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Europe Roundup: Sterling steadies despite weaker labour data, euro trims gains following weaker-than-expected German economic sentiment, European shares off-highs – Tuesday, June 12th, 2018

Market Roundup

  • EUR/USD 0.11%, USD/JPY 0.11%, GBP/USD 0.17%, EUR/GBP -0.06%
     
  • DXY -0.06%, DAX -0.14%, FTSE -0.4%, Brent 0.39%, Gold -0.12%
     
  • Trump, Kim agree on denuclearisation, but deal seen symbolic
     
  • China suggests N.Korea sanctions relief as Trump, Kim meet
     
  • Germany ZEW Economic Sentiment, -16.1, 14 forecast, -8.2 previous
  • Germany ZEW Current Conditions, 80.6, 85 forecast, 87.4 previous
     
  • German upswing remains robust despite U.S. tariff threat -OECD
     
  • Great Britain Claimant Count Unem Chng, -7.7k, 31.2k previous
     
  • Great Britain ILO Unemployment Rate, 4.2%, 4.2% forecast, 4.2% previous
     
  • Great Britain Employment Change, 146k, 110k forecast, 197k previous
     
  • Great Britain Avg Wk Earnings 3M YY, 2.5%, 2.6% forecast, 2.6% previous
     
  • France Non-Farm Payrolls Rev, 0.20%, 0.30% previous
     
  • OPEC will squeeze oil buffer to historic lows with an output hike
     
  • In Brexit showdown, British PM May faces issue of “meaningful vote”
     
  • With rate hike in the bag, focus turns to Fed's policy language
     
  • Gold dips on strong dollar post Trump-Kim meeting; Fed in focus
     
  • Oil edges up, but bulls remain wary ahead of OPEC meeting

Economic Data Ahead
 

  • (0830 ET/1230 GMT) The U.S. consumer price index is expected to remain steady at 0.2 percent in May, while in the 12 months through May, the CPI is likely to have risen 2.7 percent.  Excluding food and energy, the core CPI probably rose 0.2 percent, after posting 0.1 percent gain in the previous month.
     
  • (1400 ET/1800 GMT) The U.S. reports its monthly budget statement for the month of May. The government is likely to show a budget deficit of $144 billion after posting a surplus of $214 billion in the previous month.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • N/A The Federal Open Market Committee commences its two-day meeting on interest rate policy.
     
  • (1000 ET/1400 GMT) The U.S. Senate Banking Committee votes on the nominations of Richard Clarida to be Federal Reserve vice chairman and Michelle Bowman to be a member of the Federal Reserve Board of Governors, in Washington.

FX Beat

DXY: The dollar index steadied ahead of the two days U.S. Federal Reserve policy meeting, which commences today, where it is widely expected to raise interest rates for the second time this year. The greenback against a basket of currencies trades 0.05 percent up at 93.65, having touched a low of 93.21 on Thursday, its lowest since May 17. FxWirePro's Hourly Dollar Strength Index stood at 44.64 (Neutral) by 1000 GMT.

EUR/USD: The euro trimmed early session gains to trade below the 1.1800 handle after data showed German investor sentiment has sunk to its lowest in nearly five years, dragged down by a trade dispute with the United States. Moreover, concerns that the new coalition government will embark on a spending splurge that Italy cannot afford dented investor sentiment. The European currency traded 0.1 percent up at 1.1795, having touched a high of 1.1839 on Thursday, its highest since May 16. FxWirePro's Hourly Euro Strength Index stood at 113.77 (Highly Bullish) by 1000 GMT. Immediate resistance is located at 1.1839 (Jun. 7 High), a break above targets 1.1896 (May 5 High). On the downside, support is seen at 1.1708 (10-DMA), a break below could drag it till 1.1652 (June 5 Low).

USD/JPY: The dollar surged to a near 3-week peak after U.S. President Donald Trump and North Korean leader Kim Jong Un pledged to work towards complete denuclearization of the Korean peninsula. The major was trading 0.2 percent up at 110.23, having hit a high of 110.49 earlier, its highest since May 23. FxWirePro's Hourly Yen Strength Index stood at -49.49 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. consumer price index and monthly budget statement. Immediate resistance is located at 110.85 (May 17 Low), a break above targets 111.18 (May 22 High). On the downside, support is seen at 109.85 (21-DMA), a break below could take it lower 109.49 (10-DMA).

