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Europe Roundup: Euro rebounds on upbeat CPI figures, dollar rises against yen as BoJ rules out early exit from stimulus, European shares rally – Friday, June 16th, 2017

Market Roundup

  • EUR/USD +0.28%, USD/JPY +0.35%, GBP/USD +0.09%, EUR/GBP +0.16%
     
  • DXY -0.08%, DAX +0.32%, FTSE +0.66%, Brent +0.79%, Gold +0.22%
     
  • BOJ kept monetary policy steady, rules out early exit from stimulus
     
  • China C. bank plans fresh incentives to support green financing
     
  • ECB's Villeroy says bank capital talks must be wrapped up
     
  • Russia's military says may have killed IS leader Baghdadi
     
  • British PM faces mounting criticism over London tower block blaze
     
  • Eurozone May Inflation final mm -0.1% vs previous 0.4%
     
  • Eurozone May Inflation final yy 1.4% vs previous 1.4%

     

  • Oil prices bounce but stuck near 2017 lows on supply overhang
     
  • EUR/JPY back over 21-DMA at 124.17 for first time in near 2-weeks
     
  • A thin daily Ichimoku cloud 111.82-112.21 may attract USD/JPY

Economic Data Ahead

  •  (0830 ET/1230 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to1.215 million units in May from 1.172 million units in April.
     
  • (0830 ET/1230 GMT) The U.S. building permits are likely to have increased to 1.250 million units in May from 1.228 million units in April.
     
  • (0830 ET/1230 GMT) The Statistics Canada will report foreign portfolio investment in domestic stocks for the month of April.
     
  • (0830 ET/1230 GMT) The Statistics Canada will release investment in foreign securities figures for the month of April.
     
  • (1000 ET/1400 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index remained unchanged at 97.1 in June.
     
  • (1005 ET/1405 GMT) The Fed releases its labor market conditions index (LMCI) for the month of May. The indicator posted a gain of 3.5 in the previous month.
     
  • (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count. 
     

Key Events Ahead

  • (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae securities (max $950 mn)
  • (1245 ET/1645 GMT) Federal Reserve Bank of Dallas President Robert Kaplan will on recent softness in inflation and the effect of Trump's policies on the economy in a session at the Park Cities Rotary Club, in Dallas, Texas.

FX Beat

DXY: The dollar rose to a 2-week high against the Japanese yen after Bank of Japan kept monetary policy steady and ruled out early exit from stimulus. The greenback against a basket of currencies traded 0.1 percent down at 97.37, having touched a low of 96.32 on Wednesday, it’s lowest since Nov 9.

EUR/USD: The euro edged up, rebounding from a 2-week low hit in the previous session after data showed Eurozone final CPI came in line with expectations. The economy's consumer price index arrived at -0.1 percent m/m in May, while on an annual basis it stood at 1.4 percent. The European currency traded 0.3 percent up at 1.1178, having touched a low of 1.1132 the day before, its lowest since May 30. The upside remains capped by major resistance around 1.1300 and any break above that level will take the pair till 1.13660/1.14350. On the lower side, near term support is around 1.1100 (May 30 low) and any break below will drag it down till 1.0750 (May 18 low)/1.1000.

USD/JPY: The dollar advanced to a fresh 2-week high as Bank of Japan's decision to leave its monetary policy unchanged and subsequent comments by BoJ Governor Kuroda on stimulus weighed heavily on the Japanese yen. The major traded 0.3 percent up at 111.29, rebounding from a low of 108.81 touched on Wednesday, its lowest since Apr. 20. 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 111.42 (89- EMA) will take it to next level till 112.12/113 likely.

GBP/USD: Sterling rose, extending previous session gains, as a hawkish vote surprise from the Bank of England continued to underpin the sentiment around the cable. Moreover, a rebound in oil prices combined with positive European equities boosted risk-on sentiment across the board. The major traded 0.2 percent up at 1.2775, retreating from a low of 1.2635 hit on Friday, its weakest since Apr 18. On the lower side, the near term support is around 1.2614 and any break below will drag the pair till 1.2585/ (200- day MA)/1.2470 (61.8% retracement of 1.21088 and 1.30470). The near term minor resistance in the 4-hour chart is around 1.2816 (89- EMA) and any break above will take it till 1.2840 (50% retracement of 1.30476 and 1.26359)/1.2890 (200 MA). Against the euro, the pound traded 0.1 percent down at 87.45 pence, having hit a 1-week high of 87.19 earlier.

USD/CHF: The Swiss franc edged up after falling to a 2-week low in the previous session on the back of upbeat U.S. economic data. The major trades 0.1 percent down at 0.9742, having touched a high of 0.9770 on Thursday, its highest since May 30. Technically the pair has been facing strong resistance around 0.9808 (May 30th high) and any close above will take it till 0.9845/0.9900. On the lower side, major support is around 0.9615 and any break below will drag it down till 0.9580/0.9520 (161.8% retracement of 0.9614 and 0.97393).

