Market Roundup
- EUR/USD -0.29%, USD/JPY +0.34%, GBP/USD -1.49%, EUR/GBP +1.25%
- DXY +0.49%, DAX +0.52%, FTSE +0.66%, Brent +0.46%, Gold -0.35%
- Britain in political chaos after election shock, uncertainty over Brexit talks
- Hung parliament shock: Tories 8 shy of 326 majority
- Commons majority level falls to 322 when you exclude 7 Sinn Fein MPs
- Reports of DUP agreement to back Tory government. DUP won 10 seats
- Arab powers adds Qatar-linked people, groups to blacklists
- China tightens grip on yuan to head off economic risks
- Germany Apr trade balance 19.8B vs previous 19.6b revised 19.9b
- German inflation to miss ECB target for another year, Bundesbank ests show
- UK industrial output limped into Q2, even before new political chaos
- Great Britain Apr Industrial output yy -0.8% vs previous 1.4%
- Great Britain Apr Mfg output yy 0.0% vs previous 2.3% revised +2.2%
- Great Britain Apr Goods trade balance -10.383b vs previous -13.44b revised -12.04b
- China May PPI +5.5 pct y/y (poll +5.7 pct), slows for 3rd month
- French central bank raises growth forecast, sees deficit cap missed
- Oil prices resume slide as supply glut prevails
- BoJ Gov Kuroda – Still far to go to reach 2% inflation target
- Japan May money supply M2 +3.9% y/y, M3 +3.4%, broadest liquidity +2.8%
Economic Data Ahead
- (0830 ET/1230 GMT) Canada's reports its industrial capacity utilization figures for the first quarter. The indicator rose to 82.2 percent in the previous quarter.
- (0830 ET/1230 GMT) Canada's job market report is expected to show the economy added 11,000 jobs in May, after adding 3,200 jobs in the month before. The unemployment rate is likely to edge up to 6.6 percent from 6.5 percent in April. The participation rate stood at 65.6 percent in the previous month.
- (0900 ET/1300 GMT) Mexico's industrial output is likely to have decreased at an annualized rate of 2.4 percent in April, while on a monthly basis industrial output likely rose 0.3 percent.
- (1000 ET/1400 GMT) The U.S. Commerce Department is expected show that wholesale inventories rose 0.2 percent in April after decreasing 0.3 percent in March.
- (1000 ET/1400 GMT) The Investor's Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of June. The indicator posted a reading of 51.3 in the previous month.
- (1300 ET/1700 GMT) Baker Hughes reports United States Oil Rig Count.
Key Events Ahead
- N/A Canadian Finance Minister Bill Morneau is scheduled to host his U.S. counterpart, Steven Mnuchin, in Ottawa.
- (1145 ET/1545 GMT) FedTrade operation 15-year Fannie Mae / Freddie Mac (max $625 mn)
FX Beat
DXY: The dollar gained versus its major peers as the Fed is widely expected to hike interest rates after it ends a two-day meeting next week. The greenback against a basket of currencies traded 0.2 percent up at 97.37, having touched a high of 97.48 earlier, it’s highest since May 31. FxWirePro's Hourly Dollar Strength Index stood at 62.21 (Bullish) by 1100 GMT.
EUR/USD: The euro fell to a 1-week low as investors continued to digest Thursday's downward revision of ECB's inflation outlook through 2019 and the central bank's readiness to increase its asset-buying program. The European currency traded 0.3 percent down at 1.1180, having touched a high of 1.1285 last week, its highest since Nov 9. FxWirePro's Hourly Euro Strength Index stood at -40.24 (Neutral) by 1000 GMT. The pair has broken trend line support at 1.12295 and a decline till 1.1100 (May 30 low) is possible. Any break below 1.1100 confirms bearish continuation. On the higher side, major resistance is around 1.1300 and further bullish continuation is only above 1.13660/1.1430.
USD/JPY: The dollar rose, extending gains for the third consecutive session, as the Fed is widely expected to hike interest rates after it ends a two-day meeting on Wednesday. Investors focus will also remain on whether it would leave the door open for further monetary tightening in the months to come. The major traded 0.3 percent up at 110.33, having touched a low of 109.11 on Wednesday, its lowest since Apr. 21. FxWirePro's Hourly Yen Strength Index stood at -5.04 (Neutral) by 1000 GMT. The pair is facing support at 108 and any break below will drag the pair down till 106.80. On the higher side, near term resistance is around 110.77 (89 4H EMA) will take it to next level till 111.71 /112.12 likely.
GBP/USD: Sterling fell over 2 percent to a 7-week low against the dollar after Prime Minister Theresa May's Conservative Party lost its parliamentary majority in elections. Markets seem to have ignored poor results from the UK’s industrial sector, with industrial production and manufacturing production expanding less than forecasted during April. Sterling traded 1.5 percent down at 1.2755, having hit a low of 1.2635 earlier in the session, its weakest since Apr 18. FxWirePro's Hourly Sterling Strength Index stood at -47.89 (Neutral) by 1000 GMT. On the lower side, the pair has broken major support of 1.270 and this confirms major weakness, a decline till 1.2580/1.2515 likely. The near-term minor resistance is around 1.2836 (4H Kijun-Sen) and any break above will take it till 1.2900/1.2960. Against the euro, the pound traded 1.3 percent down at 87.67 pence, having hit a near 5-month low of 88.59 earlier.
