY: The dollar advanced to a 1-1/2 week peak, as investors rushed into riskier assets after President Donald Trump offered concessions to his Chinese counterpart Xi Jinping including no new tariffs and reducing restrictions on tech company Huawei in order to lessen hostilities with Beijing. The pair was trading 0.3 percent up at 108.26, having hit a low of 106.78 on Tuesday, its lowest since Jan. 3. FxWirePro's Hourly Yen Strength Index stood at -96.03 (Slightly Bearish) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. construction spending and manufacturing PMI from both Markit and ISM. Immediate resistance is located at 108.80 (June 11 High), a break above targets 109.08 (Jan. 8 Low). On the downside, support is seen at 107.81 (Jun. 5 Low), a break below could take it lower at 107.24 (June 24 Low).

GBP/USD: Sterling plunged to an over 1-week low, amid growing worries that Britain might still leave the European Union with no transition agreements in place. Moreover, the selling pressure intensified after data showed British manufacturers suffered the sharpest fall in activity in more than six years in June amid Brexit uncertainty and global trade tensions. The major traded 0.5 percent down at 1.2635, having hit a high of 1.2783 on Tuesday, it’s highest since May 21. FxWirePro's Hourly Sterling Strength Index stood at 8.66 (Neutral) 1000 GMT. Immediate resistance is located at 1.2743 (June 5 High), a break above could take it near 1.2798 (May 17 High). On the downside, support is seen at 1.2611 (May 29 Low), a break below targets 1.2580 (June 14 Low). Against the euro, the pound was trading 0.2 percent down at 89.72 pence, having hit a low of 89.92 on Friday, it’s lowest since Jan. 11.

USD/CHF: The Swiss franc fell to a near 2-week low, as investors sentiment improved after the United States and China agreed to restart their troubled trade talks. The major trades 0.6 percent up at 0.9816, having touched a low of 0.9693 on Tuesday; it’s lowest since Sept. 25. FxWirePro's Hourly Swiss Franc Strength Index stood at -35.21 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9855 (50.0% retracement 1.0014 and 0.9693) and any break above will take the pair to next level till 0.9893 (61.8% retracement). The near-term support is around 0.9710 (June. 24 Low), and any close below that level will drag it till 0.0.9635 (Sept. 25).

Equities Recap

European shares surged as investors rushed into riskier assets after the United States and China agreed to restart trade negotiations after a long pause.

The pan-European STOXX 600 index surged 0.9 percent at 388.32 points, while the FTSEurofirst 300 gained 0.9 percent to 1,627.09 points.

Britain's FTSE 100 trades 1.2 percent up at 7,517.08 points, while mid-cap FTSE 250 rallied 0.9 to 19,627.79 points.

Germany's DAX rose 1.3 percent at 12,563.47 points; France's CAC 40 trades 0.9 percent higher at 5,585.83 points.

Commodities Recap

Crude oil prices rallied by more than 3 percent as OPEC and its allies looked on track to extend supply cuts until at least the end of 2019 at their meeting in Vienna this week. International benchmark Brent crude was trading 3.02 percent higher at $66.30 per barrel by 1046 GMT, having hit a high of $66.83 on Wednesday, its highest since May 30. U.S. West Texas Intermediate was trading 3.01 percent up at $59.85 a barrel, after rising as high as $60.26 earlier, its highest since the May 23.

Gold prices declined by 2 percent to hit their lowest in more than a week as the greenback strengthened and investors opted for riskier assets after the United States and China agreed to restart trade talks. Spot gold was trading 1.6 percent down at $1,385.52 per ounce by 1049 GMT, having touched a high of $1,439.14 on Tuesday, its highest since May 14, 2013. U.S. gold futures dipped 1.8 percent to $1,388.20 an ounce.

Treasuries Recap

The U.S. Treasuries remained tad lower during the afternoon session, ahead of the country’s ISM manufacturing PMI data for the month of June, scheduled to be released today by 14:00GMT, with major focus still on the trade talks between President Donald Trump and his Chinese peer Xi Jinping. The yield on the benchmark 10-year Treasury yield surged 1-1/2 basis points to 2.014 percent, the super-long 30-year bond yields edged 1 basis point higher to 2.536 percent and the yield on the short-term 2-year also trade 1-1/2 basis points up at 1.757 percent.

The United Kingdom’s gilts gained during European session after the country’s manufacturing PMI for the month of June disappointed market participants, failing to meet estimates as well as down from the prior reading in May. Investors shall now be focussing on Britain’s construction sector PMI, along with the 5-year auction and Governor of Bank of England (BoE), Mark Carney’s speech, all scheduled on July 2 for further direction in the debt market. The yield on the benchmark 10-year gilts, suffered nearly 2 basis points to 0.816 percent, the 30-year yield fell 1-1/2 basis points to 1.456 percent, and the yield on the short-term 2-year also traded 1-1/2 basis points lower at 0.601 percent

The German bunds remained steady during European trading session after the country’s manufacturing PMI for the month of June edged slightly higher, albeit retaining its contraction mode, coupled with tad lower unemployment change for the similar period. However, Germany’s jobless rate remained unchanged, while the eurozone counterpart witnessed a fall, offsetting net impact on safe-haven assets. The German 10-year bond yields, which move inversely to its price, hovered around -0.325 percent, the yield on 30-year note gained 1-1/2 basis points to 0.280 percent and the yield on short-term 2-year too tad higher at -0.728 percent.

The Japanese government bonds stepped back at close of trading Monday after trade talks resumed between the United States and China at the G-20 Summit over the weekend, improving investors’ risk-taking sentiments and thus weighing on debt prices. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, surged 1-1/2 basis points to -0.150 percent, the yield on the long-term 30-year jumped 2 basis points to 0.383 percent and the yield on short-term 2-year also traded higher at -0.221 percent.

The Australian government bonds remained nearly flat during Asian session of the first trading day of the week Monday amid a muted day that barely witnessed any data of major economic significance ahead of the Reserve Bank of Australia’s (RBA) monetary policy meeting, scheduled to be held on July 2 at 04:30GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, remained tad higher at 1.329 percent, the yield on the long-term 30-year bond hovered around 1.933 percent and the yield on short-term 2-year too remained flat at 0.979 percent.

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