News

Europe Roundup: Sterling, euro rallies as greenback plunges across the board, oil at 6-week high on Iran tensions, investors eye ECB policy meeting minutes – Thursday, July 11th, 2019

Market Roundup

  • Gold prices scale a more than 1-week peak
     
  • Dollar eases to 6-day lows after Powell's comments
     
  • Fed chief shores up rate cut prospects
     
  • Spain's acting PM says he is not planning for another election
     
  • French Senate approves tax as U.S. opens probe into digital levy
     
  • Crude oil at 6-week high on Gulf of Mexico storm, Iran tensions
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 2,000 to a seasonally adjusted 223,000 for the week ended Jul..5, while continuing claims for the week ended Jun. 28 is expected to decline to 1.685 million from a previous reading of 1.686 million.
     
  • (0830 ET/1230 GMT) The U.S. consumer price index likely increased 0.2 percent in June after posting a 0.1 percent gain in May. While in the 12 months through June, the CPI is expected to have risen 1.6 percent.  Excluding food and energy, the core CPI probably rose 0.2 percent, from 0.1 percent in the previous month.
     
  • (0830 ET/1230 GMT) Statistics Canada releases its New Housing Price Index (NHPI) for the month of May. The index stayed flat in April.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending July 5.
     
  • (1400 ET/1800 GMT) The U.S. reports its monthly budget statement for the month of June. The government is likely to show a budget deficit narrowed to $6.35 billion from $208.00 billion in the previous month.
     

Key Events Ahead

  • (1000 ET/1400 GMT) Federal Reserve Chairman Jerome Powell will speak on the second day of his congressional testimony, before the House Financial Services Committee in Washington.
     
  • (1110 ET/1510 GMT) Federal Reserve Bank of New York President William Dudley gives a speech
     
  • (1215 ET/1615 GMT) Federal Reserve Bank of Atlanta President Raphael W. Bostic's speech
     
  • (1230 ET/1630 GMT) Federal Reserve Bank of Richmond President Thomas I. Barkin  gives a speech
     
  • (1700 ET/2100 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari's speech
     

FX Beat

DXY: The dollar index tumbled to a 6-day low as a dovish tone in U.S. Federal Reserve Chairman Jerome Powell's testimony and the minutes from the Fed’s previous policy meeting indicating many policymakers thought more stimulus would be needed soon stoked speculation of aggressive rate cuts this year. The greenback against a basket of currencies traded 0.2 percent down at 96.88, having touched a high of 97.59 on Tuesday, its highest since June 19.

EUR/USD: The euro rallied, extending previous session rebound after data showed annual inflation in Germany accelerated in June, but remained below the European Central Bank’s target. Investors now await the ECB's latest policy meeting minutes, where chief Mario Draghi took a sharp dovish stance. The European currency traded 0.2 percent up at 1.1270, having touched a high of 1.1280 earlier, its highest since July 5.  Investors’ attention will remain on the ECB monetary policy meeting accounts, ahead of the U.S. unemployment benefit claims, consumer price index and Fed Chair Powell's testimony. Immediate resistance is located at 1.1304 (50.0% retracement of 1.1412 and 1.1193), a break above targets 1.1366 (78.6% retracement). On the downside, support is seen at 1.1207 (July 5 Low), a break below could drag it below 1.1181 (June 18 Low).

USD/JPY: The dollar plunged to a near 1-week low after Federal Reserve Chairman Jerome Powell bolstered expectations the Fed would cut U.S. interest rates soon. On Wednesday, Powell in his testimony to Congress highlighted broad global weakness that was clouding the U.S. economic outlook amid uncertainty about the fallout from the trade conflict with China and other countries. The pair was trading 0.3 percent down at 108.14, having hit a high of 108.99 on Wednesday, its highest since May 31. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims, consumer price index and Fed Chair Powell's testimony. Immediate resistance is located at 109.08, a break above targets 109.62 (May 31 High). On the downside, support is seen at 107.56 (June 28 Low), a break below could take it lower at 107.10 (June 26 Low).

