Europe Roundup: Sterling eases as investors eye BoE Carney's speech, euro slumps on ECB policymaker Villeroy's comments, European shares tumble amid renewed U.S. – China trade war tensions – Wednesday, July 11th, 2018

Market Roundup

  • EUR/USD -0.25%, USD/JPY 0.21%, GBP/USD -0.25%, EUR/GBP 0.01%
  • DXY 0.25%, DAX -1.42%, FTSE -1.29%, Brent -2.08%, Gold -0.42%
  • China says will hit back after U.S. proposes fresh tariffs on $200 bln in goods
  • First ECB rate rise at earliest “through summer” of 2019 – Villeroy
  • At NATO, Trump lashes Germany for being Russian “captive”
  • Italy not considering any plan B for euro exit – deputy PM
  • Brent oil falls more than $2 after Trump tariff threat, Libya ports reopen
  • Gold falls as threat of more tariffs on China boosts dollar

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. producer price index is likely to have increased 0.2 percent in June, while in the 12 months through the same period is expected to have advanced 3.2 percent. PPI excluding food and energy probably edged up 0.2 percent after rising 0.3 percent in May.
  • (1000 ET/1400 GMT) The U.S. Census Bureau is likely to report that wholesale inventories rose 0.5 percent in May after posting similar gains in the prior month.
  • (1000 ET/1400 GMT) Bank of Canada will meet to announce its benchmark interest rate, where it is expected to increase interest rates to 1.50 percent from 1.25 percent.
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending July 2.

Key Events Ahead

  • (1115 ET/1515 GMT) Bank of Canada Governor and Senior Deputy Governor hold a press conference after the release of BoC Monetary Policy Report.
  • (1130 ET/1530 GMT) Bank of England Governor Mark Carney speaks at a conference on the Global Financial Crisis hosted in Massachusetts
  • (1230 ET/1630 GMT) Federal Reserve Bank of Atlanta President Raphael W. Bostic's speech
  • (1300 ET/1700 GMT) French Economy Minister Bruno Le Maire and his German counterpart Peter Altmaier hold a joint news conference
  • (1630 ET/2030 GMT) New York Fed President John Williams participates in a Brooklyn Town Hall on issues related to the local economy and efforts around community and workforce development.

FX Beat

DXY: The dollar index gained, extending gains for the third straight session after President Donald Trump said that the United States may ultimately impose tariffs on more than $500 billion worth of Chinese goods. The greenback against a basket of currencies trades 0.2 percent up at 94.35, having touched a low of 93.71 on Monday, its lowest since June 14. FxWirePro's Hourly Dollar Strength Index stood at 154.45 (Highly Bullish) by 1000 GMT.

EUR/USD: The euro slumped after the European Central Bank's policymaker Francois Villeroy de Galhau stated that the central bank's first interest rate hike could take place at some point through the summer of 2019 if inflation conditions showed some momentum. The European currency traded 0.3 percent down at 1.1713, having touched a high of 1.1790 on Monday, its highest since June 14. FxWirePro's Hourly Euro Strength Index stood at 35.88 (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 rose, hovering towards a 1-1/2 month peak hit in the previous session, after Trump administration raised the stakes in its trade dispute with China, threatening 10 percent tariffs on a list of $200 billion worth of Chinese imports. The major was trading 0.3 percent up at 111.26, having hit a high of 111.35 the day before, its highest since May 21. FxWirePro's Hourly Yen Strength Index stood at -53.90 (Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. producer price index and wholesale inventories. 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 110.62 (10-DMA), a break below could take it lower 110.28 (July 4 Low).

GBP/USD: Sterling eased, drifting away from the 1.3300 handle as investors tried to determine if the resignation of two ministers over Prime Minister Theresa May's Brexit plans would affect an expected BoE interest rate hike this summer. The major traded 0.2 percent down at 1.3246, having hit a high of 1.3362 on Monday; it’s highest since June 14. FxWirePro's Hourly Sterling Strength Index stood at 72.04 (Bullish) 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 1.3231 (21-DMA), a break below targets 1.3200. Against the euro, the pound was trading 0.1 percent up at 88.40 pence, having hit a low of 89.00 pence on Monday, it’s lowest since March 9.

USD/CHF: The Swiss franc tumbled as the greenback rallied after the Trump administration threatened 10 percent tariffs on $200 billion worth of Chinese imports. The major trades 0.3 percent up at 0.9948, having touched a high of 0.9962 the day before, it’s highest since July 2. FxWirePro's Hourly Swiss Franc Strength Index stood at -19.25 (Neutral) 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 slumped, halting a 6-session winning streak, as an escalation in the U.S.-China trade dispute undermined investor risk sentiment.

The pan-European STOXX 600 index declined 1.1 percent at 381.89 points, while the FTSEurofirst 300 index eased 1.2 percent to 1,495.41 points.

Britain's FTSE 100 trades 1.2 percent down at 7,599.76 points, while mid-cap FTSE 250 fell 1.2 percent to 20,592.56 points.

Germany's DAX declined 1.3 percent at 12,442.66 points; France's CAC 40 trades 1.2 percent lower at 5,369.45 points.

Commodities Recap

Crude oil prices declined more than $2 a barrel after U.S. President Donald Trump threatened to impose new tariffs on China and Libya announced the reopening of key oil export terminals. International benchmark Brent crude was trading 2.3 percent down at $77.16 per barrel by 1025 GMT, having hit a low of $76.35 on Friday, its lowest since June 27. U.S. West Texas Intermediate was trading 0.8 percent lower at $73.60 a barrel, after rising as high as $75.24 last week, its highest since Nov. 2014.

Gold prices declined as the dollar held gains firmed against the yuan after the United States threatened to impose 10 percent tariffs on a list of $200 billion worth of Chinese imports, escalating trade tensions between the world's two largest economies. Spot gold eased 0.4 percent at $1,249.83 an ounce at 1028 GMT, having touched a high of $1265.79 on Monday, its highest since Jun. 26. U.S. gold futures for August delivery were 0.3 percent lower at $1,252.30 an ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.843 percent lower by 0.029 bps, while 5-year yield was 0.027 bps down at 2.745 percent.

The Eurozone bond yields declined as the United States threatened to impose 10 percent tariffs on a list of Chinese imports, with Germany's 10-year Bund yield down 2.6 basis points at 0.2960,

The long-dated Japanese government bond prices declined, with the 20-year JGB yield rising half a basis point to 0.48 percent. The 30-year and 40-year JGB yields each rose half a basis point to 0.69 percent and 0.810 percent, respectively. The 10-year JGB yield was up half a basis point at 0.040 percent, while the five-year yield was flat at minus 0.110 percent.

The Australian government bond futures gained, with the three-year bond contract up 2.5 ticks at 97.930. The 10-year contract added 2 ticks to 97.380. The New Zealand government bonds rose on a general safe-haven bid, sending yields about 2.5 basis points lower at the long-end and half basis point at the short-end.

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