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Europe Roundup: Sterling off 2-week low as UK households' pessimism eases, greenback rallies amid fading Fed rate cut expectations, European shares surge - Monday, June 17th, 2019

Market Roundup

  • EUR/USD 0.06%, USD/JPY 0.07%, GBP/USD 0.01%, EUR/GBP 0.03%
     
  • DXY -0.03%, DAX 0.08%, FTSE 0.01%, Brent 0.47%, Gold -0.53%
     
  • Fed likely to resist pressure to cut U.S. rates this week
     
  • Iran says it will exceed allowed enriched uranium limit in 10 days
     
  • Johnson gets boost in race for UK PM's job as former rival backs him
     
  • UK households' pessimism eases in June - IHS Markit
     
  • German economy to shrink slightly in Q2 - Bundesbank
     
  • ECB's Coeure: If we decide to cut rates, we'd have to consider tiering -FT
     
  • EU Q1 Labour Costs YY, 2.4%, 2.3% prev
     
  • EU Q1 Wages, 2.55%, 2.3% prev
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The Federal Reserve Bank of New York is expected to report that New York State manufacturing activity index eased to 12.75 percent in June after rising to 17.80 percent in May.
     
  • (0830 ET/1230 GMT) Statistics Canada will report foreign portfolio investment in domestic stocks for the month of April.
     
  • (0830 ET/1230 GMT) Statistics Canada will release investment in foreign securities figures for the month of April.
     
  • (1000 ET/1500 GMT) The National Association of Home Builders (NAHB) is expected to report that U.S. Housing Market Index rose to 66 in June after posting a similar increase in May.
     

Key Events Ahead

  • (1300 ET/1700 GMT) ECB's Mario Draghi delivers opening remarks at ECB Forum on Central Banking 2019 "20 Years of European Economic and Monetary Union" in Sintra, Portugal
     
  • (1430 ET/1830 GMT) BoC's Lawrence Schembri delivers speech at Economics Society of Northern Alberta, Edmonton in Ottawa
     
  • N/A U.S. Trade Representative's Office is set to conduct a public hearing on its list of 3,805 product categories of Chinese imports that could be subject to tariffs of up to 25%.
     

FX Beat

DXY: The dollar index advanced to multi-week peaks, as strong U.S. retail sales led investors to reassess whether the Federal Reserve will sound as dovish as expected at this week's monetary policy meeting. The greenback against a basket of currencies traded 0.1 percent up at 97.53, having touched a high of 97.60, its highest since June 3. FxWirePro's Hourly Dollar Strength Index stood at 86.58 (Slightly Bullish) by 1000 GMT.

EUR/USD: The euro rose, halting a 3-day losing streak, as investors wait for direction on monetary policy from the European Central Bank this week after inflation expectations in the bloc hit an all-time-low last week. The European currency traded 0.1 percent up at 1.1214, having touched a low of 1.1202 on Friday, its lowest since June 6. FxWirePro's Hourly Euro Strength Index stood at -17.48 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1237 (23.6% retracement of 1.1347 and 1.1202), a break above targets 1.1275 (50% retracement). On the downside, support is seen at 1.1172 (May 24 Low), a break below could drag it below 1.1141 (May 21 Low).

USD/JPY: The dollar rallied to a near 1-week peak, as the U.S. Federal Reserve is expected to leave borrowing costs unchanged at a policy meeting this week but possibly lay the groundwork for a rate cut later this year. Investors reduced the chances of a rate cut following the release of strong U.S. retail sales on Friday. The pair was trading 0.1 percent up at 108.65, having hit a high of 108.70 earlier, its highest since June 11. FxWirePro's Hourly Yen Strength Index stood at 24.64 (Neutral) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S.NAHB housing market index and NY empire state manufacturing index. Immediate resistance is located at 108.80 (June 11 High), a break above targets 109.08 (Jan. 8 High). On the downside, support is seen at 107.88 (June 3 Low), a break below could take it lower at 107.51 (Jan. 4 Low).

GBP/USD: Sterling attempted a minor recovery from a 2-week low after data showed British households' pessimism about their finances eased in June, as for the first time this year they took a positive view of the outlook for the next 12 months. The major traded 0.05 percent up at 1.2594, having hit a low of 1.2571 earlier; it’s lowest since May 31. FxWirePro's Hourly Sterling Strength Index stood at -30.29 (Neutral) 1000 GMT. Immediate resistance is located at 1.2644 (May 31 High), a break above could take it near 1.2714 (June 4 High). On the downside, support is seen at 1.2558 (May 31 Low), a break below targets 1.2506 (Dec.10 Low). Against the euro, the pound was trading flat at 89.05 pence, having hit a low of 89.32 last week, it’s lowest since Jan. 15.

