Europe Roundup: Sterling hits 1-week high on BoE rate hike expectations, dollar eases ahead of U.S. inflation data, European shares rally – Friday, July 14th, 2017

Market Roundup

  • EUR/USD +0.18%, USD/JPY -0.03%, GBP/USD +0.21%, EUR/GBP -0.06%
  • DXY -0.05%, DAX -0.04%, FTSE -0.28%, Brent +0.62%, Gold +0.19%
  • EZ May Eurostat Trade NSA (Eur), 21.4 bln, previous 17.9 bln
  • ECB wary of putting end-date on QE: sources
  • Sept most likely choice for ECB policy change; July a close call – POLL
  • Japan's June exports seen extending solid gains, BOJ set to hold fire
  • Japan raises FY 2017 forecasts for consumption, capex, housing
  • Japan PM Abe's support slides below 30 percent, new poll shows
  • U.S. judge narrows travel ban in defeat for Trump
  • UAE says it is headed for 'long estrangement' with Qatar
  • Oil firm as signs of higher demand outweigh worries of excess
  • Gold firmer as dollar retreats, but vulnerable to downside

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Commerce Department is expected to report that retail sales edged up 0.1 percent in June after declining 0.3 percent in May. While excluding autos, retail sales are likely to have gained 0.2 percent, after falling 0.3 percent in the previous month.
  • (0830 ET/1230 GMT) The U.S. consumer price index likely increased 0.1 percent in June after declining 0.1 percent in May. While in the 12 months through June, the CPI is expected to have risen 1.7 percent. Excluding food and energy, the core CPI probably rose 0.2 percent, after rising 0.1 percent in the previous month.
  • (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production rose 0.3 percent in June, after remaining unchanged in the prior month.
  • (0915 ET/1415 GMT) The Federal Reserve Board is expected to report that capacity utilization edged up to 76.7 percent in June from 76.6 percent in May.
  • (1000 ET/1400 GMT) The U.S. Commerce Department is expected to report that business inventories rose 0.3 percent in May, after falling 0.2 percent in April.
  • (1000 ET/1400 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index declined to 95.0 in July after posting a final reading of 95.1 in June.

Key Events Ahead

  • (0930 ET/1330 GMT) The Federal Reserve Bank of Dallas President Robert Kaplan speaks before the Conference on the Federal Reserve and Monetary Policy, hosted by the Center for Economic Studies of the Private Sector, Mexico City, Mexico.
  • (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae (max $1.1 bn)
  • (1300 ET/1700 GMT) Chicago Federal Reserve President Charles Evans will speak at the closing day of the Rocky Mountain Economic Summit in Victor, Idaho.

FX Beat

DXY: The dollar declined versus its major peers as U.S. Federal Reserve Chair Janet Yellen less hawkish comments faded expectations of a faster Fed rate tightening cycle. The greenback against a basket of currencies traded 0.1 percent down at 95.66, having touched a low of 95.46 the day before, it’s lowest since Oct. 3. FxWirePro's Hourly Dollar Strength Index stood at -43.21 (Neutral) by 1000 GMT.

EUR/USD: The euro rose after falling to a 1-week low in the previous session amid ongoing subdued trading activity around the greenback as investors awaited the crucial U.S. CPI figures for further direction. The European currency traded 0.2 percent up at 1.1414, having touched a high of 1.1489 on Wednesday, its highest since May 5, 2016. FxWirePro's Hourly Euro Strength Index stood at -26.96 (Neutral) by 1000 GMT. The pair is facing strong support at 1.1350 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 edged down against the yen after the Japanese government revised the FY 2017 forecasts for consumption, capex and housing higher, which provided some respite to the Yen bulls.  The major traded 0.1 percent down at 113.22, having hit a low of 112.86 the prior day, its lowest since Jul. 5. FxWirePro's Hourly Yen Strength Index stood at 26.00 (Neutral) by 1000 GMT. The near term resistance is around 114.50 and any break above targets 115.50. It is facing minor support at 112.50 and any break below will drag the pair till 111.75 (100- day MA).

