Europe Roundup: Sterling eases on mixed economic data, euro declines despite upbeat CPI figures, European shares gain – Monday, July 31st, 2017

Europe Roundup: Sterling eases on mixed economic data, euro declines despite upbeat CPI figures, European shares gain – Monday, July 31st, 2017

Market Roundup

  • EUR/USD -0.15%, USD/JPY -0.09%, GBP/USD -0.13%, EUR/GBP 0.02%

     
  • DXY +0.21%, DAX +0.09%, FTSE +0.37%, Brent +0.08%, Gold -0.14%

     
  • EZ Jul Inflation flash y/y, 1.3% vs forecast 1.3%, previous 1.3%

     
  • EZ Jul Inflation ex-food and energy flash, 1.3% vs forecast 1.1%, previous 1.2%

     
  • EZ Jul Unemployment rate, 9.1% vs forecast 9.2%, previous 9.3% revised 9.2%

     
  • Great Britain Jun BOE consumer credit 1.458 bln vs forecast 1.500 bln, previous

    1.732 bln revised 1.769 bln

     
  • Germany Jun Retail sales y/y, 1.5% vs forecast 2.7%, previous 4.8% revised 4.9%

     
  • UK will not cut taxes below European average after Brexit –Hammond

     
  • Trump and Japan’s Abe talk about “grave and growing” North Korea threat

     
  • China hits back at Trump criticism over N. Korea

     
  • China June services trade deficit widens as Chinese spend abroad

     
  • Japan-US may link currency, trade in economic dialogue – Nikkei

     
  • Japan may reverse course, issue more government bonds – Nikkei

     
  • Oil near two-month high as producers set to meet again

     
  • Gold hits highest in nearly 7 weeks on struggling dollar

     

Economic Data Ahead

  • (0830 ET/1230 GMT) The Statistics Canada releases its Raw Material Price Index for the month of June. The index posted a decline of 1.8 percent in May.

     
  • (0830 ET/1230 GMT) The Statistics Canada will report its industrial producer prices for the month of June. The indicator fell 0.2 percent in the prior month.

     
  • (0900 ET/1300 GMT) Chile’s unemployment rate is expected to edge up to 7.1 percent in June from 7.0 percent the previous month.

     
  • (0945 ET/1345 GMT) Chicago Purchasing Managers’ Index is likely to show that business conditions declined to 61.0 in July from 65.7 last month.

     
  • (1000 ET/1400 GMT) The National Association of Realtors is likely to report that U.S. pending home sales increased 1.0 percent in June after declining 0.8 percent in May.

     
  • (1030 ET/1430 GMT) The Dallas Fed releases its Manufacturing Business Index for the month of July. The index posted a rise of 15.0 percent in the previous month.

     
  • (1930 ET/2330 GMT) Australian Industry Group (AiG) releases its performance of manufacturing index for the month of June. The index stood at 55.0 in May.

     

Key Events Ahead

  • (0745 ET/1145 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.575 bn)

FX Beat

DXY: The dollar rebounded versus some of its major peers as investors awaited economic fundamental drivers from the U.S. docket for further momentum. The greenback against a basket of currencies traded 0.2 percent up at 93.46, having touched a low of 93.15 on Thursday, it’s lowest since Jun. 23 2016. FxWirePro’s Hourly Dollar Strength Index stood at -53.17 (Bearish) by 1000 GMT.

EUR/USD: The euro eased, reversing some of its previous session gains, despite consumer prices in the Eurozone rising at an annualized rate of 1.3 percent in July, matching consensus, while core CPI edged higher 1.2 percent y/y and the unemployment rate fell to 9.1 percent during June, bettering prior surveys. The European currency traded 0.1 percent down at 1.1730, having touched a high of 1.1776 on Thursday, its highest since Jan 14, 2015. FxWirePro’s Hourly Euro Strength Index stood at 26.04 (Neutral) by 1000 GMT. The pair has formed temporary top at 1.17767 and any break above will take the pair till 1.18000/1.1845. On the lower side, minor support is around 1.1628 (10- day MA) and any break below will drag it down till 1.1600 (38.2% retracement of 1.13123 and 1.17767)/1.14896 (61.8% retracement of 1.13123 and 1.17767).

USD/JPY: The dollar slumped to a 1-1/2 month low following escalating geopolitical tensions on North Korea’s another launch of ballistic missile and Friday’s disappointing details from the advance US Q2 GDP report. Moreover, strong rebound in the Japanese industrial production for June provided an additional boost to the safe haven Japanese yen. The major was trading 0.1 percent down at 110.51, having hit a low of 110.30 earlier, its lowest since Jun 15. FxWirePro’s Hourly Yen Strength Index stood at 82.57 (Slightly Bullish) by 1000 GMT. On the lower side, the pair has broken low of 110.62 formed on Jul 24th, 2017. The near term resistance is around 112 (21- day EMA) and any break above targets 112.98/114.

GBP/USD: Sterling eased towards the 1.3100 handle following mixed results from the UK docket. BoE’s consumer credit declined to £1.458 billion in June, mortgage approvals came in at 64.68K and M4 money supply contracted more than expected, while mortgage lending rose £4.1 billion and net lending to individual surpassed initial forecasts at £5.6 billion. Sterling traded 0.1 percent down at 1.3116, having hit a high of 1.3158 on Thursday, its highest since Sept. 16. FxWirePro’s Hourly Sterling Strength Index stood at 37.97 (Neutral) by 1000 GMT. On the higher side, the pair is facing major resistance 1.3160 and break above confirms bullish continuation, a jump till 1.3220/1.3245 (161.8% retracement of 1.31260 and 1.29343) is likely. The downside remains capped by 10- day MA at 1.3040 and any break below will drag it till 1.3000/1.29435 (61.8% fibo). Against the euro, the pound traded flat at 89.45 pence, having hit a 1-week high of 88.91 last week.

