Market Roundup
- U.S., Chinese negotiators hold constructive phone talks on trade
- UK economy expands in May as autos rebound
- French industry posts biggest monthly output gain since late 2016
- Fed's Powell likely to focus on trade-inspired policy shift in testimony
- Fed's George says does not look like inflation set to surge
- Oil prices rise after U.S. stockpiles drop, rigs evacuated
- Gold slips ahead of Powell's testimony
Economic Data Ahead
- (1000 ET/1400 GMT) The U.S. Census Bureau is likely to report that wholesale inventories rose 0.4 percent in May after posting a similar gain in the prior month.
- (1000 ET/1400 GMT) Bank of Canada will meet to announce its benchmark interest rate, where it is expected to hold interest rates at 1.75 percent.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending July 5.
- (1400 ET/1800 GMT) The Federal Open Market Committee issues minutes of its latest policy meeting.
Key Events Ahead
- (1000 ET/1400 GMT) Federal Reserve Chairman Jerome Powell will speak on the first day of his congressional testimony, before the House Financial Services Committee in Washington.
- (1015 ET/1415 GMT) Bank of Canada Governor Stephen S. Poloz's presser
- (1310 ET/1710 GMT) Bank of England Monetary Policy Committee member Silvana Tenreyro's speech
- (1310 ET/1710 GMT) Federal Reserve Bank of St. Louis President James Bullard gives a speech
FX Beat
DXY: The dollar index steadied near a 3-week peak, ahead of Federal Reserve Chairman Jerome Powell’s congressional testimony due later in the day. The greenback against a basket of currencies traded 0.05 percent up at 97.47, having touched a high of 97.59 on Tuesday, its highest since June 19.
EUR/USD: The euro rebounded from a 3-week low, boosted by strong industrial output data from France and Italy. Data released earlier showed French industrial output rose 2.1 percent in May, its biggest monthly jump since November 2016, while industrial production figure for April was revised to 0.5 percent from 0.4 percent previously. The European currency traded 0.2 percent up at 1.1224, having touched a low of 1.1193 on Tuesday, its lowest since June 19. Immediate resistance is located at 1.1246 (23.6% retracement of 1.1412 and 1.1193), a break above targets 1.1304 (50.0% retracement). On the downside, support is seen at 1.1181 (June 18 Low), a break below could drag it below 1.1141 (May 21 Low).
USD/JPY: The dollar surged to a fresh 1-1/2 month high as investors awaited U.S. Federal Reserve Chair Jerome Powell’s testimony that could determine the path of future interest rate cuts. The pair was also supported by White House economic adviser Larry Kudlow comments, stating that the U.S. and Chinese trade officials held a constructive phone conversation. The pair was trading up at 108.89, having hit a high of 108.99 earlier, its highest since May 31. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. wholesale investors and Fed Chair Powell's testimony. Immediate resistance is located at 109.08, a break above targets 109.62 (May 31 High). On the downside, support is seen at 108.46 (June 17 Low), a break below could take it lower at 107.81 (June 5 Low).
GBP/USD: Sterling rebounded from a 6-month low after data showed Britain’s economy grew by more than expected in May, boosted by a rebound in car production after Brexit-related shutdowns. The economy's overall output expanded 0.3 percent after contracting by 0.4 percent in April and surpassing forecast of 0.1 percent gain. The major traded rose 0.2 percent to 1.2482, having hit a low of 1.2439 on Tuesday, it’s lowest since Jan. 3. Immediate resistance is located at 1.2521 (23.6% retracement of 1.2783 and 1.2439), a break above could take it near 1.2611 (50% retracement). On the downside, support is seen at 1.2400, a break below targets 1.2363. Against the euro, the pound was trading flat at 89.92 pence, having hit a low of 90.10 earlier, it’s lowest since Jan. 11.
USD/CHF: The Swiss franc edged up, retreating from a 3-week low hit in the previous session, as markets cautiously wait to see if Fed Chair Jerome Powell would give more clues on its plans during Congressional testimony starting today. The major trades 0.2 percent down at 0.9914, having touched a high of 0.9951 the day before; it’s highest since June 19. On the higher side, near-term resistance is around 0.9959 (June 12 High) and any break above will take the pair to next level till 0.9999 (June 17 High). The near-term support is around 0.9872 (21-DMA), and any close below that level will drag it till 0.9834 (July 3 Low).
Equities Recap
European shares declined as investors remained cautious ahead of U.S. Federal Reserve Chair Jerome Powell’s testimony that could determine the path of future interest rate cuts.
The pan-European STOXX 600 index fell 0.2 percent at 387.27 points, while the FTSEurofirst 300 slumped 0.1 percent to 1,526.38 points.
Britain's FTSE 100 trades 0.1 percent down at 7,528.22 points, while mid-cap FTSE 250 eased 0.2 to 19,435.34 points.
Germany's DAX declined 0.4 percent at 12,388.71 points; France's CAC 40 trades 0.1 percent lower at 5,564.43 points.
Commodities Recap
Crude oil prices rose to a 1-week peak after industry data showed U.S. stockpiles fell far more than expected, while major U.S. producers evacuated rigs in the Gulf of Mexico ahead of a brewing storm. International benchmark Brent crude was trading 1.3 percent higher at $65.44 per barrel by 0925 GMT, having hit a high of $65.44 earlier, its highest since July 2. U.S. West Texas Intermediate was trading 1.2 percent up at $59.00 a barrel, after rising as high as $59.16 earlier, its highest since the July 2.
Gold prices eased as the greenback rallied on reduced expectations of a sharp U.S. interest rate cut and ahead of Federal Reserve Chairman Jerome Powell’s congressional testimony due later in the day. Spot gold was trading 0.1 percent down at $1,395.63 per ounce by 0929 GMT, having touched a high of $1,437.66 last week, its highest since June 25. U.S. gold futures slipped 0.4 percent to $1,395.60 an ounce.
Treasuries Recap
The U.S. Treasuries slumped during the afternoon session, ahead of the Federal Reserve Chair Jerome Powell’s testimony, scheduled to be held today by 19:30GMT, besides, the country’s benchmark 10-year auction and FOMC member Bullard’s speech, both due later today. Further, the Fed’s latest monetary policy meeting minutes, scheduled to be released today at 23:30GMT, will provide further direction to the debt market. The yield on the benchmark 10-year Treasury yield surged nearly 4-1/2 basis points to 2.100 percent, the super-long 30-year bond yields jumped 5 basis points to 2.582 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 1.921 percent.
The German bunds plunged during European session ahead of the European Central Bank’s (ECB) account of monetary policy meeting for the month of June and the country’s consumer price inflation (CPI), both scheduled for July 11 by 17:00GMT and 11:30GMT respectively. The German 10-year bond yields, which move inversely to its price, jumped 6 basis points to -0.296 percent, the yield on 30-year note surged 7-1/2 basis points to 0.326 percent and the yield on short-term 2-year traded 1-1/2 basis points lower at -0.715 percent.
The Australian government bonds slumped during Asian trading session ahead of the Reserve Bank of Australia’s (RBA) Assistant Governor Guy Debelle’s speech, due to be held on July 11 by 06:40GMT and most importantly, Federal Reserve Chair Jerome Powell’s scheduled testimony tomorrow, which shall guide markets thoroughly. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 2-1/2 basis points to 1.351 percent, the yield on the long-term 30-year bond surged 2 basis points to 1.977 percent and the yield on short-term 2-year traded 1-1/2 basis points higher at 0.981 percent.