GBP/USD: Sterling rose to fresh 1-week high as this week's labour market data strengthened the likelihood of an interest rate rise from the Bank of England. Moreover, offered tone around the greenback across the board supported the upside in the major. Sterling traded 0.2 percent up at 1.2969, having hit a high of 1.2970 earlier, its highest since Jul. 7. FxWirePro's Hourly Sterling Strength Index stood at 55.97 (Bullish) by 1000 GMT. It has formed minor resistance around at 1.3030 in the previous week and any break above targets 1.3050. On the lower side, near term support is around 1.2918 (daily Tenkan-Sen) and any break above 1.2870 (21- EMA)/1.2820 (55- EMA). Against the euro, the pound traded 0.1 percent up at 88.00 pence, having hit a 1-week high of 87.98 earlier.

USD/CHF: The Swiss franc fell to an over 2-week low as global stocks scaled to record highs on improving risk-on market sentiment.  The major trades 0.2 percent up at 0.9693, having touched a high of 0.9700 earlier, it’s highest since Jun. 27. FxWirePro's Hourly Swiss Franc Strength Index stood at -142.78 (Highly Bearish) by 1000 GMT. It is facing minor trend line resistance around 0.9725 (trend line joining 0.98252 and 0.97708) and any break above will take the pair to next level till 0.97708/0.9808. On the lower side, near term support stands at 0.9550 and any break below will drag it till 0.9520/0.94450.

AUD/USD: The Australian dollar rallied to a fresh 4-month high as a slump in the U.S. Treasury bond yields coupled with easing concerns of an economic slowdown in China provided an additional boost to the major. The Aussie trades 0.4 percent up at 0.7758, having hit a high of 0.7763 earlier, it’s highest since Mar. 21. FxWirePro's Hourly Aussie Strength Index stood at 113.28 (Highly Bullish) by 1000 GMT. On the lower side, near term support is around 0.7650 (5- day MA) and any break below will drag the pair till 0.7570/0.7530 (200- MA). The near term resistance is around 0.7780 and any break above targets 0.7835.

Equities Recap

European shares rose and were set for their best week in more than two months, as investors stampede into equities on signs that the world's major central banks would likely not tighten monetary policy as quickly as some had anticipated.

The pan-European STOXX 600 index added 0.03 percent to 386.25 points, while the FTSEurofirst 300 index fell 0.05 percent to 1,518.80 points.

Britain's FTSE 100 trades 0.2 percent down at 7,396.97 points, while mid-cap FTSE 250 fell 0.2 percent to 19,381.28 points.

Germany's DAX eased 0.03 percent at 12,637.88 points; France's CAC 40 trades 0.1 percent higher at 5,241.36 points.

Commodities Recap

Crude oil prices rose, extending previous session gains and were on track for solid weekly gains following positive demand signals and a reported decline in stocks. International benchmark Brent crude was trading 0.7 percent up at $48.68 per barrel by 0946 GMT, having hit a high of $48.81 earlier, its strongest since Jul. 7. U.S. West Texas Intermediate traded 0.5 percent up at $46.32 a barrel, after falling as low as $43.63 on Monday, its weakest since Jun 27.

Gold prices rose, reversing most of its previous session losses and remained on course for its first weekly gain in three, amid little change in the dollar ahead of key U.S. economic data. Spot gold rose 0.2 percent to $1,219.45 per ounce at 1011 GMT, having rebounded from a low of $1,204.69 hit on Monday, the lowest since March 15 and was up 0.4 percent for the week so far. U.S. gold futures for August delivery fell 0.02 percent to $1,217.00 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.335 percent lower by 0.013 bps, while 5-year yield was 0.008 bps down at 1.881 percent.

The benchmark German 10-year yield fell some 3 basis points to 0.50 percent, moving away from an 18-month high hit earlier this week of 0.583 percent.

The Japanese government bond prices tracked declines in their U.S. and euro zone counterparts. The benchmark 10-year JGB yield was half a basis point higher at 0.080 percent, while the five-year yield was half a basis point higher at minus 0.045 percent.

The Australian government bond futures slipped, with the three-year bond contract down 3 ticks at 97.990. The 10-year contract was off 3.5 ticks at 97.28.

The New Zealand government bonds eased, sending yields about 4-4.5 basis points higher at the long end of the curve.

The Canadian government bond prices were lower across the yield curve, with the two-year down 3.5 Canadian cents to yield 1.214 percent and the 10-year falling 30 Canadian cents to yield 1.912 percent. The 2-year yield touched its highest intraday level since September 2013 at 1.257, while the 10-year touched 1.948 percent, a level not reached since December 2014.

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