Europe Roundup: Euro eases despite upbeat CPI figures, dollar index rebounds from 10-month low, European shares volatile - Monday, July 17th, 2017

Market Roundup

  • EUR/USD -0.08%, USD/JPY -0.04%, GBP/USD -0.17%, EUR/GBP +0.16%
  • DXY +0.05%, DAX -0.37%, FTSE +0.36%, Brent +0.29%, Gold +0.13%
  • EZ Jun Inflation final y/y, 1.3% vs forecast 1.3%, previous 1.3%
  • EZ Jun Inflation excluding food and energy y/y, 1.2% vs forecast 1.1%, previous 1.0%

  • China Q2 GDP y/y, 6.9% vs forecast 6.8%, previous 6.9%
  • As London squabbles, full Brexit talks start in Brussels
  • South Korea's new government proposes military talks with N. Korea
  • Oil edges above $49 on US drilling slowdown
  • Gold inches up as prospects for slower U.S. rate hikes weigh on dollar
  • Economic Data Ahead

    • (0830 ET/1230 GMT) The Federal Reserve Bank of New York is expected to report that manufacturing activity in New York State fell to 15 percent in July after rising 19.8 percent in June.
    • (0830 ET/1230 GMT) The Statistics Canada will report foreign portfolio investment in domestic stocks for the month of May.
    • (0830 ET/1230 GMT) The Statistics Canada will release investment in foreign securities figures for the month of May.
    • (1845 ET/2245 GMT) The Statistics New Zealand is likely to report that consumer price index rose at an annualized rate of 1.9 percent in the second quarter, while on a quarterly basis it is expected to rise 0.2 percent, after climbing 1.0 percent in the previous quarter.

    Key Events Ahead

    • (11475 ET/1545 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.325 bn)

    FX Beat

    DXY: The dollar steadied after falling to multi-week lows versus its major peers on diminishing worries of aggressive policy tightening in the United States. The greenback against a basket of currencies traded 0.1 percent up at 95.20, having touched a low of 95.07 earlier, it’s lowest since Sept. 22 FxWirePro's Hourly Dollar Strength Index stood at -127.00 (Highly Bearish) by 1000 GMT.

    EUR/USD: The euro declined despite data showing Eurozone final CPI data for the month of June in-line with expectations. The weakness comes in as the greenback attempted a minor recovery from ten-month troughs. The European currency traded down at 1.1458, having touched a high of 1.1489 on Wednesday, its highest since May 5, 2016. FxWirePro's Hourly Euro Strength Index stood at -19.40 (Neutral) by 1000 GMT. The pair is facing strong support at 1.13700 and any break below will drag the pair till 1.12900. On the higher side, minor near term resistance is around 1.1450 and any break above will take it till 1.1500/1.15600.

    USD/JPY: The dollar trimmed some of its recovery gains from near two-week lows, as diminishing risk appetite in the European equity markets benefited the Japanese Yen's safe-haven appeal. Moreover, the soft inflation and domestic demand figures released on Friday continued to undermine the prospects of the Federal Reserve interest rate hike in December. The major traded 0.1 percent down at 112.43, having hit a high of 114.49 last week, its highest since March 15. FxWirePro's Hourly Yen Strength Index stood at 64.24 (Bullish) by 1000 GMT. The near term resistance is around 114.50 and any break above targets 115.50. The pair is facing minor support at 112.60 and any close below will drag the pair till 111.75 (100- day MA).

    GBP/USD: Sterling eased after rising to a 10-months peak in the prior session as investors were cautious as four days of Brexit negotiations began in Brussels. Additionally, a minor recovery in the greenback across the board weakened the bid tone around the major. Sterling traded 0.3 percent down at 1.3061, having hit a high of 1.3113 on Friday, its highest since Sept. 22. FxWirePro's Hourly Sterling Strength Index stood at 116.02 (Highly Bullish) by 1000 GMT. On the higher side, the pair closed well above the temporary top formed at 1.30475 on Friday and this confirms minor trend reversal, a jump till 1.3200 likely. On the lower side, near term support is around 1.30470 (resistance turned into support, 23.6% retracement of 1.28118 and 1.31138) and any break below will drag the pair till 1.3000/1.2965 (daily Tenkan-Sen).

    USD/CHF: The Swiss franc edged up, extending previous session gains as a fresh bout of risk-aversion strengthened safe haven assets demand. The major trades 0.1 percent down at 0.9622, having touched a high of 0.9700 on Friday, it’s highest since Jun. 27. FxWirePro's Hourly Swiss Franc Strength Index stood at -97.94 (Slightly Bearish) by 1000 GMT. The pair is trading well below short term and long term MA and this confirms minor weakness a decline till 0.9550 likely. Any break below 0.9550 will drag it till 0.9520 /0.9440. On the higher side, it is facing minor trend line resistance around 0.9720 (trend line joining 0.98252 and 0.97708) and any break above will take it to next level till 0.97708/0.9808.