USD/CHF: The Swiss franc plunged to a 2-week low, as the greenback surged after expectations of a rate cut at the Fed's June 18-19 meeting eased following the release of strong U.S. retail data. The major trades 0.1 percent up at 0.9994, having touched a high of 0.9998 earlier; it’s highest since June 3. FxWirePro's Hourly Swiss Franc Strength Index stood at -32.29 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 1.0042 (May 24 High) and any break above will take the pair to next level till 1.0098 (May 30 High). The near-term support is around 0.9925 (Jan. 14 Low), and any close below that level will drag it till 0.9879 (June 6 Low).

Equities Recap

European shares advanced, boosted by gains in banking shares, while the greenback rallied to a 2-week peak ahead of the U.S. Federal Reserve meeting this week.

The pan-European STOXX 600 index surged 0.1 percent at 379.19 points, while the FTSEurofirst 300 gained 0.05 percent to 1,491.54 points.

Britain's FTSE 100 trades 0.1 percent up at 7,350.16 points, while mid-cap FTSE 250 rallied 0.4 to 19,185.63 points.

Germany's DAX rose 0.1 percent at 12,109.35 points; France's CAC 40 trades 0.2 percent higher at 5,377.56 points.

Commodities Recap

Crude oil prices declined as signs of an economic slowdown amid international trade disputes began to outweigh supply fears that were stoked by attacks on oil tankers in the Gulf of Oman last week. International benchmark Brent crude was trading 0.4 percent lower at $61.78 per barrel by 0959 GMT, having hit a low of $59.55 on Wednesday, its lowest since June 5. U.S. West Texas Intermediate was trading 0.6 percent down at $52.17 a barrel, after falling as low as $50.71 on Wednesday, its lowest since the June 5.

Gold prices slumped, retreating from a 14-month peak hit in the previous session, as the dollar held firm near multi-week highs on strong U.S. retail sales data. Spot gold was down 0.6 percent at $1,333.77 per ounce by 1002 GMT, having touched a high of $1,358.06 on Friday, its highest since April 11. U.S. gold futures were down 0.2 percent at $1,341.70 an ounce.

Treasuries Recap

The U.S. Treasuries suffered during the afternoon session, amid a muted trading session that witnessed data of little economic significance ahead of the Federal Reserve’s monetary policy meeting on June 19 at 18:00GMT. The yield on the benchmark 10-year Treasury yield jumped 2 basis points to 2.115 percent, the super-long 30-year bond yields also surged 2 basis points to 2.613 percent and the yield on the short-term 2-year traded nearly 3-1/2 basis points higher at 1.883 percent.

The German bunds traded lower during European trading session ahead of the European Central Bank (ECB) President Mario Draghi’s speech, scheduled to be delivered today by 17:00GMT and the country’s ZEW economic sentiment index for the month of June, due to be released on June 18 by 09:00GMT, besides, a host of other economically significant data. The German 10-year bond yields, which move inversely to its price, rose 1-1/2 basis points to -0.242 percent, the yield on 30-year note surged nearly 2 basis points to 0.339 percent and the yield on short-term 2-year traded nearly 1-1/2 basis points higher at -0.677 percent.

The Japanese government bonds ended higher as investors wait to watch the country’s trade balance data for the month of May, scheduled to be released on June 18 by 23:50GMT and the Bank of Japan’s (BoJ) monetary policy meeting, due to be held on June 20, which shall provide further direction to the debt market. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, slumped 12-1/2 basis points to -0.124 percent, the yield on the long-term 30-year slightly slipped to 0.370 percent and the yield on short-term 2-year remained flat at -0.197 percent.

The Australian government bonds plunged during early Asian session of the first trading day of the week as investors wait to watch the Reserve Bank of Australia’s (RBA) June monetary policy meeting minutes, scheduled to be released on June 18 by 01:30GMT and Governor Philip Lowe’s speech, due on the following day by 01:15GMT for further direction in the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 2 basis points to 1.402 percent, the yield on the long-term 30-year bond edged nearly 1-1/2 basis points higher to 2.030 percent and the yield on short-term 2-year surged 3 basis points to 1.038 percent by 04:30GMT.

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July 2 15:00 UTC Released

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