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Europe Roundup: Sterling declines on Brexit worries, euro steadies amid speculation for dovish ECB, European shares subdue - Monday, July 15th, 2019

Market Roundup

  • Gold steadies on mixed Chinese data
  • UK banks say business investment slowing further ahead of Brexit
  • Oil prices nudge up on Chinese economic data
  • Brexit worries keep pressure on Sterling

Economic Data Preview

  • (0830 ET/1230 GMT) The Federal Reserve Bank of New York is expected to report that NY empire state manufacturing activity index grew to 2 in July after declining 8.6 percent in May.

Key Events Ahead

  • (0850 ET/1250 GMT Federal Reserve Bank of New York President William Dudley will participate in a chat organized by the Cornell College of Business and the Johnson Club of New York City.

FX Beat

DXY: The dollar index steadied after falling to a 10-day low in the previous session on expectations the Federal Reserve will cut interest rates at the end of this month. The greenback against a basket of currencies traded 0.1 percent up at 96.82, having touched a low of 96.72 on Friday, its lowest since July 3.

EUR/USD: The euro consolidated within narrow ranges amid growing expectations for a dovish European Central Bank meeting next week. Investors have priced in an ECB rate cut of 10 basis points in September and another one in March and expect the meeting on July 25 reinforce these probabilities. The European currency traded 0.05 percent up at 1.1278, having touched a high of 1.1286 on Thursday, its highest since July 5. 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 tumbled to a 10-day low as investors expect the Federal Reserve to cut its key rate by 25 basis points at the end of July, followed by another cut in September. However, the downside was limited as investors’ sentiment improved after data showed Chinese June industrial production, retail sales and fixed-asset investment all beat forecasts, indicating that Beijing’s earlier growth-boosting efforts may be starting to have an effect. The pair was trading flat at 107.90, having hit a low of 107.79 earlier, its lowest since July 5. Investors’ will continue to track the broad-based market sentiment, ahead of the New York empire state manufacturing index. Immediate resistance is located at 108.48 (5-DMA), a break above targets 108.80 (July 8 High). On the downside, support is seen at 107.64 (June 27 Low), a break below could take it lower at 107.10 (June 26 Low).

GBP/USD: Sterling plunged after rising for three straight sessions as investors still remain nervous about a loss of momentum in the UK economy, the prospect of BoE interest rate cut and a new prime minister. The major eased 0.2 percent to 1.2542, having hit a high of 1.2578 earlier, it’s highest since July 5. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2611 (50.0% retracement of 1.2783 and 1.2439), a break above could take it near 1.2652 (61.8% retracement). On the downside, support is seen at 1.2499 (July 8 Low), a break below targets 1.2439 (July 9 Low). Against the euro, the pound was trading 0.4 percent down at 89.90 pence, having hit a high of 89.55 earlier, it’s highest since Jul. 9.

USD/CHF: The Swiss franc rallied to a 2-week peak as the greenback remained on the back foot on expectations the Federal Reserve will cut interest rates at the end of this month. The major trades 0.2 percent down at 0.9822, having touched a low of 0.9820 earlier; 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 were subdued as worrying comments on Germany’s industrial and services sectors offset optimism stemming from China’s upbeat factory output and retail sales data.

The pan-European STOXX 600 index gained 0.05 percent at 386.91 points, while the FTSEurofirst 300 eased 0.05 percent to 1,522.05 points.

Britain's FTSE 100 trades 0.2 percent up at 7,517.56 points, while mid-cap FTSE 250 gained 0.2 to 19,959.58 points.

Germany's DAX rose 0.2 percent at 12,345.79 points; France's CAC 40 trades 0.1 percent lower at 5,565.83 points.

Commodities Recap

Crude oil prices surged as Chinese industrial output and retail data surpassed expectations, although overall figures showing the country’s slowest quarterly economic growth in decades capped gains. International benchmark Brent crude was trading 0.3 percent higher at $67.05 per barrel by 1039 GMT, having hit a high of $67.63 on Thursday, its highest since May 30. U.S. West Texas Intermediate was trading 0.2 percent up at $60.41 a barrel, after rising as high as $60.91 on Thursday, its highest since the May 23.

Gold prices consolidated within narrow ranges, as key China data eased concerns about the global economic slowdown and boosted appetite for riskier assets. Spot gold was flat at $1,415.21 per ounce by 1041 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 $1,415.10 an ounce.

Treasuries Recap

The U.S. Treasuries suffered during the afternoon session, ahead of FOMC member Williams’ speech, due today at 12:50GMT, besides, a host of other speeches, lined up for tomorrow. The yield on the benchmark 10-year Treasury yield gained 2 basis points to 2.125 percent, the super-long 30-year bond yields jumped 2-1/2 basis points to 2.656 percent and the yield on the short-term 2-year traded tad up at 1.845 percent.

The United Kingdom’s gilts surged during European trading session as investors wait to watch the country’s labour market data for the month of May, scheduled to be released on July 16 by 08:30GMT and the Bank of England (BoE) Governor Mark Carney is also due to deliver a speech on the same day by 12:00GMT, which shall render some specific direction to the debt market. The yield on the benchmark 10-year gilts, slumped 2-1/2 basis points to 0.810 percent, the 30-year yield rose also plunged 2-1/2 basis points to 1.415 percent, and the yield on the short-term 2-year too traded nearly 2-1/2 basis points lower at 0.573 percent

The German bunds jumped during European session ahead of the country’s ZEW economic sentiment data for the month of July, scheduled to be released on July 16 by 09:00GMT and eurozone’s consumer price inflation (CPI) for the month of June, due on the following day by 09:00GMT. The German 10-year bond yields, which move inversely to its price, slumped nearly 2-1/2 basis points to -0.270 percent, the yield on 30-year note also plunged 2-1/2 basis points to 0.363 percent and the yield on short-term 2-year traded tad lower at -0.734 percent.

The Australian government bonds remained flat during Asian session of the first trading day of the week, amid a muted session ahead of the Reserve Bank of Australia’s (RBA) July monetary policy meeting minutes, scheduled to be released on July 16 by 01:30GMT and the country’s employment data for the month of June, due on July 18 for further direction in the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, hovered around 1.462 percent, the yield on the long-term 30-year bond surged 1-1/2 basis points to 2.121 percent and the yield on short-term 2-year traded nearly flat at 1.008 percent.

By Lactus Fernandes
  • Market Data
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