USD/CHF: The Swiss franc declined, extending losses for the third straight session, as investors looked past Friday’s mixed US GDP report. The major trades 0.2 percent up at 0.9708, having touched a high of 0.9726 the prior session, it’s highest since Jun. 27. FxWirePro’s Hourly Swiss Franc Strength Index stood at -122.50 (Highly Bullish) by 1000 GMT. The major trend line resistance is around 0.9700 and any close above will take the pair till 0.9808 (May 30th high)/0.9940 (200- day MA) is possible. On the lower side, any further bearish continuation happens only below 0.9437 level and break below will drag it down till 0.92835 (161.8% retracement of 0.94385 and 0.97210).

AUD/USD: The Australian dollar eased below the 0.8000 handle, as lower than expected Chinese data offset better than estimated domestic private sector credit growth figures. The Aussie trades 0.1 percent down at 0.7973, having hit a high of 0.8065 on Thursday, it’s highest since May 15, 2015. FxWirePro’s Hourly Aussie Strength Index stood at 51.48 (Bullish) by 1000 GMT. On the lower side, near term support is around 0.7935 (10- day MA) and any break below will drag the pair till 0.7875 (38.2% retracement of 0.75711 and 0.80656)/0.7802 (21- day EMA). The near term resistance is around 0.8070 and any break above targets 0.8100/0.8150.

Equities Recap

European shares rallied, bolstered by strong gains among mining and bank stocks, while the dollar against a basket of currencies rebounded as markets looked past Friday’s mixed US GDP report.

The pan-European STOXX 600 index rallied 0.3 percent to 379.61 points, while the FTSEurofirst 300 index rose 0.4 percent to 1,492.15 points.

Britain’s FTSE 100 trades 0.6 percent up at 7,407.69 points, while mid-cap FTSE 250 gained 0.4 percent to 19,809.40 points.

Germany’s DAX rose 0.2 percent at 12,184.62 points; France’s CAC 40 trades 0.1 percent higher at 5,135.15 points.

Commodities Recap

Crude oil prices rallied, having hit two-month highs on tightening U.S. crude market and the threat of sanctions against OPEC-member Venezuela. International benchmark Brent crude was trading 0.5 percent up at $52.27 per barrel by 0947 GMT, having hit a high of $52.64 on Friday, its strongest since May 25. U.S. West Texas Intermediate was trading 0.02 percent higher at $49.72 a barrel, after rising as high as $50.01 earlier, its strongest since May 30.

Gold prices declined after rising to their highest levels in nearly seven weeks as tensions on the Korean peninsula boosted the demand for the safe-haven metal. Spot gold was trading 0.2 percent down at $1,267.19 per ounce at 0951 GMT, having hit a high of $1,270.91 in early trade, its highest since June 14. U.S. gold futures for August delivery fell 0.1 percent to $1,267.60 per ounce.

Treasures Recap

The U.S. Treasuries remained flat as investors wait to watch the country’s manufacturing PMI, scheduled to be released on August 1 amid a silent session that witnessed data of little economic significance. The yield on the benchmark 10-year Treasury, hovered around 2.29 percent, the super-long 30-year bond yields steady at 2.89 percent and the yield on the short-term 2-year note too traded flat at 1.35 percent.

The UK gilts gained Monday as investors wait to watch the 10-year auction, scheduled to be held on August 1 and the country’s construction PMI, for the month of July, due on August 2, will provide further direction to the debt market. The yield on the benchmark 10-year gilts, slipped nearly 1 basis point to 1.21 percent, the super-long 30-year bond yields slumped nearly 2 basis points to 1.84 percent and the yield on the short-term 2-year traded almost flat at 0.24 percent.

The Eurozone periphery bonds traded mixed Monday after the region’s consumer price-led inflation index (CPI) for the month of July met market expectations and the rate of unemployment cheered investors, dropping from the previous. The benchmark German 10-year bond yields, which moves inversely to its price, rose nearly 1 basis point to 0.55 percent, the French 10-year bond yields hovered around 0.81 percent, Irish 10-year bond yields flat at 0.85 percent, Italian down by 3 basis points to 2.09 percent, Netherlands 10-year bond yields traded 1-1/2 basis points higher at 0.67 percent, Portuguese equivalents slumped nearly 4 basis points to 2.88 percent and the Spanish 10-year yields traded 3 basis points lower at 1.49 percent.

The Japanese bonds remained flat at the start of the trading week Monday after the country’s industrial production, release later yesterday, rebounded during the month of June. The yield on the benchmark 10-year Treasury note, which moves inversely to its price remained tad higher at 0.07 percent, the yield on 30-year note climbed nearly 1 basis point to 0.87 percent and the yield on short-term 2-year hovered around -0.11 percent.

The New Zealand bonds ended flat Monday as investors wait to watch the country’s GlobalDairyTrade price auction, scheduled to be held on August 1. At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, hovered around 3.00 percent, the yield on 7-year note flat at 2.84 percent while the yield on short-term 2-year note ended 1 basis point lower at 2.12 percent.

The Australian bonds gained Monday as investors remained cautious ahead of the Reserve Bank of Australia monetary policy meeting scheduled to be held on Tuesday.  The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1/2 basis point to 2.69 percent, the yield on 15-year note also slumped 1 basis point to 2.99 percent and the yield on short-term 2-year traded nearly 2 basis points lower at 1.81 percent.

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