Europe Roundup: Sterling eases amid turmoil over Brexit strategy, euro slumps on weak EZ economic sentiment, European shares surge – Tuesday, July 10th, 2018

Market Roundup

  • EUR/USD -0.23%, USD/JPY 0.35%, GBP/USD -0.07%, EUR/GBP -0.17%
  • DXY 0.21%, DAX 0.25%, FTSE 0.27%, Brent 1.28%, Gold -0.32%
  • UK PM May seeks unity amid turmoil over Brexit strategy
  • Germany Jul ZEW Economic Sentiment, -24.7, -18.0 f'cast, -16.1 previous
  • Germany Jul ZEW Current Conditions, 72.4, 78.2 f'cast, 80.6 previous
  • UK economy perks up slightly as Bank of England nears rate decision
  • Great Britain May Industrial Output MM, -0.4%, 0.5% forecast, -0.8% previous
  • Great Britain May Manufacturing Output MM, 0.4%, 0.9% forecast, -1.4% previous
  • Great Britain May Construction O/P Vol MM, 2.9%%, 0.2% forecast, 0.5% previous
  • Great Britain May Goods Trade Balance Non-EU, -3.49 bln, -3.70 bln forecast, -5.37 bln previous
  • Great Britain May Goods Trade Balance GBP, -12.36 bln, -12.00 bln forecast, -14.04 bln previous
  • Great Britain Jun BRC Retail Sales YY, 1.10%, 2.80% previous
  • France May Industrial Output MM, -0.2%, 0.7% forecast, -0.5% previous
  • Don't takes risks with economy, central bank tells Italy's new govt
  • Oil rises above $79 a barrel on Norway strike, Libyan disruption

Economic Data Ahead

  • (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of June. The indicator is expected to rise at a seasonally adjusted annualized rate of 210,000 after increasing 195,613 in the previous month.
  • (0830 ET/1230 GMT) The Statistics Canada is likely to report that building permits rose 0.1 percent in May after declining by 4.6 percent in April.
  • (1000 ET/1400 GMT) The U.S. Labor Department releases Job Openings and Labor Turnover Survey (JOLTS) report for the month of May. The report is expected to show job openings eased to 6.583 million from 6.698 million in April.
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (1800 ET/2200 GMT) Federal Reserve Bank of San Francisco Executive Vice President Mary Daly speaks on the economic outlook and the economy before the Chartered Financial Analysts Society of San Francisco.

FX Beat

DXY: The dollar index surged as investors focused on the recent favourable U.S. jobs figures, which boosted expectations that the Federal Reserve would hike interest rates a total of four times his year. The greenback against a basket of currencies trades 0.4 percent up at 94.45, having touched a low of 93.71 on Monday, its lowest since June 14. FxWirePro's Hourly Dollar Strength Index stood at 50.18 (Bullish) by 1000 GMT.

EUR/USD: The euro declined after data showed French industrial output weakened in May, adding to signs of a slowdown in the euro zone's second-biggest economy. Additionally, the selling pressure intensified after another survey showed the sentiment among German investors slumped in July to its lowest since August 2012, weighed down by concerns about escalating trade tensions with the United States. The European currency traded 0.3 percent down at 1.1715, having touched a high of 1.1790 the session before, its highest since June 14. FxWirePro's Hourly Euro Strength Index stood at 88.24 (Highly Bullish) 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 rallied above the 111.00 handle to hit a 1-1/2 month peak amid growing monetary policy divergence between the Federal Reserve and Bank of Japan and mildly positive trading sentiment around equity markets. The major was trading 0.4 percent up at 111.30, having hit a high of 111.32 earlier, its highest since May 21. FxWirePro's Hourly Yen Strength Index stood at -142.21 (Highly Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. JOLTS Job Openings report. Immediate resistance is located at 111.39 (May 21 High), a break above targets 111.48 (Jan 18 High). On the downside, support is seen at 110.58 (5-DMA), a break below could take it lower 110.28 (July 4 Low).

GBP/USD: Sterling slumped, retreating from an over 3-week peak hit in the previous session, amid renewed speculation that British Prime Minister Theresa May would face a leadership challenge, dragging Britain into deeper political turmoil less than 9- months before it exits the European Union in March 2019. The major traded 0.2 percent down at 1.3234, having hit a high of 1.3362 the day before; it’s highest since June 14. FxWirePro's Hourly Sterling Strength Index stood at -14.51 (Neutral) 1000 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 1.3193 (10-DMA), a break below targets 1.3175. Against the euro, the pound was trading 0.3 percent down at 88.39 pence, having hit a low of 89.00 pence on Monday, it’s lowest since March 9.

USD/CHF: The Swiss franc slumped to a 1-week low as investors sought riskier assets, encouraged by signs that trade tensions have yet to hurt economic momentum. The major trades 0.5 percent up at 0.9959, having touched a high of 0.9962 earlier, it’s highest since July 2. FxWirePro's Hourly Swiss Franc Strength Index stood at -108.06 (Highly 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 gained as global markets extended their recovery, while the dollar rallied against the Japanese yen amid fading trade war worries.

The pan-European STOXX 600 index gained 0.4 percent at 386.01 points, while the FTSEurofirst 300 index surged 0.4 percent to 1,513.14 points.

Britain's FTSE 100 trades 0.4 percent up at 7,714.68 points, while mid-cap FTSE 250 gained 0.2 percent to 20,857.42 points.

Germany's DAX rose 0.3 percent at 12,573.61 points; France's CAC 40 trades 0.8 percent higher at 5,424.57 points.

Commodities Recap

Crude oil prices rose by more than 1 percent amid growing global supply outages, and Norway shutting down one oilfield as hundreds of workers began a strike. International benchmark Brent crude was trading 1.2 percent up at $79.08 per barrel by 0538 GMT, having hit a high of $79.25 earlier, its highest since June 29. U.S. West Texas Intermediate was trading 0.4 percent higher at $74.27 a barrel, after rising as high as $75.24 last week, its highest since Nov. 2014.

Gold prices eased, reversing early session gains as the U.S. dollar rebounded against a basket of currencies while lingering U.S.-China trade worries and political uncertainty over Brexit limited downside.  Spot gold was 0.4 percent down at $1,253.17 an ounce by 1026 GMT, having touched a high of $1265.79 on Monday, its highest since Jun. 26. U.S. gold futures for August delivery were 0.2 percent lower at $1,257.40 an ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.871 percent higher by 0.020 bps, while 5-year yield was 0.014 bps up at 2.763 percent.

The European bond yields edged higher, with German debt yields rising around 2 basis points on both 5 and 10-year maturities. British benchmark 10-year maturities rose by more than four basis points to nearly 1.31 percent.

The Japanese government bond prices dropped as equities extended gains on the back of ebbing risk aversion. The 10-year and 20-year JGB yields rose by a basis point each to 0.035 percent and 0.480 percent respectively. The five-year yield was half a basis point higher at minus 0.115 percent.

The Australian government bond futures dipped, with the three-year bond contract off 1.5 ticks at 97.915. The 10-year contract eased 2 ticks to 07.3600. The New Zealand government bonds eased, sending yields 2.5 basis points higher towards the long end of the curve.

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