AUD/USD: The Australian dollar rose above the 0.7600 handle as a rebound in crude oil prices from recent lows and positive sentiment around the global equity markets underpinned the risk sentiment across the board.  The Aussie trades 0.4 percent up at 0.7618, hovering towards a high of 0.7635 hit on Wednesday, it’s strongest since Apr 3. On the lower side, near term support is around 0.7530 (200- day MA) and any break below will drag the pair till 0.7485 (21 – EMA)/0.7385 (61.8% retracement of 0.71599 and 0.77493) /0.7325/0.7300. The near term resistance is around 0.7650 and any break above targets 0.7700/0.7745.

Equities Recap

European shares rebounded from two days of losses following a rise in auto and retail sector stocks, while the dollar rallied to a 2-week peak against the yen following BoJ's policy decision.

The pan-European STOXX 600 index climbed 0.6 percent to 388.53 points, while the FTSEurofirst 300 index gained 0.6 percent to 1,527.54 points.

Britain's FTSE 100 trades 0.6 percent up at 7,468.95 points, while mid-cap FTSE 250 rallied 0.9 percent to 19,745.45 points.

Germany's DAX rose 0.5 percent at 12,749.14 points; France's CAC 40 trades 0.8 percent higher at 5,260.39 points.

Commodities Recap

Crude oil prices edged up from 2017 lows, however, were on track for their fourth consecutive weekly decline as an ongoing supply excess weighed on markets. International benchmark Brent crude was trading 1.0 percent up at $47.24 per barrel by 0952 GMT, having hit a low of $46.70 on Thursday, its weakest since May 5. U.S. West Texas Intermediate traded 0.9 percent at $44.62 a barrel, after falling as low as $44.21 the prior day, its lowest since May 5.

Gold prices steadied after hitting a three-week low in the previous session, but were on track for a second weekly fall as upbeat U.S. economic data supported the dollar. Spot gold rose 0.1 percent up at $1,255.44 per ounce by 0955 GMT, having hit its weakest since May 24 at $1,251.32 on Thursday. U.S. gold futures for August delivery rose 0.1 percent to $1,256.4.

Treasuries Recap

The U.S. Treasuries remained weaker as investors wait to watch the Federal Open Market Committee (FOMC) member Kaplan’s speech, scheduled for later in the day. The yield on the benchmark 10-year Treasury, rose 1 basis point to 2.17 percent, the super-long 30-year bond yields hovered around 2.78 percent and the yield on short-term 2-year note also traded flat at 1.35 percent.

The UK gilts remained tad lower as investors booked in profits amid a muted trading session that witnessed no data of economic significance. Also, the Bank of England (BoE) kept the benchmark interest rate unchanged at the monetary policy meeting, held late yesterday. The yield on the benchmark 10-year gilts, rose 1 basis point to 1.04 percent, the super-long 30-year bond yields also climbed 1 basis point to 1.74 percent and the yield on the short-term 2-year traded 1/2 basis point higher at 0.17 percent.

The Eurozone periphery bonds traded weak after reading the zone’s consumer price inflation index (CPI) data, which remained unchanged during the month of May, compared to that in the previous month. The benchmark German 10-year bond yields, jumped 2 basis points to 0.31 percent, the French 10-year bond yields, rose 1 basis point to 0.64 percent, Irish 10-year bond yield climbed nearly 1 basis point to 0.70 percent; however, Italian equivalent fell nearly 1 basis point to 1.96 percent, Netherlands 10-year bonds yield traded surged 1-1/2 basis points to 0.52 percent, Portuguese equivalents nose-dived remained almost flat at 2.86 percent and the Spanish 10-year yields traded 3 basis points higher at 1.45 percent.

The Japanese government bonds traded modestly lower after the Bank of Japan (BoJ) maintained its benchmark interest rate unchanged at its 2-day monetary policy meeting, concluded early today. The benchmark 10-year bond yield, hovered around 0.05 percent, the long-term 30-year bond yields rose nearly 1 basis point to 0.80 percent and the yield on the short-term 3-year note traded 1/2 basis point higher at -0.10 percent.

The New Zealand bonds slumped at the time of closing as investors remained side-lined in any major trading activity amid a silent session that witnessed data of little economic significance. Also, investors are eyeing the GlobalDairyTrade (GDT) price auction, scheduled for early next week. At the time of closing, the yield on the benchmark 10-year bond, surged 5 basis points to 2.79 percent, the yield on 7-year note jumped 3-1/2 basis points to 2.68 percent and the yield on short-term 2-year note ended 2 basis points higher at 1.95 percent.

The Australian bonds plunged as investors booked in profits after a long rally this week. Also, weakness in the United States counterpart added to the sluggishness in the country’s debt market. The yield on the benchmark 10-year Treasury note, jumped nearly 5-1/2 basis points to 2.42 percent, the yield on 15-year note surged 5 basis points to 2.78 percent while the yield on short-term 2-year traded nearly 4 basis points higher at 1.69 percent.


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