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Europe Roundup: Sterling eases ahead of UK Conservative party’s leadership election result, euro tumbles on Italian political tensions, Europe shares nudge up - Monday, July 22nd, 2019

Market Roundup

  • British junior foreign minister Alan Duncan resigns
     
  • Japan's Abe says will make every effort to ease tension with Iran
     
  • Japan's Abe vows flexible steps in case of downside economic risks
     
  • Ministry: Indicators point to sustained period of German industrial weakness
     
  • Oil rallies more than 2 percent after Iran seizes British tanker
     

Economic Data Ahead

  • (0830 ET/1330 GMT) The Federal Reserve Bank of Chicago will release its Chicago Fed National Activity Index (CFNAI) for the month of December. The index stood at -0.27 in the prior month.
     
  • (0830 ET/1230 GMT) Canadian wholesale trade is likely to have increased 0.5 percent in May after rising by 1.7 percent in April.
     

Key Events Ahead

  • (1850 ET/2350 GMT) Bank of Japan Governor Kuroda's speech

FX Beat

DXY: The dollar index advanced amid growing expectations of a smaller interest rate cut from the Federal Reserve. The greenback against a basket of currencies traded 0.1 percent up at 97.17, having touched a low of 96.67 on Thursday, its lowest since June 4.

EUR/USD: The euro consolidated within narrow ranges as investors refrained from taking big ahead of the European Central Bank monetary policy meeting on Thursday, where it is expected to cut interest rates by a 10 basis point. The pair is likely to remain on the downside as political tensions in Italy stirred speculation of a snap election. The European currency traded flat at 1.1218, having touched a low of 1.1199 on Wednesday, its lowest since July 9. Immediate resistance is located at 1.1246 (23.6% retracement of 1.1412 and 1.1193), a break above targets 1.1278 (38.2% retracement). On the downside, support is seen at 1.1193 (July 9 Low), a break below could drag it below 1.1193 (July 9 Low).

USD/JPY: The dollar rallied to a near 1-week peak as investors reduced expectations of an aggressive interest rate cut by the Federal Reserve. The Wall Street Journal reported that the U.S. central bank was likely to cut rates by 25 basis points by end of this month, and may make further cuts in the future amid global growth and trade uncertainties. The major was trading 0.2 percent up at 107.88, having hit a low of 107.21 on Thursday, its lowest since June 26. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. Chicago Fed National Activity Index and Bank of Japan Governor Haruhiko Kuroda’s speech for further clues on monetary policy. Immediate resistance is located at 108.32 (July 17 High), a break above targets 108.63 (July 5 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, extending previous session losses, as investors cautiously awaited to see whether Boris Johnson would win the Conservative party leadership contest. The result of the party’s leadership election will be announced on Tuesday, which will decide Britain’s next prime minister. The major traded 0.2 percent down at 1.2469, having hit a high of 1.2558 on Thursday, it’s highest since July 15. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2574 (21-DMA), a break above could take it near 1.2648 (July 2 High). On the downside, support is seen at 1.2439 (July 9 Low), a break below targets 1.2396 (July 16 Low). Against the euro, the pound was trading 0.3 percent down 89.98 pence, having hit a high of 89.55 earlier, it’s highest since July 9.

USD/CHF: The Swiss franc surged, hovering towards a near 3-week peak hit in the previous session, as political tensions in Italy and Britain boosted the safe-havens appeal. The major trades 0.05 percent down at 0.9811, having touched a low of 0.9805 on Friday; it’s lowest since July 1. On the higher side, near-term resistance is around 0.9873 (July 3 High) and any break above will take the pair to next level till 0.9932 (July 5 High). The near-term support is around 0.9778 (July 1 Low), and any close below that level will drag it till 0.9738 (June 28 Low).

Equities Recap

European shares edged higher in early trading as the Italian shares rebounded, while sterling eased as investors awaited UK’s Conservative party leadership contest result.

The pan-European STOXX 600 index gained 0.1 percent at 387.51 points, while the FTSEurofirst 300 rallied 0.1 percent to 1,524.14 points.

