Europe Roundup: Sterling at 6-month low amid Brexit deal concerns, greenback rallies ahead of Fed Chair Powell's speech, European shares plunge- Tuesday, July 9th, 2019

Market Roundup

  • Gold edges lower as dollar firms
  • Italy Retail Sales s.a May (MoM) -0.7%
  • Italy Retail Sales n.s.a May (YoY) -1.8%

Economic Data Ahead

  • (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of June. The indicator stood at a seasonally adjusted annualized rate of 202,300 in the previous month.
  • (0830 ET/1230 GMT) Statistics Canada is likely to report that building permits decreased 2.5 percent in May after rising 14.7 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 that job opening rose to 7.479 million from 7.449 million in April.
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (0845 ET/1245 GMT) Federal Reserve Bank Chairman Jerome Powell's speech
  • (0910 ET/1410 GMT) Federal Reserve Bank of St. Louis President James Bullard gives a speech
  • (1400 ET/1800 GMT) Federal Reserve Board of Governors Randal Keith Quarles' speech
  • (1430 ET/1830 GMT) Federal Reserve Bank of Atlanta President Raphael W. Bostic's speech

FX Beat

DXY: The dollar index rallied to multi-week peaks, as investors awaited Fed chief Jerome Powell’s testimony to Congress beginning on Wednesday for cues on the U.S. monetary policy near-term outlook. The greenback against a basket of currencies traded 0.2 percent up at 97.55, having touched a high of 97.59 earlier, its highest since June 19.

EUR/USD: The euro plunged to a 3-week low after data showed Italian retail sales slumped 0.7 percent in May and was down 1.8 percent on an annual basis. Moreover, the selling pressure around the major intensified as market participants continued to adjust to the renewed expectations of a potential smaller rate cut by the Federal Reserve later in this month. The European currency traded 0.1 percent down at 1.1202, having touched a low of 1.1193 earlier, its lowest since June 19. Immediate resistance is located at 1.1246 (23.6% retracement of 1.1412 and 1.1193), a break above targets 1.1278 (38.2% retracement). On the downside, support is seen at 1.1160 (June 3 Low), a break below could drag it below 1.1116 (May 30 Low).

USD/JPY: The dollar surged to a 5-1/2 week peak as investors re-assessed their expectations of how much the Federal Reserve may cut interest rates this month. According to CME Group’s FedWatch tool, money markets price in a 94 percent probability of a 25-basis-point rate cut at the Fed meeting on July 31. The pair was trading 0.1 percent up at 108.81, having hit a high of 108.96 earlier, its highest since May 31. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. JOLTS job opening and speeches by Fed officials. Immediate resistance is located at 109.08, a break above targets 109.62 (May 31 High). On the downside, support is seen at 108.21 (June 12 Low), a break below could take it lower at 107.81 (June 5 Low).

GBP/USD: Sterling slumped to a fresh 6-month low, amid worries about the threat of a no-deal Brexit under the next prime minister. Additionally, concerns about the deteriorating economic outlook further weakened the bid tone around the British pound. The major traded eased 0.4 percent to 1.2455, having hit a low of 1.2454 earlier, it’s lowest since Jan. 3. Investors’ attention will remain on development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2564 (June 18 High), a break above could take it near 1.2613 (10-DMA). On the downside, support is seen at 1.2445, a break below targets 1.2402. Against the euro, the pound was trading 0.4 percent down at 89.92 pence, having hit a low of 89.95 earlier, it’s lowest since Jan. 11.

USD/CHF: The Swiss franc tumbled to a 3-week low, as the greenback rallied amid fading expectations of a 50 basis point rate cut at the Fed's July 30-31 policy meeting. The major trades 0.1 percent up at 0.9945, having touched a high of 0.9951 earlier; it’s highest since June 19. On the higher side, near-term resistance is around 0.9959 (June 12 High) and any break above will take the pair to next level till 0.9999 (June 17 High). The near-term support is around 0.9870 (21-DMA), and any close below that level will drag it till 0.9834 (July 3 Low).

Equities Recap

European shares plunged, weighed down by losses in German shares, while the greenback surged on dimming hopes of a sharp interest rate cut by the U.S. Federal Reserve later this month.

The pan-European STOXX 600 index fell 0.7 percent at 387.26 points, while the FTSEurofirst 300 slumped 0.5 percent to 1,527.78 points.

Britain's FTSE 100 trades 0.05 percent up at 7,552.11 points, while mid-cap FTSE 250 eased 0.7 to 19,451.07 points.

Germany's DAX declined 1.1 percent at 12,407.14 points; France's CAC 40 trades 0.4 percent lower at 5,564.41 points.

Commodities Recap

Crude oil prices rose as OPEC supply cuts and Middle East tensions outweighed the U.S.-China trade dispute that dented the global economy and oil demand. International benchmark Brent crude was trading 1.2 percent higher at $64.68 per barrel by 1026 GMT, having hit a low of $62.06 on Wednesday, its lowest since June 19. U.S. West Texas Intermediate was trading 0.9 percent up at $58.09 a barrel, after falling as low as $56.03 on Wednesday, its lowest since the June 20.

Gold prices declined as the dollar rallied to multi-week highs on reduced expectations of an aggressive U.S. rate cut. Spot gold was trading 0.6 percent down at $1,386.91 per ounce by 1033 GMT, having touched a high of $1,437.66 on Wednesday, its highest since June 25. U.S. gold futures fell 0.3 percent to $1,395.70 an ounce.

Treasuries Recap

The U.S. Treasuries slumped during the afternoon session, ahead of the Federal Reserve Chair Jerome Powell’s speech, scheduled to be held today by 12:45GMT, besides, an additional testimony due on Thursday. Also, today’s JOLTs job openings data for the month of May, besides, a host of other Fed speeches, all due later in the day, shall provide further direction to the debt market. The yield on the benchmark 10-year Treasury yield jumped nearly 2-1/2 basis points to 2.060 percent, the super-long 30-year bond yields traded 1-1/2 basis points up at 2.535 percent and the yield on the short-term 2-year surged nearly 3 basis points to 1.907 percent.

The German bunds suffered slightly during European trading session amid a relatively quiet day for euro area economic data as investors await Fed Chair Powell’s speech later this week. The German 10-year bond yields, which move inversely to its price, suffered nearly 2 basis points to -0.359 percent, the yield on 30-year note also slumped 2 basis points lower to 0.244 percent and the yield on short-term 2-year remained flat at -0.734 percent.

The Australian government bonds remained flat during Asian trading session amid a muted trading day that witnessed data of little economic significance ahead of Federal Reserve Chair Jerome Powell’s scheduled testimony later this Thursday. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, barely slipped to 1.325 percent, the yield on the long-term 30-year bond fell 2 basis points to 1.955 percent and the yield on short-term 2-year traded about 4 basis points higher at 0.976 percent.

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