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Europe Roundup: Sterling steadies near 10-month low on Brexit concerns, euro trims gains amid renewed Italian political tensions, European shares trade in red - Friday, July 20th, 2018

Market Roundup

  • EUR/USD 0.04%, USD/JPY -0.11%, GBP/USD 0.05%, EUR/GBP 0.02%
     
  • DXY -0.04%, DAX -0.92%, FTSE -0.28%, Brent 0.41%, Gold 0.22%
     
  • Trump ready to put tariffs on $500 bln of Chinese imports, CNBC reports
     
  • EZ May Current Account NSA,EUR, 4.6 bln, 27.3 bln previous
     
  • EZ May Current Account SA, EUR 22.4 bln, 28.4 bln previous, 29.6 bln revised
     
  • Germany Jun Producer Prices MM, 0.3%, 0.3% forecast, 0.5% previous
     
  • Germany Jun Producer Prices YY, 3.0%, 2.9% forecast, 2.7% previous
     
  • Britain records slightly larger than expected budget deficit in June
     
  • UK's May demands new deal from EU on Irish border backstop
     
  • UK PMI data suggests Q1 weakness was temporary - BoE's Tenreyro
     
  • China's policy debate deepens as trade war threatens economy
     
  • Merkel says U.S. auto tariffs a threat to the prosperity of many
     
  • Republicans upbeat about November elections despite Trump-Putin uproar
     
  • Oil prices rise, but still set for weekly drop on oversupply, trade worries
     
  • Gold edges up as U.S. dollar trades below 1-year highs

Economic Data Ahead

  • (0830 ET/1230 GMT) Statistics Canada is expected to report that retail sales gained 1.1 percent in May after declining 1.2 percent in April. While excluding autos, retail sales are likely to have risen 0.7 percent, after easing 0.1 percent in the previous month.
     
  • (0830 ET/1230 GMT) The Statistics Canada is expected to report that annual inflation rate rose 2.4 percent in June from 2.2 percent in May, while core consumer price index fell 0.1 percent in May.
     
  • (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events Ahead

  • (0820 ET/1220 GMT) Federal Reserve Bank of St. Louis President James Bullard gives a presentation on the U.S. economy and monetary policy before the Glasgow Chamber of Commerce in Glasgow, Kentucky.

FX Beat

DXY: The dollar index declined, hovering away from a yearly high touched in the prior session after U.S. President Donald Trump criticized Federal Reserve policy and expressed concerns about the potential impact on the U.S. economy and American corporate competitiveness from rising rates and a stronger dollar. The greenback against a basket of currencies trades 0.1 percent down at 95.10, having touched a high of 95.65 on Thursday, its highest since July 2017. FxWirePro's Hourly Dollar Strength Index stood at 59.48 (Bullish) by 0900 GMT.

EUR/USD: The euro trimmed gains as investors turned cautious on escalating tensions within the Italian coalition government. Additionally, comments from the Italian Head of the budget committee at the Lower House Claudio Borghi undermined the bid tone around the major. The European currency traded 0.05 percent up at 1.1645, having touched a high of 1.1744 on Tuesday, its highest since July 11. FxWirePro's Hourly Euro Strength Index stood at -27.45 (Neutral) by 0900 GMT. Immediate resistance is located at 1.1744 (June 4 High), a break above targets 1.1801 (June 13 High). On the downside, support is seen at 1.1613 (July 13 Low), a break below could drag it till 1.1600.

USD/JPY: The dollar extended losses for the third straight session after U.S. President Donald Trump expressed concern about a stronger greenback and Fed interest rate hikes. The major was trading 0.05 percent down at 112.40, having hit a high of 113.17 on Thursday, its highest since Jan 9. FxWirePro's Hourly Yen Strength Index stood at 84.70 (Slightly Bearish) by 0900 GMT. Immediate resistance is located at 113.38 (Dec 8 High), a break above targets 113.62 (Dec 21 High). On the downside, support is seen at 111.96 (10-DMA), a break below could take it lower 111.50.

GBP/USD: Sterling rebounded from a 10-month low touched in the previous session, as Prime Minister Theresa May has yet to reach a consensus within her own Conservative Party on the future ties with the European Union. The major traded 0.2 percent up at 1.3034, having hit a low of 1.2957 on Thursday; it’s lowest since Sept. 2017. FxWirePro's Hourly Sterling Strength Index stood at -65.54 (Bearish) 0900 GMT. Immediate resistance is located at 1.3133 (5-DMA), a break above could take it near 1.3189 (10-DMA). On the downside, support is seen at 1.2957 (July 19 Low), a break below targets 1.2910. Against the euro, the pound was trading 0.1 percent up at 89.37 pence, having hit a low of 89.57 earlier, it’s lowest since March 7.

