Europe Roundup: Sterling falls after UK unemployment rises unexpectedly - July 15th, 2015

Market Roundup

• Sterling falls as UK unemployment rises unexpectedly.
  
  
• GBP/USD falls to 1.5603 from 1.5676. EUR/GBP up to 0.7068 from 0.7022.
  
  
• UK June Claimant count +7.0k vs previous 1.1k revised. -8.8k expected.
  
  
• UK May ILO unemployment rate 5.6% vs previous 5.5%. 5.5% expected.
  
  
• UK Average week earnings £m to May 3.2% y/y vs previous 2.7%. 3.3% expected.
  
  
• EUR/USD up but within recent range, plays in between 1.0987/1.1035 levels.
  
  
• IMF signals it could walk away from Greek bailout deal.
  
  
• Greek economy minister- We can't have a deal without restructuring the debt.
  
  
• BOJ leaves policy as it is, as eyed, vote 8-1, Kiuchi again lone dissenter.
  
  
• EU Commission proposes 7 bln euro loan for Greece for July.
  
  
• SSEC closes down 3.0% At 3,805.70 points.
  
  
• Switzerland ZEW investor sentiment -5.4 vs previous 0.1.

Economic Data Ahead

• (0830 ET/1230 GMT) US July NY Fed Empire State manufacturing index, 3.00 eyed; last -1.98.
  
  
• (0830 ET/1230 GMT) US Core PPI Final Demand (June) consensus +0.1% m/m, 0.7% y/y, previous +0.1%prev +0.6%.
  
  
• (0830 ET/1230 GMT) US June PPI final demand, +0.2% m/m, -0.9% y/y eyed; last +0.5%, -1.1%.
  
  
• (0915 ET/1315 GMT) US Factory Output (June) consensus +0.1% m/m, previous -0.2% m/m.
  
  
• (0915 ET/1315 GMT) US June industrial output, +0.2% m/m eyed; last -0.2%.
  
  
• (0915 ET/1315 GMT) US June capacity utilization, 78.1% eyed; last 78.1%.
  
  
• (1030 ET/1430 GMT) EIA petroleum statistics.

Key Events Ahead

• (1000 ET/1400 GMT) FOMC chair Yellen Semi annual testimony.
  
  
• (1000 ET/1400 GMT) BOC policy announcement.
  
  
• (1115 ET/1515 GMT) BOC Gov Poloz press conference.
  
  
• (1225 ET/1625 GMT) Cleveland Fed Mester speaks at Columbus, Ohio forum.
  
  
• (1400 ET/1800 GMT) Fed Beige Book release.
  
  
• (1500 ET/1900 GMT) SF Fed Williams speech in Mesa, Arizona/22:00 speaks in Phoenix, Arizona.

FX Recap

EUR/USD is supported above 1.1000 levels and currently trading at 1.1020 levels. It has made intraday high at 1.1034 and low at 1.0985 levels. A lack of data on the European macro front paired with the waiting on Greeks to adopt necessary reforms is leaving the EUR/USD pair to hover just above the $1.10 barrier. Greece's Prime Minister Alexis Tsipras says he does not believe in the deal he reached with the country's lenders but is willing to fight for its implementation as it represents the only way for Greece to stay in the Euro. The US session will be in focus with Fed Chair Janet Yellen's speech. Traders will anticipate any news on the number of possible rate hikes this year, but views around the Greek negotiations, volatility in China's equity markets and moves in the USD and energy will also be important. Initial support is seen around at 1.0914 and resistance at 1.1243 levels. Option expiries are at 1.0950 (321M), 1.1000 (858M), 1.1050 (319M), 1.1100 (400M).

USD/JPY is supported above 123.00 levels and posted a high of 123.67 levels. It has made intraday low at 123.25 and currently trading at 123.58 levels. The Bank of Japan made no changes to its current policy settings on Wednesday, but the bank downgraded its economic growth outlook for fiscal 2015. BOJ decided to continue with its current pace of asset purchases on Wednesday, which amounts to around ¥80 trillion per year. Today BOJ downgraded economic growth to 1.7%. Forecasts for growth in the following two years were left unchanged at 1.5% and 0.2% respectively. Near term resistance is seen at 124.57 and support is seen at 120.63 levels. Option expiries are at 122.00 (654M), 123.25 (430M), 123.50 (715M), 125.00 (992M).

GBP/USD is supported above $1.5600 levels. It made an intraday high at 1.5673 and low at 1.5601 levels. Pair is currently trading at 1.5633 levels. Sterling fell to $1.5603 after the data showed UK unemployment unexpectedly rose for the first time since 2013 in the three months to May, while wage growth came in slightly weaker than expected. It was trading at $1.5655 before the release, and recovering a touch to $1.5618, down 0.1 percent on the day. Against the euro, it weakened 0.3 percent to 70.685 pence. The jobless rate ticked higher to 5.6% as jobless claims, a narrower and less distant gauge tracking labour market activity, rose by 7,000, compared to a 1,100 decline the month before, leaving the claimant-count rate unchanged at 2.3%. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.

USDCHF is supported below 0.9500 levels and trading at 0.9468 levels and made intraday low at 0.9441 and high at 0.9474 levels. Yesterday Switzerland released PPI data with negative numbers at -0.1 % mm vs -0.8% previous release. Today Switzerland released at ZEW investor sentiment data with negative numbers at -5.4% vs 0.1% previous. Near term support is seen at 0.9341 levels and resistance is seen at 0.9542 levels.

AUD/USD is supported below 0.7500 levels and trading at 0.7456 levels. It has made intraday high at 0.7487 levels and low at 0.7435 levels. The Chinese data was positive and gives a relief to the Aussie bulls who have taken the price through overnight highs. All three readings were in positive territory with Industrial Production and Retails Sales slightly better and GDP Q/Q 1.7% vs 1.6% and 7% vs 6.9% Y/Y. The Westpac-Melbourne Institute Consumer Sentiment gauge fell 3.2% to 92.2 in July from 95.3 in June. The US session will be in focus with Fed Chair Janet Yellen's speech. Traders will anticipate any news on the number of possible rate hikes this year, but views around the Greek negotiations, volatility in China's equity markets and moves in the USD and energy will also be important. Initial support is seen at 0.7360 and resistance at 0.7647 levels.