USD/CHF: The Swiss franc declined to an over 1-week low as the greenback gained on the back of rising expectations of Fed hiking interest rates next week. The major trades 0.4 percent up at 0.9716, having touched a high of 0.9727 earlier, its highest since May 31. FxWirePro's Hourly Swiss Franc Strength Index stood at -138.57 (Highly Bearish) by 1000 GMT. Any break above 0.9808 high made on May 30 will take the pair till 0.9835 (38.2% retracement of 1.00998 and 0.96220)/0.9900/0.9925 (50- day MA). Any daily close below will 0.9617 will drag the pair down till 0.9580/0.95490 (Nov 9 low). Overall bearish invalidation is only above 1.03435.
AUD/USD: The Australian dollar eased after data showed domestic investment lending for homes slumped in April and China’s PPI eased in the month May. The Aussie trades 0.1 percent down at 0.7534, having hit a high of 0.7566 on Wednesday, it’s strongest since Apr 25. FxWirePro's Hourly Aussie Strength Index stood at 56.80 (Bullish) by 1100 GMT. On the lower side, near term support is around 0.7520 (21 –4H EMA) and any break below will drag the pair till 0.7450 (200 – 4H MA)/0.7385 (61.8% retracement of 0.71599 and 0.77493) /0.7325/0.7300. The near term resistance is around 0.75880 (61.8% retracement of 0.77479 and 0.73285) and any close above targets 0.7650/0.7700.
Equities Recap
European shares gained, while sterling tumbled to multi-week lows after Britain's election delivered no clear winner to claim power.
The pan-European STOXX 600 index rallied 0.1 percent to 389.55 points, while the FTSEurofirst 300 index advanced 0.1 percent to 1,531.12 points.
Britain's FTSE 100 trades 0.6 percent up at 7,497.55 points, while mid-cap FTSE 250 fell 0.3 percent to 19,676.02 points.
Germany's DAX gained 0.5 percent at 12,778.84 points; France's CAC 40 trades 0.4 percent higher at 5,288.67 points.
Commodities Recap
Crude oil prices steadied after tumbling to multi-week low earlier in the session, pressured by widespread evidence of a fuel glut despite efforts led by OPEC to tighten the market. International benchmark Brent crude was trading 0.4 percent up at $48.07 per barrel by 1030 GMT, having hit a low of $47.47 earlier, its weakest since May 5. U.S. West Texas Intermediate traded 0.4 percent up at $45.85 a barrel, after falling as low as $45.19 on Thursday, its lowest since May 5.
Gold prices declined, extending losses for a third session as the dollar strengthened after the UK national election left no single party with a claim to power. Spot gold was down 0.3 percent at $1,273.98 per ounce by 1036 GMT and was poised for its first weekly drop in five. U.S. gold futures for August delivery were 0.2 percent lower at $1,276.40.
Treasuries Recap
The U.S. Treasuries traded narrowly mixed in the midst of a political turmoil in the global economy, following the UK snap election that resulted in a hung Parliament amid the absence of any economically influential data. The yield on the benchmark 10-year Treasury, rose nearly 1 basis point to 2.20 percent, the super-long 30-year bond yields traded flat at 2.85 percent and the yield on short-term 1-year note traded nearly 1 basis point lower at 1.18 percent.
The UK gilts jumped on worries over the country’s hung Parliament after the Conservatives party fell short of a majority vote to secure its position as the ruling government. Prime Minister Theresa May’s surprise call for a snap election in the country has massively backfired, leaving investors and other market participants in the mid of an uncertain situation that calls for a coalition by May to form a ruling party. The yield on the benchmark 10-year gilts, plunged 2 basis points to 1.01 percent, the super-long 30-year bond yields slipped 1 basis point to 1.68 percent and the yield on the short-term 2-year traded 2-1/2 basis points lower at 0.09 percent.
The Eurozone periphery bonds gained, as investors poured into safe-haven instruments after Germany’s registered a softer trade surplus for the month of April, released earlier today. The benchmark German 10-year bond yields, fell 1 basis point to 0.26 percent, the French 10-year bond yields, slumped 3-1/2 basis points to 0.63 percent, Irish 10-year bond yield traded also plunged 3-1/2 basis points to 0.66 percent, Italian equivalent nose-dived 6-1/2 basis points to 2.12 percent, Netherlands 10-year bonds yield remained nearly flat at 0.47 percent, Portuguese equivalents hovered around 3.04 percent and the Spanish 10-year yields slipped nearly 3-1/2 basis points to 1.44 percent.
The Japanese government bonds traded flat, as markets lacked significant economic data at the end of the trading week. The benchmark 10-year bond yield, hovered around 0.05 percent, the long-term 30-year bond yields struggled 1/2 basis point lower at 0.82 percent and the yield on the short-term 2-year note traded flat at -0.10 percent.
The New Zealand remained flat at the time of closing in a silent trading session that witnessed no significant data. However, the ongoing distress surrounding the notion of a hung Parliament in the UK, after Prime Minister Theresa May failed to secure a winning majority has added further sluggishness to the country’s debt market. At the time of closing, the yield on the benchmark 10-year bond, hovered around 2.78 percent, the yield on 7-year note also traded flat at 2.68 percent and the yield on short-term 2-year note ended 1/2 basis point lower at 1.95 percent.
The Australian bonds traded flat after the United Kingdom’s general election results failed to secure PM May’s Conservatives Party a winning majority. Labour leader Jeremy Corby has already demanded her resignation, saying he had failed to get a bigger mandate. The Conservatives won 318 seats, much lower than their 330-seat majority in 2015. The yield on the benchmark 10-year Treasury note, hovered around 2.42 percent, the yield on the 15-year note fell 1 basis point to 2.80 percent while the yield on short-term 2-year traded 1 basis point higher at 1.62 percent.
