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Europe Roundup: Sterling at 6-1/2 month low on Brexit uncertainties, euro slumps as German investor morale deteriorates, investors eye U.S. retail sales and Fed Powell's speech - Tuesday, July 16th, 2019

Market Roundup

  • German investor morale darkens on trade disputes
     
  • EU goods trade gaps with U.S. and China widen
     
  • UK pay growth strongest since 2008
     
  • Oil steadies as U.S. supply concerns ease
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Commerce Department is expected to report that retail sales edged up 0.1 percent in June after advancing 0.5 percent in May. While excluding autos, retail sales are likely to have gained 0.1 percent, after surging 0.5 percent in the previous month.
     
  • (0830 ET/1230 GMT) The U.S. Labor Department publishes import and export prices index for the month of June. The import prices are likely to have declined 0.7 percent after easing 0.3 percent in May, while exports are expected to have edged down 0.2 percent after posting similar losses in the prior month.
     
  • (0830 ET/1230 GMT) Statistics Canada will report foreign portfolio investment in domestic stocks for the month of May.
     
  • (0830 ET/1230 GMT) Statistics Canada will release investment in foreign securities figures for the month of May.
     
  • (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production rose 0.2 percent in June after increasing 0.4 in the prior month.
     
  • (0915 ET/1315 GMT) The Federal Reserve Board is expected to report that capacity utilization edged up to 78.1 percent in June after posting similar gains in the previous session.
     
  • (1000 ET/1400 GMT) The U.S. Commerce Department is expected to report that business inventories rose 0.4 percent in May, after rising 0.5 percent in April.
     
  • (1000 ET/1400 GMT) The National Association of Home Builders (NAHB) is expected to report that U.S. Housing Market Index rose to 64 in July, after posting a similar increase in June.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.
     

Key Events Ahead

  • (0815 ET/1215 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic gives a speech
     
  • (0815 ET/1215 GMT) Federal Reserve Board Governor Michelle Bowman's speech
     
  • (1300 ET/1700 GMT) Federal Reserve Chairman Jerome H. Powell gives a speech
     
  • (1530 ET/1930 GMT) Federal Reserve Bank of Chicago President Charles Evans' speech
     

FX Beat

DXY: The dollar index advanced to a near 1-week peak, ahead of the U.S. data due later in the day, which is expected to imply that retail sales had edged up 0.1 percent in June. The greenback against a basket of currencies traded 0.3 percent up at 97.24, having touched a high of 97.28 earlier, its highest since July 10.

EUR/USD: The euro plunged to a 6-day low after data showed the sentiment among German investors deteriorated more sharply than expected in July, due to the unresolved trade dispute between China and the United States as well as political tensions with Iran. The European currency traded 0.2 percent down at 1.1230, having touched a low of 1.1227 earlier, its lowest since July 10. Immediate resistance is located at 1.1304 (50.0% retracement of 1.1412 and 1.1193), a break above targets 1.1366 (78.6% retracement). On the downside, support is seen at 1.1207 (July 5 Low), a break below could drag it below 1.1181 (June 18 Low).

USD/JPY: The dollar consolidated within narrow ranges as investors’ price in a 25-basis-point cut by the Federal Reserve at its meeting at the end of this month. Markets now await the release of U.S. retail sales figures for signs of improvement in the economy. The pair was trading flat at 107.94, having hit a low of 107.79 on Monday, its lowest since July 5. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. retail sales, capacity utilization, industrial production, business inventories, NAHB housing market index, and import and export price index. Immediate resistance is located at 108.32 (5-DMA), a break above targets 108.80 (July 8 High). On the downside, support is seen at 107.53 (July 3 Low), a break below could take it lower at 107.10 (June 26 Low).

GBP/USD: Sterling plunged to a 6-1/2 month low, weighed down by persistent Brexit-related uncertainties and disappointing release of UK claimant count change for June. Investors now await the BoE Governor Mark Carney's scheduled speech for further insight on the near-term monetary policy outlook. The major traded 0.8 percent down at 1.2417, having hit a low of 1.2408 earlier, it’s lowest since Jan. 3. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2571 (38.2% retracement of 1.2783 and 1.2439), a break above could take it near 1.2611 (50.0% retracement). On the downside, support is seen at 1.2400, a break below targets 1.2373 (Jan 3 Low). Against the euro, the pound was trading 0.5 percent down at 90.37 pence, having hit a low of 90.41 earlier, it’s lowest since Jan. 11.

