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Europe Roundup: Sterling plunges on hard Brexit fears, euro rebounds on upbeat EZ inflation figures, European shares surge - Wednesday, July 17th, 2019

Market Roundup

  • Eurozone inflation revised up to 1.3%
     
  • Kuroda says BOJ will debate policy this month on view economy on growth path
     
  • Bank of England says balance sheet likely to halve when quantitative easing reversed
     
  • UK house prices fall in May at fastest rate in a decade
  • IMF cuts forecast for Russian 2019 GDP growth forecast to 1.2%

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to 1.261 million units in June from 1.269 million units in May.
  • (0830 ET/1230 GMT) The U.S. building permits are likely to have increased to a 1.300 million-unit pace in June from a revised 1.299 million-unit pace in May.
     
  • (0830 ET/1230 GMT) Statistics Canada releases manufacturing shipments data for the month of May. Manufacturing sales are likely to have increased 1.6 percent after easing 0.6 percent in April.
     
  • (0830 ET/1230 GMT) Statistics Canada is expected to report that annual inflation rate rose 2.0 percent in June, after rising 2.4 percent in the previous month. While core consumer price index rose 0.3 percent in May.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending June 12.
     
  • (1400 ET/1800 GMT) The Fed issues its Beige Book, a summary of anecdotes on the health of the economy.
     

Key Events Ahead

  • No significant event scheduled

FX Beat

DXY: The dollar index steadied near a 1-week peak as surprisingly strong growth in U.S. retail sales in June soothed fears about the economy and trimmed expectations the Federal Reserve may embark on a deep interest rate cut later this month. The greenback against a basket of currencies traded 0.05 percent up at 97.35, having touched a low of 96.72 on Friday, its lowest since June 5.

EUR/USD: The euro rebounded from a 1-week low after data showed consumer prices in the eurozone increased by slightly more than initially projected in June. The bloc's prices were 1.3 percent higher year-on-year in June, compared with a flash estimate of 1.2 percent. The European currency traded 0.1 percent up at 1.1217, having touched a low of 1.1201 on Tuesday, 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 1.1160 (June 3 Low).

USD/JPY: The dollar consolidated within narrow ranges as investors waited for direction on interest rates from the Federal Reserve after robust U.S. retail sales data trimmed expectations of an aggressive interest rate cut by the Fed. The pair was trading flat at 108.23, having hit a low of 107.79 on Monday, its lowest since July 5. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. housing starts and building permits. Immediate resistance is located at 108.53 (July 1 High), a break above targets 108.80 (July 8 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 plunges to a fresh 6-1/2 month low as investors continued to price in the growing risk of Britain leaving the European Union without a transition arrangement in place. Moreover, data showing UK house prices eased at the fastest rate in almost 10 years in May further intensified the selling pressure around the British pound. The major traded flat at 1.2405, having hit a low of 1.2382 earlier, it’s lowest since Jan. 3. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2439 (23.6% retracement of 1.2578 and 1.2396), a break above could take it near 1.2466 (32.8% retracement). On the downside, support is seen at 1.2373 (Jan. 3 Low), a break below targets 1.2334. Against the euro, the pound was trading 0.1 percent down at 90.43 pence, having hit a low of 90.51 earlier, it’s lowest since Jan. 11.

USD/CHF: The Swiss franc slumped to a 5-day peak as the greenback steadied near a 1-week high on upbeat U.S. retail sales. Moreover, improving risk sentiment further dented the bid tone around the Swiss currency. The major trades 0.2 percent up at 0.9898, having touched a low of 0.9817 on Monday; it’s lowest since July 1. On the higher side, near-term resistance is around 0.9932 (July 5 High) and any break above will take the pair to next level till 0.9963 (June 6 High). The near-term support is around 0.9844 (July 11 Low), and any close below that level will drag it till 0.9791 (June 20 Low).

Equities Recap

European shares surged, boosted by upbeat corporate results, while the greenback advanced on the back of stronger than expected U.S. retail sales data.

The pan-European STOXX 600 index gained 0.1 percent at 389.34 points, while the FTSEurofirst 300 rallied 0.1 percent to 1,532.03 points.

Britain's FTSE 100 trades 0.1 percent down at 7,567.83 points, while mid-cap FTSE 250 eased 0.05 to 19,651.33 points.

Germany's DAX rose 0.05 percent at 12,434.24 points; France's CAC 40 trades 0.05 percent higher at 5,615.34 point.

Commodities Recap

Crude oil prices rose by more than 1 percent after data showed crude inventories fell by 1.4 million barrels in the week to July 12 to 460 million barrels. International benchmark Brent crude was trading 0.3 percent higher at $64.92 per barrel by 1034 GMT, having hit a low of $63.81 on Tuesday, its lowest since July 9. U.S. West Texas Intermediate was trading 0.9 percent up at $57.96 a barrel, after falling as low as $57.06 on Tuesday, its lowest since the July 5.

Gold prices eased to a 1-week low as the greenback held gains near a 1-week peak on the back of better than expected retail sales data from the United States. Spot gold fell 0.3 percent to $1,401.92 per ounce by 1043 GMT, having touched a high of $1,427.06 last week, its highest since July 3. U.S. gold futures for August delivery shed 0.6 percent to $1,403.10.4

Treasuries Recap

The U.S. Treasuries jumped during the afternoon session, amid a quiet session, despite the release of housing starts figures for June, which, are expected to show a further decline towards the end of the second quarter. The yield on the benchmark 10-year Treasury yield plunged 3 basis points to 2.090 percent, the super-long 30-year bond yields slumped 2-1/2 basis points to 2.608 percent and the yield on the short-term 2-year traded 1-1/2 basis points lower at 1.848 percent.

The United Kingdom’s gilts surged during European trading hours after the country’s consumer price inflation (CPI) for the month of June, released today, remained unchanged from that in May, also meeting market estimates. Investors will now eye the country’s retail sales for the month of June, scheduled to be released on July 18 by 14:00GMT. The yield on the benchmark 10-year gilts, plunged 4-1/2 basis points to 0.774 percent, the 30-year yield rose suffered nearly 1-1/2 basis points to 1.395 percent and the yield on the short-term 2-year slumped nearly 4 basis points to 0.549 percent.

The German bunds jumped during European session despite a better-than-expected rise in the eurozone’s consumer price inflation (CPI) for the month of June, released early today. The German 10-year bond yields, which move inversely to its price, slumped 2-1/2 basis points to -0.274 percent, the yield on 30-year note also suffered nearly 2-1/2 basis points to 0.304 percent and the yield on short-term 2-year traded tad down at -0.740 percent.

The Australian government bonds remained narrowly mixed during Asian session amid a muted trading session that witnessed data of little economic significance ahead of the country’s employment report for the month of June, scheduled to be released on July 18 by 07:00GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, traded tad higher at 1.402 percent, the yield on the long-term 30-year bond remained flat at 2.054 percent and the yield on short-term 2-year slipped 1 basis point to 0.950 percent.

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July 2 15:00 UTC Released

DKCurrency Reserves

Actual

449.6 Stale

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451.7 Stale

July 2 13:45 UTC Released

USISM NY Biz Conditions

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50 %

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48.6 %

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2016 bln ARS

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January 22 19:00 UTC 832151832151m

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-1541 %

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January 22 19:00 UTC 832151832151m

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-1541 %

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2016 bln ARS

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Bln AR bln ARS

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