GBP/USD: Sterling surged, extending gains above the 1.2500 handle as the greenback eased across the board. However, Britain’s economic gloom and a fast-approaching Brexit deadline limited the upside. The major traded rose 0.5 percent to 1.2557, having hit a low of 1.2439 on Tuesday, it’s lowest since Jan. 3. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2571 (38.2% retracement of 1.2783 and 1.2439), a break above could take it near 1.2652 (61.8% retracement). On the downside, support is seen at 1.2443 (July 10 Low), a break below targets 1.2400. Against the euro, the pound was trading 0.2 percent up at 89.77 pence, having hit a low of 90.10 on Wednesday, it’s lowest since Jan. 11.

USD/CHF: The Swiss franc extended gains for the third straight session, as the greenback eased on U.S. Federal Reserve Chairman Jerome Powell's dovish remarks. The major trades 0.3 percent down at 0.9861, having touched a high of 0.9951 on Tuesday; 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 0.9834 (July 3 Low), and any close below that level will drag it till 0.9791 (June 20 Low).

Equities Recap

European shares advanced, halting a 4-day losing streak, as U.S. Federal Reserve Chair Jerome Powell’s dovish comments cemented hopes of an interest rate cut this month.

The pan-European STOXX 600 index gained 0.2 percent at 387.83 points, while the FTSEurofirst 300 surged 0.1 percent to 1,526.33 points.

Britain's FTSE 100 trades 0.05 percent up at 7,530.41 points, while mid-cap FTSE 250 rose 0.2 to 19,462.66 points.

Germany's DAX declined 0.05 percent at 12,368.49 points; France's CAC 40 trades 0.1 percent higher at 5,574.40 points.

Commodities Recap

Crude oil prices rallied to a 6-week high as oil rigs in the Gulf of Mexico were evacuated ahead of a storm, while an incident with a British tanker in the Middle East highlighted tensions in the region.  International benchmark Brent crude was trading 1.3 percent higher at $67.44 per barrel by 1022 GMT, having hit a high of $67.63 earlier, its highest since May 30. U.S. West Texas Intermediate was trading 0.9 percent up at $60.80 a barrel, after rising as high as $60.91 earlier, its highest since the May 23.

Gold prices surged to a more than 1-week peak as the greenback eased after dovish remarks from the U.S. Federal Reserve Chairman Jerome Powell boosted the case for an interest rate cut later this month. Spot gold was 0.2 percent up at $1,421.56 per ounce by 1026 GMT, having touched a high of $1,427.06 earlier, its highest since July 3. U.S. gold futures jumped 0.9 percent to $1,424.80 an ounce.

Treasuries Recap

The U.S. Treasuries flattened during the afternoon session, ahead of the Federal Reserve Chair Jerome Powell’s second testimony, scheduled to be held today by 14:00GMT, besides, the country’s consumer price inflation (CPI) data for June and a host of FOMC speeches, all scheduled for later today. The yield on the benchmark 10-year Treasury yield hovered around 2.065 percent, the super-long 30-year bond yields edged 1-1/2 basis points higher to 2.586 percent and the yield on the short-term 2-year traded steady at 1.812 percent.

The German bunds slipped during European session after the country’s consumer price inflation (CPI) for the month of June, released early today, remained unchanged ahead of the European Central Bank’s (ECB) account of monetary policy meeting for the month of June scheduled to be released in a short while today. The German 10-year bond yields, which move inversely to its price, jumped nearly 2-1/2 basis points to -0.281 percent, the yield on 30-year note also surged 2-1/2 basis points to 0.334 percent and the yield on short-term 2-year traded flat at -0.722 percent.

The Australian government bonds remained tad higher during Asian trading session tracking a similar movement in the U.S. Treasuries after Federal Reserve Chair Jerome Powell put out a dovish testimony in front of the House Financial Services Committee, indicating a greater probability of a 25bps cut at the July FOMC meeting. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1-1/2 basis points to 1.337 percent, the yield on the long-term 30-year bond remained flat at 1.977 percent and the yield on short-term 2-year suffered 2-1/2 basis points to 0.955 percent.


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