News

Europe Roundup: Euro eases on ECB Draghi's comments, greenback declines on growing Fed rate cut speculation, investors eye U.S. inflation data – Wednesday, June 12th, 2019

Market Roundup

  • EUR/USD -0.06%, USD/JPY -0.15%, GBP/USD 0.23%, EUR/GBP -0.26%
     
  • DXY -0.01%, DAX -0.55%, FTSE -0.65%, Brent -2.39%, Gold 0.67%
     
  • Boris Johnson bids for British leadership with pledge of an October Brexit
     
  • Expectations low for Trump-Xi talks, preparations limited
     
  • Central Europe particularly vulnerable to global trade war: Draghi
     
  • European Central Bank can act further if slowdown worsens – Villeroy
     
  • Italian yields jump as surprise 20-year bond sale shakes up market
     
  • China's factory inflation slows as manufacturing stumbles; food prices soar
     
  • Oil falls over 2% on weaker demand growth, gain in U.S. crude stocks
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. consumer price index likely increased 0.1 percent in May, after posting a rise of 0.3 percent in April, while in the 12 months through January, the CPI is expected to have risen 1.9 percent.  Excluding food and energy, the core CPI probably rose 0.2 percent, after nudging up 0.1 percent in the previous month.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending June 7.
     

Key Events Ahead

  • (0815 ET/1215 GMT) ECB's Benoit Coeure chairs Session 2 on “Responses to monetary and financial shocks” at 8th ECB conference on CESEE countries in Frankfurt
     
  • (1100 ET/1500 GMT) Closing remarks by ECB Board member Benoit Coeure at Bond Market Contact Group (BMCG) meeting organised by ECB in Frankfurt
     

FX Beat

DXY: The dollar index slumped, extending prior session losses, as recent weak U.S. economic data supported the growing expectations of a Fed rate cut next week. The greenback against a basket of currencies traded 0.1 percent down at 96.64, having touched a low of 96.46 on Friday, its lowest since Mar. 25. FxWirePro's Hourly Dollar Strength Index stood at 39.22 (Neutral) by 1100 GMT.

EUR/USD: The euro declined, reversing some of its previous session gains after European Central Bank President Mario Draghi stated that central European economies may be more vulnerable to a global trade war given their high reliance on foreign trade and particular focus on single industries. The European currency traded 0.1 percent down at 1.1319, having touched a high of 1.1347 on Friday, its highest since Mar. 22. FxWirePro's Hourly Euro Strength Index stood at 40.29 (Neutral) by 1100 GMT. Immediate resistance is located at 1.1359 (Mar. 18 High), a break above targets 1.1402 (Feb. 16 High). On the downside, support is seen at 1.1263 (Mar. 26 Low), a break below could drag it below 1.1201 (May 14 Low).

USD/JPY: The dollar plunged to a 5-day low, as markets priced in at least two Fed rate cuts by the end of 2019 amid rising trade tensions, slowing U.S. growth and declining hiring in May. The pair was trading 0.2 percent down at 108.35, having hit a high of 108.80 on Tuesday, its highest since May 31. FxWirePro's Hourly Yen Strength Index stood at 64.04 (Bullish) by 1100 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. consumer price index and monthly budget statement. Immediate resistance is located at 108.87 (50.0% retracement of 109.92 and 107.81), a break above targets 109.47 (78.6% retracement). On the downside, support is seen at 107.88 (June 3 Low), a break below could take it lower at 107.51 (Jan. 4 Low).

GBP/USD: Sterling edged higher, hovering towards a 3-week high after Britain's main opposition party said it would try to introduce parliamentary legislation to prevent a no-deal Brexit. The major traded 0.1 percent up at 1.2731, having hit a high of 1.2763 on Friday; it’s highest since May 21. FxWirePro's Hourly Sterling Strength Index stood at 97.32 (Slightly Bullish) 1100 GMT. Immediate resistance is located at 1.2763 (June 7 High), a break above could take it near 1.2798 (May 17 High). On the downside, support is seen at 1.2647 (May 24 Low), a break below targets 1.2580 (May 30 Low). Against the euro, the pound was trading 0.05 percent up at 88.93 pence, having hit a low of 89.32 on Tuesday, it’s lowest since Jan. 15.