USD/CHF: The Swiss franc eased, extending losses for the second straight session, as the greenback gained amid signs of an improving economic situation in the United States on the back of strong jobs data. The major trades 0.2 percent up at 0.9861, having touched a low of 0.9817 on Monday; it’s lowest since July 1. On the higher side, near-term resistance is around 0.9908 (July 12 High) and any break above will take the pair to next level till 0.9963 (June 6 High). The near-term support is around 0.9791 (June 20 Low), and any close below that level will drag it till 0.9738 (June 28 Low).

Equities Recap

European shares advanced, boosted by upbeat corporate results, while the greenback surged ahead of the U.S. retail sales data.

The pan-European STOXX 600 index gained 0.1 percent at 387.99 points, while the FTSEurofirst 300 rallied 0.1 percent to 1,526.63 points.

Britain's FTSE 100 trades 0.3 percent up at 7,552.47 points, while mid-cap FTSE 250 eased 0.05 to 19,583.04 points.

Germany's DAX rose 0.05 percent at 12,388.28 points; France's CAC 40 trades 0.2 percent higher at 5,590.92 points.

Commodities Recap

Crude oil prices surged as a resumption of output in the Gulf of Mexico after Hurricane Barry countered tensions in the Middle East. International benchmark Brent crude was trading 0.8 percent higher at $66.68 per barrel by 1032 GMT, having hit a high of $67.63 on Thursday, its highest since May 30. U.S. West Texas Intermediate was trading 0.8 percent up at $59.76 a barrel, after rising as high as $60.91 on Thursday, its highest since the May 23

Gold prices edged up as investors awaited U.S. retail sales data that could provide further insight on the strength of the economy amid lingering concerns over global economic slowdown. Spot gold was trading 0.1 percent up $1,414.71 per ounce by 1035 GMT, having touched a high of $1,427.06 on Thursday, its highest since July 3. U.S. gold futures were up 0.2 percent at $1,416.60 an ounce.

Treasuries Recap

The U.S. Treasuries slipped during the afternoon session, ahead of the country’s retail sales for the month of June and Fed Chair Jerome Powell’s speech, scheduled for today by 12:30GMT and 17:00GMT respectively. Further, the benchmark 10-year auction, due to be held on July 18 will be eyed for further direction to the debt market. The yield on the benchmark 10-year Treasury yield gained nearly 1 basis point to 2.099 percent, the super-long 30-year bond yields hovered around 2.614 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points higher at 1.846 percent.

The United Kingdom’s gilts surged during European trading hours as investors turned deaf towards a stronger-than-expected growth in average wages for the month of May as participants still await the results of the country’s consumer price inflation (CPI) for the month of June, scheduled to be released on July 17 by 08:30GMT. The yield on the benchmark 10-year gilts, slumped 2 basis points to 0.781 percent, the 30-year yield rose suffered 1-1/2 basis points to 1.393 percent and the yield on the short-term 2-year too traded 1-1/2 basis points down at 0.557 percent.

The German bunds jumped during European session after the country’s ZEW economic sentiment data for the month of July, disappointed market sentiments in July, while investors still eye the eurozone’s consumer price inflation (CPI) for the month of June, due on July 16 by 09:00GMT for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, slipped 1 basis point to -0.306 percent, the yield on 30-year note slumped nearly 2 basis points to 0.308 percent and the yield on short-term 2-year traded tad down at -0.740 percent.

The Japanese government bonds gained at close, tracking a similar movement in the global peers, helped further by the Bank of Japan’s (BoJ) daily bond-buying operations, held earlier today. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, slipped 1-1/2 basis points to -0.135 percent, the yield on the long-term 30-year edged tad lower to 0.380 percent and the yield on short-term 2-year slumped 5 basis points to -0.185 percent.

The Australian government bond yields plunged during Asian session of the second trading day of the week after the Reserve Bank of Australia’s (RBA) July monetary policy meeting minutes hinted at further easing in its benchmark interest rate at its upcoming meetings. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 8 basis points to 1.387 percent, the yield on the long-term 30-year bond slumped 7-1/2 basis points to 2.044 percent and the yield on short-term 2-year traded nearly 5-1/2 basis points down at 0.954 percent.

By Lactus Fernandes
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