Britain's FTSE 100 trades 0.4 percent up at 7,534.89 points, while mid-cap FTSE 250 gained 0.1 to 19,640.77 points.

Germany's DAX rose 0.2 percent at 12,279.58 points; France's CAC 40 trades 0.2 percent higher at 5,560.42 point.

Commodities Recap

Crude oil prices surged by more than 2 percent on concerns that Iran’s seizure of a British tanker last week may lead to supply disruptions in the Gulf. International benchmark Brent crude was trading 1.6 percent higher at $63.81 per barrel by 0954 GMT, having hit a low of $61.26 on Thursday, its lowest since June 18. U.S. West Texas Intermediate was trading 1.9 percent up at $56.77 a barrel, after falling as low as $54.71 on Thursday, its lowest since the June 20.

Gold prices surged after easing from a 6-year peak in the previous session as tensions in the Middle East supported the demand for safe-haven assets. Spot gold was trading up at $1,425.23 per ounce by 0957 GMT, having touched a high of $1,452.80 on Friday, its highest since May 2013. U.S. gold futures were up 0.1 percent at $1,427.80 an ounce.

Treasuries Recap

The U.S. Treasuries remained mixed during the afternoon session, ahead of economically significant data by the end of this week, with major focus on the country’s first estimate of Q2 GDP on Friday. The yield on the benchmark 10-year Treasury yield hovered around 2.043 percent, the super-long 30-year bond yields suffered nearly 2 basis points to 2.560 percent and the yield on the short-term 2-year traded nearly 1 basis point higher at 1.823 percent.

The United Kingdom’s gilts gained during European trading hours ahead of the country’s 10-year auction, scheduled to be held on July 23 by 09:45GMT. The yield on the benchmark 10-year gilts, slipped 1-1/2 basis points to 0.719 percent, the 30-year yield rose slumped nearly 2-1/2 basis points to 1.339 percent and the yield on the short-term 2-year edged tad down to 0.500 percent.

The German bunds jumped during European session ahead of the country’s manufacturing PMI for the month of July, scheduled to be released on July 24 by 07:30GMT and the European Central Bank’s (ECB) monetary policy meeting, due to be held on the following day by 11:45GMT for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, slumped nearly 2 basis points to -0.338 percent, the yield on 30-year note suffered 1-1/2 basis points to 0.260 percent and the yield on short-term 2-year traded nearly 1 basis point down at -0.779 percent.

The Australian government bonds jumped during Asian session of the first trading day of the week amid a muted trading session that witnessed data of little economic significance ahead of the Reserve Bank of Australia’s Assistant Governor Christopher Kent’s speech, scheduled to be held today at 22:30GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2-1/2 basis points to 1.335 percent, the yield on the long-term 30-year bond also suffered 2-1/2 basis points to 1.978 percent and the yield on short-term 2-year traded nearly 1 basis point down at 0.954 percent.

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July 2 15:00 UTC Released

DKCurrency Reserves

Actual

449.6 Stale

Forecast

Previous

451.7 Stale

July 2 13:45 UTC Released

USISM NY Biz Conditions

Actual

50 %

Forecast

Previous

48.6 %

January 31 00:00 UTC 814114814114m

ARAnnual Primary Balance*

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2016 bln ARS

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January 31 00:00 UTC 814114814114m

ARAnnual Primary Balance*

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Forecast

2016 bln ARS

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Bln AR bln ARS

January 22 19:00 UTC 825934825934m

ARTrade Balance

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Forecast

Previous

-1541 %

January 31 00:00 UTC 814114814114m

ARAnnual Primary Balance*

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Forecast

2016 bln ARS

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Bln AR bln ARS

January 22 19:00 UTC 825934825934m

ARTrade Balance

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Forecast

Previous

-1541 %

January 31 00:00 UTC 814114814114m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

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Bln AR bln ARS

January 31 00:00 UTC 814114814114m

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Forecast

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Previous

Bln AR bln ARS

January 31 00:00 UTC 814114814114m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

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