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Europe Roundup: Sterling eases on downbeat UK service PMI; euro rallies as EU chooses Lagarde to head ECB, European shares rally - Wednesday, July 3rd, 2019

Economic Data Ahead

  • (0815 ET/1215 GMT) Payrolls processor ADP releases U.S. employment report for the month of June. The report is expected to show that 140,000 jobs were added as compared with 27,000 jobs in May.
     
  • (0830 ET/1230 GMT) The United States releases trade balance figures for the month of May. The economy's trade deficit is expected to have widened to $54.0 billion from 50.8 billion in April.
     
  • (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have decreased by 4,000 to a seasonally adjusted 223,000 for the week ended Jun. 28, while continuing claims for the week ended Jun. 21 is expected to decline to 1.675 million from a reading of 1.688 million.
     
  • (0945 ET/1345 GMT) Financial firm Markit releases final U.S. composite PMI for the month of June. The index posted a final reading of 50.6 in the previous month.
     
  • (0945 ET/1345 GMT) Markit Economics reports final U.S. services PMI for the month of June. The index posted a final reading of 50.7 in May.
     
  • (1000 ET/1400 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. non-manufacturing Purchasing Managers' index eased to a reading of 55.9 in June from 56.9 in May.
     
  • (1000 ET/1400 GMT) The United States is likely to report that factory orders decreased 0.5 percent in May after posting a fall of 0.8 percent in the prior month.
     
  • (1100 ET/1500 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending June 28
     
  • (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending June 28.
     

Key Events Ahead

  • (0815 ET/1215 GM) Bank of England Monetary Policy Committee member Ben Broadbent gives a speech

FX Beat

DXY: The dollar index eased amid growing expectations that the Fed will embark on its first rate cut in a decade at a policy review this month. The greenback against a basket of currencies traded 0.05 percent down at 96.69, having touched a high of 96.88 on Tuesday, its highest since June 20.

EUR/USD: The euro rebounded from a near 2-week low after the European Union leaders agreed to name France’s Christine Lagarde as the new head of the European Central Bank and sealed a deal on filling the EU’s other top four jobs. The European currency traded 0.1 percent up at 1.1294, having touched a low of 1.1268 earlier, its lowest since June 20. Immediate resistance is located at 1.1327 (38.2% retracement of 1.1412 and 1.1275), a break above targets 1.1360 (61.8% retracement). On the downside, support is seen at 1.1251 (June 7 Low), a break below could drag it below 1.1203 (June 17 Low).

USD/JPY: The dollar declined, extending previous session losses, weighed down by the fall in U.S. Treasury bond yields, fading optimism over the U.S.-China trade deal and a potential trade feud with Europe. The pair was trading 0.2 percent down at 107.65, having hit a low of 107.53 earlier, its lowest since Jun. 26. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. trade balance, unemployment benefit claims, factory orders and service PMI by both Markit and ISM. Immediate resistance is located at 108.36 (June 4 High), a break above targets 108.80 (June 11 High). On the downside, support is seen at 107.24 (June 24 Low), a break below could take it lower at 106.78 (June 25 Low).

GBP/USD: Sterling slumped to a 2-week low after data showed Britain’s services Purchasing Managers’ Index slipped to 50.2 in June, indicating that the economy appears to have shrunk for the first time since late 2012 between April and June as worries about Brexit were compounded by global trade tensions. The major traded 0.2 percent down at 1.2570, having hit a low of 1.2557 earlier, it’s lowest since June 19. Immediate resistance is located at 1.2655 (5-DMA), a break above could take it near 1.2743 (June 5 High). On the downside, support is seen at 1.2542 (June 19 Low), a break below targets 1.2506 (June 18 Low). Against the euro, the pound was trading 0.3 percent down at 89.87 pence, having hit a high of 89.19 on Tuesday, it’s highest since Jun. 25.

USD/CHF: The Swiss franc surged, as investors grew more skeptical about the possibility of a speedy resolution to the U.S.-China trade war. The major trades 0.2 percent down at 0.9842, having touched a high of 0.9889 on Tuesday; it’s highest since June 20. On the higher side, near-term resistance is around 0.9920 (June 10 High) and any break above will take the pair to next level till 0.9963 (June 6 High). The near-term support is around 0.9817 (10-DMA), and any close below that level will drag it till 0.0.9738 (June 28 Low).

Equities Recap

European shares advanced, boosted by hopes that European Central Bank Chief nominee Christine Lagarde would follow the dovish steps of Mario Draghi.

The pan-European STOXX 600 index surged 0.8 percent at 392.59 points, while the FTSEurofirst 300 gained 0.8 percent to 1,544.97 points.

Britain's FTSE 100 trades 0.8 percent up at 7,616.99 points, while mid-cap FTSE 250 rallied 0.6 to 19,779.08 points.

Germany's DAX rose 0.8 percent at 12,626.30 points; France's CAC 40 trades 0.7 percent higher at 5,614.83 points.

Commodities Recap

Crude oil prices rebounded from a 2-week low, supported by OPEC and its allies’ decision to extend output cuts. International benchmark Brent crude was trading 0.8 percent higher at $63.09 per barrel by 1020 GMT, having hit a low of $62.06 earlier, its lowest since June 19. U.S. West Texas Intermediate was trading 0.8 percent up at $56.75 a barrel, after falling as low as $56.03, its lowest since the June 20.

Gold prices rallied to a 1-week high, boosted by upbeat safe-haven sentiment as hopes of a quicker resolution of the U.S.-China trade dispute ebbed. Spot gold was 0.5 percent up at $1,425.24 per ounce by 1023 GMT,  having touched a high of $1,437.66 earlier, its highest since June 25. U.S. gold futures rose 1.5 percent to $1,429.30 an ounce.

Treasuries Recap

The U.S. Treasuries jumped during the afternoon session, ahead of the country’s ADP non-farm employment for the month of June, scheduled to be released today by 12:15GMT, besides, the weekly initial jobless claims and the ISM non-manufacturing PMI for the same month, all due for release later today, will add further direction to the debt market. The yield on the benchmark 10-year Treasury yield slumped 2 basis points to 1.958 percent, the super-long 30-year bond yields also suffered 2 basis points to 2.489 percent and the yield on the short-term 2-year traded 1 basis point down at 1.756 percent.

The German bunds remained mixed during European session after the country’s services PMI for the month of June edged tad higher, while investors still eye the eurozone’s retail sales for the month of May, due for release on July 4 by 09:00GMT, for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, hovered around -0.352 percent, the yield on 30-year note jumped 2-1/2 basis points to 0.268 percent and the yield on short-term 2-year remained flat at -0.748 percent.

The Australian government bonds jumped during Asian session after the United States counterpart fell back under 2 percent on renewed concerns over global economic growth that forced investors into safe-haven assets. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 4 basis points to 1.296 percent, the yield on the long-term 30-year bond remained tad lower at 1.941 percent and the yield on short-term 2-year slumped nearly 3 basis points to 0.931 percent.

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