Europe Roundup: Sterling hits 3-week peak as investors speculate softer Brexit, euro rallies as  investor morale in EZ improves, European shares surge – Monday, July 9th, 2018

Market Roundup

  • EUR/USD 0.16%, USD/JPY 0.01%, GBP/USD 0.35 %, EUR/GBP -0.21%
  • DXY -0.19%, DAX 0.3%, FTSE 0.41%, Brent 0.83%, Gold 0.77%
  • Warning of “weak” UK position, Brexit minister quits in blow to Britain's May
  • Germany Exports MM SA, 1.80%, 0.75% forecast, -0.30% previous
  • Germany Imports MM SA, 0.7%, -0.3% forecast, 2.2% previous
  • Germany Trade Balance, EUR, SA, 20.3 bln, 20.0 bln forecast, 19.4 bln previous
  • EZ Sentix Index, 12.1, 8.2 forecast, 9.3 previous
  • Bank of France keeps French Q2 GDP growth forecast at 0.3 pct
  • BOJ keeps upbeat view on regional Japan, labour shortages cloud outlook
  • China tells banks to 'significantly cut' lending rates for small businesses -sources
  • China's FX reserves post surprise gain, withstand June market chaos

Key Events Ahead

  • (1500 ET/1900 GMT) The U.S. Federal Reserve is likely to report that consumer credit rose to $11.50 billion in May from $8.26 billion the month before.

Economic Data Ahead

  • (0900 ET/1300 GMT) ECB president Mario Draghi speaks to the European Parliament's ECON committee in Brussels
  • (0910 ET/1310 GMT) Minneapolis Fed President Neel Kashkari makes welcoming remarks at “Homeownership in Indian Country: Creating the Opportunity for Choice.”

FX Beat

DXY: The dollar index slumped to a 3-week low as a rise in the U.S. unemployment rate and slower wage growth indicated moderate inflation pressures that dented expectations that the Federal Reserve would hike interest rates a total of four times in 2018. The greenback against a basket of currencies trades 0.2 percent down at 93.79, having touched a low of 93.74 earlier, its lowest since June 14. FxWirePro's Hourly Dollar Strength Index stood at -101.15 (Highly Bearish) by 1000 GMT.

EUR/USD: The euro rallied to a 2-week peak after data showed investor morale in the eurozone rose in July to end a 5-month run of declines. The economy's Sentix index confidence rose to 12.1 from 9.3 in June, against a forecast for a fall to 8.2.  The European currency traded 0.2 percent up at 1.1766, having touched a high of 1.1781 earlier, its highest since June 14. FxWirePro's Hourly Euro Strength Index stood at 31.86 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1801 (June 13 High), a break above targets 1.1852 (June 14 High). On the downside, support is seen at 1.1680 (July 6 Low), a break below could drag it till 1.1630 (July 4 Low)

USD/JPY: The dollar traded within narrow ranges as slower wage growth indicated the Federal Reserve may go slow on future rate hikes. The major was trading flat at 110.46, having hit a low of 110.28 on Wednesday, its lowest since June 28. FxWirePro's Hourly Yen Strength Index stood at -20.02 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S consumer credit change and FOMC member Kashkari speech. Immediate resistance is located at 111.08 (June 18 High), a break above targets 111.39 (May 21 High). On the downside, support is seen at 110.28 (July 4 Low), a break below could take it lower 109.68 (June 27 Low).

GBP/USD: Sterling rallied to an over 3-week high as investors attention shifted on the government's newly-announced plan that would see Britain and the European Union retain close trade ties. The major traded 0.3 percent up at 1.3313, having hit a high of 1.3318 earlier; it’s highest since June 12. FxWirePro's Hourly Sterling Strength Index stood at 32.90 (Neutral) 0500 GMT. Immediate resistance is located at 1.3362 (June 1 High), a break above could take it near 1.3389 (June 13 High). On the downside, support is seen at 1.3243 (21-DMA), a break below targets 1.3200. Against the euro, the pound was trading 0.1 percent down at 88.28 pence, having hit a high of 87.99 pence on Wednesday, it’s highest since June 27.

USD/CHF: The Swiss franc rose to a 2-week peak as investors focused on deepening trade conflict between the United States and China. The major trades 0.2 percent down at 0.9877, having touched a high of 0.9992 o June 28, it’s highest since May 21. FxWirePro's Hourly Swiss Franc Strength Index stood at -88.95 (Slightly Bearish) by 1000 GMT. On the higher side, near-term resistance is around 0.9977 (June 19 High) and any break above will take the pair to next level till 1.0018 (May 18 High). The near-term support is around 0.9880 and any close below that level will drag it till 0.9855.

Equities Recap

European shares rose as a wave of optimism about the resilience of the global economy spread across markets.

The pan-European STOXX 600 index gained 0.7 percent at 384.85 points, while the FTSEurofirst 300 index surged 0.6 percent to 1,507.03 points.

Britain's FTSE 100 trades 0.4 percent up at 7,647.42 points, while mid-cap FTSE 250 gained 0.6 percent to 20,748.59 points.

Germany's DAX rose 0.3 percent at 12,534.10 points; France's CAC 40 trades 0.7 percent higher at 5,411.64 points.

Commodities Recap

Crude oil prices rose as an increase in U.S. drilling, likely to lead to higher shale production, balanced evidence of tightening supply. International benchmark Brent crude was trading 0.8 percent up at $77.72 per barrel by 0953 GMT, having hit a low of $76.35 on Friday, its lowest since June 27. U.S. West Texas Intermediate was trading 0.9 percent higher at $73.64 a barrel, after rising as high as $75.24 on Tuesday, its highest since Nov. 2014.

Gold prices rose to a near 2-week high as investors covered their short positions amid lingering U.S.-Sino trade tensions. Spot gold was up 0.7 percent at $1,263.17 an ounce by 0957 GMT, after touching its highest since June 26 at $1,263.29. U.S. gold futures for August delivery were 0.5 percent higher at $1,261.70 an ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.852 percent higher by 0.022 bps, while 5-year yield was 0.024 bps up at 2.746 percent.

The Eurozone government bond yields rose, giving up previous session declines. Germany's 10-year bond yield rose 2.5 basis points to 0.31 percent

The Japanese government bond prices slipped, with the 10-year JGB yield rising half a basis point to 0.030 percent. The 30-year JGB yield was unchanged at 0.680 percent, while the JGB yield curve flattened.

The Australian government bond futures gained, with the three-year bond contract up 1 tick at 97.925. The 10-year contract inched up 2 ticks to 97.385. The New Zealand government bonds were largely flat, though yields were 1.8 basis points lower towards the shorter end of the curve.

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