USD/CHF: The Swiss franc eased, extending losses for the third straight session, as investors await the Swiss National Bank policy meeting, where it expected to hold its ultra-loose monetary policy unchanged and foreseeably until at least 2021. The major trades 0.2 percent up at 0.9937, having touched a low of 0.9853 last week; it’s lowest since Jan. 15. FxWirePro's Hourly Swiss Franc Strength Index stood at -16.53 (Neutral) by 1100 GMT. On the higher side, near-term resistance is around 0.9987 (April 3 High) and any break above will take the pair to next level till 1.0121 (May 17 High). The near-term support is around 0.9859 (June 7 Low), and any close below that level will drag it till 0.9820 (Dec. 20 Low).

Equities Recap

European retreated from a 3-week high as investor sentiment weakened on the back of soft Chinese factory activity data and the latest signs of friction between Washington and Beijing on trade.

The pan-European STOXX 600 index tumbled 0.4 percent at 379.45 points, while the FTSEurofirst 300 plunged 0.4 percent to 1,493.65 points.

Britain's FTSE 100 trades 0.6 percent down at 7,354.02 points, while mid-cap FTSE 250 declined 0.5 to 19,237.46 points.

Germany's DAX fell 0.4 percent at 12,109.57 points; France's CAC 40 trades 0.6 percent lower at 5,378.23 points

Commodities Recap

Crude oil prices plunged by more than 2 percent, weighed down by a weaker demand outlook and a rise in U.S. crude inventories. International benchmark Brent crude was trading 2.01 percent lower at $60.80 per barrel by 1046 GMT, having hit a high of $63.81 on Monday, its highest since May 31. U.S. West Texas Intermediate was trading 2.1 percent down at $51.90 a barrel, after rising as high as $54.80 on Monday, its highest since the May 31.

Gold prices surged after hitting a 1-week low in the previous session, as worries over U.S.-China trade war flared up, curbing risk appetite and boosting safe-haven assets' demand. Spot gold was 0.7 percent up at $1,335.43 by 1049 GMT, having touched a low of $1,319.79 on Tuesday, its lowest since June 3. U.S. gold futures were up 0.6 percent at $1,339 an ounce.

Treasuries Recap

The U.S. Treasuries jumped during the afternoon session, ahead of the country’s consumer price index (PPI) data for the month of May, scheduled to be released today by 12:30GMT, and the benchmark 10-year Note auction, also due later today. The yield on the benchmark 10-year Treasury yield suffered 1-1/2 basis points to 2.126 percent, the super-long 30-year bond yields slipped 1 basis point to 2.606 percent and the yield on the short-term 2-year plunged 3 basis points to 1.891 percent.

The United Kingdom’s gilts remained narrowly mixed during European session ahead of a scheduled speech by the Governor of Bank of England (BoE), Mark Carney, on June 14 by 12:55GMT. The yield on the benchmark 10-year gilts, slipped 1 basis point to 0.848 percent, the super-long 30-year bond yields hovered around 1.449 percent and the yield on the short-term 2-year traded tad higher at 0.594 percent.

The German bunds remained mixed during European trading session. The German 10-year bond yields, which move inversely to its price, hovered around -0.233 percent, the yield on 30-year note traded flat at 0.376 percent and the yield on short-term 2-year also remained steady at -0.658 percent.

The Japanese government bonds closed flat amid a silent Asian trading session that witnessed data of little economic significance as investors wait to watch the country’s super-long 30-year auction, scheduled to be held on June 13 by 03:35GMT and industrial production data for the month of April, due on the following day by 04:30GMT for further direction in the debt market. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, hovered around -0.112 percent, the yield on the long-term 30-year edged tad lower to 0.351 percent and the yield on short-term 2-year also remained nearly stable at -0.193 percent.

The Australian government bonds surged during early Asian session amid a muted trading session that witnessed data of little economic significance ahead of the country’s employment report for the month of May, scheduled to be released on June 13 by 01:30GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2-1/2 basis points to 1.444 percent, the yield on the long-term 30-year bond plunged 3 basis points to 2.083 percent and the yield on short-term 2-year traded 2 basis points lower at 1.062 percent.


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