USD/CHF: The Swiss franc edged up as the greenback weakened after U.S. President Donald Trump said a strong dollar puts the United States at a disadvantage. The major trades 0.1 percent down at 0.9980, having touched a high of 1.0068 last week, it’s highest since May 2017. FxWirePro's Hourly Swiss Franc Strength Index stood at 18.57 (Neutral) by 0900 GMT. On the higher side, near-term resistance is around 1.0040.and any break above will take the pair to next level till 1.0070. The near-term support is around 0.9968 (10-DMA) and any close below that level will drag it till 0.9958 (21-DMA).

Equities Recap

European shares tumbled, weighed down by losses in autos and banks stocks, while the greenback eased after U.S. President Donald Trump expressed concern about the U.S. currency's strength.

The pan-European STOXX 600 index slumped 0.6 percent at 383.86 points, while the FTSEurofirst 300 index plunged 0.5 percent to 1,506.04 points.

Britain's FTSE 100 trades 0.4 percent down at 7,655.17 points, while mid-cap FTSE 250 declined 0.4 percent to 20,835.46 points.

Germany's DAX fell 0.7 percent at 12,593.65 points; France's CAC 40 trades 0.8 percent lower at 5,373.05 points.

Commodities Recap

Crude prices rallied but were on course for a weekly decline on concerns about oversupply and the ongoing trade conflict between the United States and China. International benchmark Brent crude was trading 0.5 percent up at $72.88 per barrel by 1034 GMT, having hit a low of $71.19 on Wednesday, its lowest since April 17. U.S. West Texas Intermediate was trading 1.7 percent lower at $68.25 a barrel, after falling as low as $67.08 on Tuesday, its lowest since June 22.

Gold prices gained, retreating from a 1-year low touched in the previous session, as the U.S. dollar eased from its highest in a year. Spot gold was trading 0.1 percent up at $1,224.34 an ounce at 1036 GMT, after recording the lowest since early July at $1,211.45 on Thursday. U.S. gold futures were little changed at $1,224.40 an ounce.

Treasuries Recap

The U.S. Treasury yields remained flat during the late European session, after moving lower overnight, following President Donald Trump’s pessimistic comments over the Federal Reserve’s rate hikes, besides threatening markets with a worse action on Russia if Putin fails to maintain a relationship with the former. The yield on the benchmark 10-year Treasuries steadied at 2.84 percent, the super-long 30-year bond yields flat at 3.00 percent and the yield on the short-term 2-year hovered around 2.59 percent.

The United Kingdom’s gilts remained tad lower during European session as investors side-lined from any major trading activity amid lack of economically significant data. The yield on the benchmark 10-year gilts, slipped 1/2 basis point to 1.18 percent, the super-long 30-year bond yields fell nearly 1 basis point to 1.65 percent and the yield on the short-term 2-year hovered around 0.72 percent.

The New Zealand bonds ended lower on the last trading day of the week after the country’s domestic stock index NZX50 closed the day on a higher note, snapping recent losses, as Fisher & Paykel Healthcare Corp and Ryman Healthcare stocks supported investors’ sentiments. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, slid 1 basis point to 2.89 percent, the yield on the long-term 20-year note also slipped 1 basis point to 3.21 percent and the yield on short-term 2-year closed 1-1/2 basis points lower at 1.85 percent.

The Japanese government bonds remained tad higher as investors had largely shrugged-off the improvement in the country’s national core consumer price inflation data for the month of June, although the non-core CPI remained unchanged, missing market expectations as well. The yield on Japan’s benchmark 10-year bond, which moves inversely to its price, slipped 1 basis point to 0.03 percent, the yield on the long-term 30-year hovered around 0.68 percent and the yield on short-term 2-year remained tad lower at -0.12 percent.

The Australian bonds gained on last trading day of the week along with U.S. Treasuries after President Donald Trump questioned Federal Reserve interest rate hikes and strong dollar. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 5 basis points to 2.628 percent, the yield on the long-term 30-year Note also dipped 5 basis points to 3.096 percent and the yield on short-term 2-year down 2 basis points to 2.048 percent.

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