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Europe Roundup: Sterling rallies as UK retail sales rebound, euro declines as investors expect ECB to move rates deeper into negative, European shares consolidate - Thursday, July 18th, 2019

Market Roundup

  • UK retail sales jump in June
     
  • Dollar falls on U.S. rate cut bets
     
  • Sterling recovers on upbeat retail sales
     
  • Gold eases from 2-week high on profit-taking
     
  • UK may enter full-blown recession: Budget Watchdog
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 7,000 to a seasonally adjusted 216,000 for the week ended Jul. 12, while continuing claims for the week ended Jul. 5 is expected to decline to 1.700 million from a previous reading of 1.723 million.
     
  • (0830 ET/1230 GMT) Philadelphia Federal Reserve manufacturing survey is likely to show that business activity index increased to 5.0 in July from 0.3 in May.
     
  • (0830 ET/1230 GMT) The ADP releases Canada's employment change data for the month of June. The economy shed 16,000 jobs in the previous month.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending July 12.
     

Key Events Ahead

  • (0930 ET/1330 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic gives a speech
     
  • (1415 ET/1815 GMT) Federal Reserve Bank of New York John Williams' speech

FX Beat

DXY: The dollar index declined as the U.S. Treasury yields declined following weaker than expected housing data, while investors awaited a policy meeting next week where Fed policymakers are set to cut interest rates for the first time in a decade. The greenback against a basket of currencies traded 0.05 percent down at 97.15, having touched a low of 96.72 on Friday, its lowest since June 5.

EUR/USD: The euro plunged, reversing most of its previous session losses, as investors expected the European Central Bank to follow in the Fed’s footsteps. The ECB is likely to move policy rates deeper into negative later this year as the eurozone economy continues to struggle. The European currency traded 0.1 percent down at 1.1212, having touched a low of 1.1199 earlier, its lowest since July 9. Immediate resistance is located at 1.1278 (38.2% retracement of 1.1412 and 1.1193), a break above targets 1.1304 (50.0% 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 slumped to a 2-week low amid growing expectations the Federal Reserve will cut a total of 75 basis points by the end of the year. Moreover, increasing signs that a trade dispute between the United States and China was taking a toll on corporate earnings further dented the bid tone around the pair.  The major was trading 0.1 percent down at 107.87, having hit a low of 107.61 earlier, its lowest since July 3. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims and the Philadelphia Fed manufacturing survey. 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 surged, extending previous session's rebound after data showed British retail sales bounced unexpectedly in June, boosted by sales of antiques and second-hand clothes. The economy's retail sales jumped 1.0 percent in June, well above forecasts for a 0.3 percent drop. The major traded 0.5 percent up at 1.2493, having hit a low of 1.2382 on Wednesday, 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 1.2510 (61.8% retracement of 1.2578 and 1.2396), a break above could take it near 1.2542 (78.6% 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 0.5 percent up at 89.83 pence, having hit a low of 90.51 on Wednesday, it’s lowest since Jan. 11.

USD/CHF: The Swiss franc edged up as investors remained cautious over the uncertainty whether the talks between the United States and China will resume. The major trades 0.05 percent down at 0.9878, 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 0.9817 (July 15 Low), and any close below that level will drag it till 0.9778 (July 1 Low).

Equities Recap

European shares consolidated within narrow ranges amid concerns over corporate health as progress towards a U.S.-China trade deal stalled.

The pan-European STOXX 600 index gained 0.05 percent at 387.60 points, while the FTSEurofirst 300 rallied 0.05 percent to 1,525.49 points.

Britain's FTSE 100 trades 0.3 percent down at 7,513.73 points, while mid-cap FTSE 250 eased 0.3 to 19,552.52 points.

Germany's DAX eased 0.5 percent at 12,277.86 points; France's CAC 40 trades 0.05 percent higher at 5,572.86 point.

Commodities Recap

Crude oil prices surged by more than 1 percent amid mixed signals from the United States and Iran. International benchmark Brent crude was trading 1.2 percent higher at $64.26 per barrel by 1101 GMT, having hit a low of $63.20 on Wednesday, its lowest since July 5. U.S. West Texas Intermediate was trading 1.2 percent up at $57.21 a barrel, after falling as low as $56.19 on Wednesday, its lowest since the July 3.

Gold prices plunged from a 2-week high hit earlier in the session on profit-booking; however, increased expectations of a dovish monetary policy stance from the U.S. Federal Reserve limited downside.  Spot gold eased 0.5 percent to $1,418.88 an ounce by 1103 GMT, having touched a high of $1,430.02 earlier, its highest since July 3.

Treasuries Recap

The U.S. Treasuries slightly gained during the afternoon session, ahead of the country’s weekly initial jobless claims, besides, the Philly Fed and Conference Board’s Leading indices, all scheduled to be released today by 12:30GMT. The yield on the benchmark 10-year Treasury yield slipped 1/2 basis point to 2.057 percent, the super-long 30-year bond yields remained flat at 2.573 percent and the yield on the short-term 2-year traded 1 basis point lower at 1.826 percent.

The United Kingdom’s gilts remained tad higher during European trading hours despite a better-than-expected jump in the country’s retail sales for the month of June. The yield on the benchmark 10-year gilts, slipped 1 basis point to 0.750 percent, the 30-year yield rose also suffered 1 basis point to 1.372 percent and the yield on the short-term 2-year also edged nearly 1 basis point down to 0.528 percent.

The Australian government bonds jumped during Asian session tracking a similar movement in the U.S. Treasuries despite a tad higher growth in the country’s employment for the month of June, although unemployment rate remained unchanged. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 5-1/2 basis points to 1.346 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

Forecast

Previous

451.7 Stale

July 2 13:45 UTC Released

USISM NY Biz Conditions

Actual

50 %

Forecast

Previous

48.6 %

January 31 00:00 UTC 818375818375m

ARAnnual Primary Balance*

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Forecast

2016 bln ARS

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Bln AR bln ARS

January 31 00:00 UTC 818375818375m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

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Bln AR bln ARS

January 22 19:00 UTC 830195830195m

ARTrade Balance

Actual

Forecast

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-1541 %

January 31 00:00 UTC 818375818375m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 22 19:00 UTC 830195830195m

ARTrade Balance

Actual

Forecast

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-1541 %

January 31 00:00 UTC 818375818375m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 31 00:00 UTC 818375818375m

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Forecast

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Previous

Bln AR bln ARS

January 31 00:00 UTC 818375818375m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

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