    AUD/USD: The Australian dollar rose, extending gains for the seventh straight session following upbeat Chinese macro data, which showed economic growth of 6.9 percent during April-June quarter, while industrial production and retail sales rose at an annualized rate of 7.6 percent and 11 percent, respectively. The Aussie trades up at 0.7826, having hit a high of 0.7834 on Friday, it’s highest since Jun. 18, 2015. FxWirePro's Hourly Aussie Strength Index stood at 105.00 (Highly Bullish) by 1000 GMT. On the lower side, near term support is around 0.7770 (daily Teneken-Sen) and any break below will drag the pair till 0.7715 /0.7630 (21- day EMA). The near term resistance is around 0.7850 and any break above targets 0.7900/0.7950.

    Equities Recap

    European shares reversed early session gains, following weak earnings report from companies, while the greenback rebounded from 10-month lows amid fading prospects of another U.S. interest rate hike this year.

    The pan-European STOXX 600 index declined 0.2 percent to 386.23 points, while the FTSEurofirst 300 index fell 0.2 percent to 1,517.73 points.

    Britain's FTSE 100 trades 0.2 percent up at 7,396.36 points, while mid-cap FTSE 250 gained 0.3 percent to 19,3468.14 points.

    Germany's DAX eased 0.5 percent at 12,574.22 points; France's CAC 40 trades 0.3 percent lower at 5,221.26 points.

    Commodities Recap

    Crude oil prices declined after rising to an 11-day high on the back of a slowdown in the growth of rigs drilling in the United States. International benchmark Brent crude was trading 0.2 percent down at $48.89 per barrel by 0922 GMT, having hit a high of $49.21, its strongest since Jul. 6. U.S. West Texas Intermediate traded 0.3 percent lower at $46.50 a barrel, after rising as high as $46.85, its strongest since Jul 5.

    Gold prices rose, extending previous session gains as the greenback tumbled to multi-month lows after the prospect for further Fed interest rate hikes this year dimmed following weak U.S. economic data last week. Spot gold gained 0.1 percent to $1,229.77 per ounce at 0942 GMT, having hit $1,232.74 on Friday, its highest since July 3. U.S. gold futures for August delivery climbed 0.2 percent to $1,229.50 per ounce.

    Treasuries Recap

    The U.S. Treasuries traded tad higher in a muted trading session that awaits data of little economic significance and ahead of the 10-year auction, scheduled to be held by later this week. The yield on the benchmark 10-year Treasury fell nearly 1 basis point to 2.32 percent, the super-long 30-year bond yields hovered around 2.91 percent and the yield on short-term 2-year note traded 1 basis point lower at 1.34 percent.

    The UK gilts jumped as investors wait to watch the country’s consumer price inflation for the month of May, scheduled to be released on July 18. Also, the Bank of England Governor Mark Carney’s speech, due on the same day will provide further direction to the debt market. The yield on the benchmark 10-year gilts, plunged 2-1/2 basis points to 1.28 percent, the super-long 30-year bond yields slumped 2 basis points to 1.90 percent and the yield on the short-term 2-year also traded nearly 2 basis points lower at 0.30 percent.

    The Eurozone periphery bonds trended higher after reading the zone’s consumer price-led inflation for the month of June, which met market expectations. Also, investors are eyeing the European Central Bank’s (ECB) monetary policy decision, scheduled to be held on July 20, which will add further direction to the debt market. The benchmark German 10-year bond yields, fell 1 basis point to 0.58 percent, the French 10-year bond yields slumped 1-1/2 basis points to 0.84 percent, Irish 10-year bond yields plunged 3-1/2 basis points to 2.26 percent, Italian also down 3-1/2 basis points to 2.25 percent, Netherlands 10-year bond yields lower nearly 1-1/2 basis points to 0.71 percent, Portuguese equivalents struggled 3-1/2 basis points lower at 3.52 percent and the Spanish 10-year yields 4 basis points lower at 1.61 percent.

    The New Zealand bonds ended narrowly mixed at the start of the trading week as investors are awaiting to read the country’s consumer price-led inflation for the second-quarter of this year, scheduled to be released on July 18. Also, market participants are eyeing the GlobaldairyTrade (GDT) price auction, due on the same day for further direction in the debt market. At the time of closing, the yield on the benchmark 10-year bond, rose 1/2 basis point to 2.99 percent, the yield on 7-year note also hovered around 2.87 percent while the yield on short-term 2-year note ended 2 basis points lower at 1.98 percent.

    The Australian bonds traded flat as investors remained muted in a silent trading session ahead of the Reserve Bank of Australia’s (RBA) July monetary policy meeting minutes, scheduled to be released on July 18. The yield on the benchmark 10-year Treasury note, hovered around 2.73 percent, the yield on 15-year note remained tad higher at 3.03 percent while the yield on short-term 2-year traded flat at 1.84 percent.


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