GBP/USD: Sterling steadied below the 1.3400 handle after data showed British workers' wages grew more slowly in the three months to April, which could further slash expectations that the Bank of England will raise interest rates as soon as August. Moreover, uncertainty around the ongoing Brexit negotiation process weighed on investor sentiment. The major traded 0.1 percent up at 1.3392, having hit a high of 1.3471 on Thursday, it’s highest since May 22. FxWirePro's Hourly Sterling Strength Index stood at -53.66 (Bearish) by 1000 GMT. Immediate resistance is located at 1.3483 (May 21 High), a break above could take it near 1.3527 (May 18 High). On the downside, support is seen at 1.3302 (June 6 Low), a break below targets 1.3253 (June 1 Low). Against the euro, the pound was trading 0.1 percent up at 87.99 pence, having hit a low of 88.37 pence on Thursday, it’s lowest since May 7.

USD/CHF: The Swiss franc edged up as investors had mixed reactions to the summit, with attention now shifting on the U.S. consumer price inflation data for the month of May. The major trades 0.1 percent down at 0.9844, having touched a low of 0.9788 on Thursday, it’s lowest since Apr. 25. FxWirePro's Hourly Swiss Franc Strength Index stood at 79.88 (Slightly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 0.9887 (Jun. 8 High) and any break above will take the pair to next level till 0.9935 (May 30 High). The near-term support is around 0.9782 (Apr. 25 Low) and any close below that level will drag it till 0.9739 (Apr. 23 Low).

Equities Recap

European shares tumbled after nearing their highest level in almost a week, while the euro steadied ahead of the European Central Bank policy meeting on June 14, where it could signal intentions to start unwinding its massive bond-purchasing programme.

The pan-European STOXX 600 index plunged 0.04 percent at 387.80 points, while the FTSEurofirst 300 index declined 0.05 percent to 1,515.72 points.

Britain's FTSE 100 trades 0.4 percent up at 7,706.52 points, while mid-cap FTSE 250 eased 0.2 percent to 21,272.50 points.

Germany's DAX fell 0.1 percent at 12,829.34 points; France's CAC 40 trades 0.3 percent lower at 5,456.06 points.

Commodities Recap

Crude oil prices consolidated within a narrow range, as investors prepared for a key meeting of the OPEC producer group next week. International benchmark Brent crude was trading 0.4 percent up at $76.66 per barrel by 1016 GMT, having hit a high of $77.58 on Friday, its highest since June 1. U.S. West Texas Intermediate was trading 0.3 percent up at $66.22 a barrel, after rising as high as $66.32 on Monday, its highest since June 1.

Gold prices edged lower as the dollar strengthened following a positive U.S.-North Korea summit, with investors now waiting for a likely interest rate hike by the U.S. Federal Reserve. Spot gold was 0.2 percent down at $1,298.01 per ounce at 1018 GMT, having hit a high of $1,303.09 on Thursday, its highest price level since May 31. U.S. gold futures for August delivery were 0.1-percent lower at $1,301.90 per ounce.

Treasuries Recap

The U.S. Treasuries remained range-bound, as investors wait to watch the country’s consumer price inflation (CPI) data for the month of May, scheduled to be released today by 12:30GMT and the Federal Open Market Committee’s (FOMC) policy statement due on June 13 for added direction in the debt market. The yield on the benchmark 10-year Treasuries rose 1/2 basis point to 2.96 percent, the super-long 30-year bond yields hovered around 3.10 percent and the yield on the short-term 2-year traded nearly flat at 2.53 percent.

The United Kingdom’s gilts lost ground during European session following a better-than-expected employment report for the month of April. The yield on the benchmark 10-year gilts, rose 1-1/2 basis points to 1.42 percent, the super-long 30-year bond yields gained nearly 1 basis point to 1.87 percent and the yield on the short-term 2-year traded 2-1/2 basis points higher at 0.77 percent.

The New Zealand bonds closed mixed as investors remained side-lined in a muted trading week that is scheduled to witness no data of major economic significance. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, slid 1/2 basis point to 3.01 percent, the yield on the long-term rose 1/2 basis point to 3.33 percent and the yield on short-term 2-year too closed 1/2 basis point lower at 1.91 percent.

The Japanese government bonds remained tad lower during late Asian session as investors await the country’s industrial production for the month of April and the Bank of Japan’s (BoJ) monetary policy decision, scheduled to be unveiled by later this week. The yield on the benchmark 10-year JGB note, which moves inversely to its price, traded 1/2 basis point higher at 0.04 percent, the yield on the long-term 30-year note rose 1 basis point higher at 0.73 percent and the yield on short-term 2-year hovered around -0.12 percent.

The Australian government bonds remained in tight trading range, after domestic markets opened following a long weakened and investors will now focus on the country’s employment report for the month of May, scheduled to be released on June 14 by 01:30GMT. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 1/2 basis point to 2.80 percent, the yield on the long-term 30-year Note fell 1-1/2 basis points to 3.30 percent and the yield on short-term 2-year hovered around 2.07 percent.


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