Market Roundup
• Trump to use U.S. security review panel to curb China tech investments.
• Automakers warn U.S. tariffs will cost hundreds of thousands of jobs, hike prices.
• U.S. May Durable Goods, -0.6%, -1.0% forecast, -1.6% previous.
• U.S. May Durables Ex-Transport, -0.3%, 0.5% forecast, 0.9% previous.
• U.S. May Durables Ex-Defense MM, -1.5%, -1.9% previous.
• U.S. May Retail Inventories Advance, 0.1%, 0.4% previous.
• U.S. May Pending Homes Index, 105.9, 106.4 previous.
• U.S. May Pending Sales Change MM, -0.5%, 0.5% forecast, -1.3% previous.
• U.S. May Wholesale Inventories Adv, 0.5%, 0.1% previous.
• U.S. MBA Mortgage Applications w/e, -4.9%, 5.1% previous.
• U.S. Mortgage Market Index w/e, 365.3, 384.1 previous.
• U.S. Mortgage Refinance Index w/e, 1,015.9, 1,052.3 previous.
• U.S. MBA 30-Yr Mortgage Rate w/e, 4.84%, 4.83% previous.
• Bank of England hits back at EU over banks' Brexit readiness.
• Euro's past rise could weigh on inflation for several more quarters: ECB.
• Italy's new government is no threat to euro, eurosceptic senator say.
Looking Ahead - Economic Data (GMT)
• 27 Jun 23:50 Japan Foreign Bond Investment JPY w/e, 1,490.4 bln
• 27 Jun 23:50 Japan Foreign Invest JP Stock JPY w/e, -40.8 bln
• 27 Jun 23:50 Japan May Retail Sales YY, 0.9% forecast, 1.6% previous
• 28 Jun 23:30 Japan Jun CPI Core Tokyo YY, 0.6% forecast, 0.5% previous
• 28 Jun 23:30 Japan Jun CPI, Overall Tokyo, 0.4% previous
• 28 Jun 23:30 Japan May Jobs/Applicants Ratio, 1.59 forecast, 1.59 previous
• 28 Jun 23:30 Japan May Unemployment Rate, 2.5% forecast, 2.5% previous
• 28 Jun 23:50 Japan May Industrial output prelim mm, -1.1% forecast, 0.5% previous
• 28 Jun 23:50 Japan Jun IP Forecast 1 Mth Ahead, 0.3% previous
• 28 Jun 23:50 Japan Jul IP Forecast 2 Mth Ahead, -0.8% previous
Looking Ahead - Events, Other Releases (GMT)
• 09:00 Swiss National Bank publishes report on the situation of Swiss banks in Zurich
• 10:00 Bank of England's Buck Rogers is due to speak at the Financial Times' Managing Cyber Risk in Critical Infrastructure event, under Chatham House rules in London
• 10:00 Bank of England's David Bailey: Keynote Seminar at Westminster Business Forum in London
• 13:30 Bank of England's Andy Haldane talks in London about one of Britain's biggest economic problems, poor productivity growth in London
• 14:45 Fed's James Bullard participates in moderated discussion on the U.S. economy and monetary policy before the Ascension Health Management Annual Conference in St. Louis
• N/A General Council meeting of the ECB in Frankfurt
Currency Summaries
EUR/USD is supported at 1.1500 levels and currently trading at 1.1554 levels. The pair has made session high at 1.1612 hit lows at 1.1552 levels. The euro declined against US dollar on Wednesday as concern about an escalating trade conflict boosted the dollar. Worries that a full-blown trade war will break out between Beijing and Washington continued to weigh on currencies and sent Chinese stocks hurtling lower, despite data showing profits rose at China's industrial companies. The euro slipped in US session, under pressure from the trade conflict, the threat of a political crisis in Germany and uncertainty over a European Union summit. A row over migration within Germany's governing coalition will also weighed on the single currency. Angela Merkel hopes this week's European summit can save her from a migrant crisis that could cost her job. And while there is little love lost for the German chancellor in many capitals, they appear ready to help her out for reasons of self-interest. Merkel's Bavarian CSU allies have given her until the end of the EU summit to reduce the burden of immigration on Germany, which has taken in 1.6 million migrants since 2014. Otherwise, they will defy her and impose border controls, which could collapse the chancellor's fledgling coalition. The euro was 0.76 percent lower at $1.1557. The dollar index , which measures the greenback against a basket of six other currencies, was up 0.63 percent at 95.249, on pace for its second straight day of gains.
GBP/USD is supported in the range of 1.3100 levels and currently trading at 1.3121 levels. It reached session high at 1.3166 and dropped to session low at 1.3121 levels. Britain's pound declined sharply against the dollar on Wednesday as the greenback rebounded, on track for its biggest daily drop in nearly two weeks, as imminent Brexit talks and doubts the Bank of England will raise interest rates at all this year darkened the outlook for the pound. The dollar gained as trade-related worries eased after the U.S. administration softened its approach to Chinese investment. Most of its gains came against the euro and the Swiss franc .Bank of England Governor Mark Carney on Wednesday said that British banks were fully prepared for a disorderly Brexit but shed little light on whether the central bank would raise rates at its next policy meeting, in Augus. The pound extended losses and fell 0.7 percent to a one-week low at $1.3127 as the dollar strengthened. Against the euro, it fell 0.1 percent to trade at 88.12 pence, an 11-day low. Investors are pondering whether a rate hike is still likely this summer after an incoming BoE policymaker expressed caution over the impact of Brexit on Britain's economy .Sterling has been caught between contrasting signals from policymakers over whether the economy is performing well enough to justify raising rates for only the second time since the 2008-09 financial crisis. Markets still see more than a 50 percent likelihood the BoE will raise rates by 25 basis points in August and around a 90 percent chance of an increase by the end of 2018.
USD/CAD is likely to find support at 1.3261 levels and is trading at 1.3350 levels. It has made intraday high at 1.3385 and lows at 1.3275 levels. The Canadian dollar weakened to a one-year low against its U.S. counterpart on Wednesday after a speech by Bank of Canada Governor Stephen Poloz reduced bets for an interest rate hike next month from the central bank. The effects of U.S. steel and aluminum tariffs and tighter mortgage rules will "figure prominently" in the Bank of Canada's July decision on interest rates, Poloz said. Chances of a rate increase at the July 11 announcement fell to less than 50 percent from about 55 percent before the speech. Growing trade tensions between Canada and the United States and the start of tariffs between the two countries have dimmed Canada's economic outlook since the Bank of Canada on May 30 said higher interest rates would be needed to keep inflation near target. The price of oil, one of Canada's major exports, was supported by U.S. demands that importers stop buying Iranian crude from November. U.S. crude prices settled 3.2 percent higher at $72.76 a barrel. On the data front, Canada's gross domestic product data for April and the Bank of Canada Business Outlook Survey are due on Friday. The Canadian dollar was trading last 0.5 percent lower at C$1.3350 to the greenback. The currency touched its weakest since June 12, 2017 at C$1.3386.
USD/JPY is supported around 109.50 levels and currently trading at 110.21 levels. It peaked to hit session high at 110.48 and made session lows at 110.12 levels. The dollar strengthened against the Japanese yen on Wednesday as the greenback rose broadly after trade-related worries eased amid a slight softening of the U.S. administration's approach to Chinese investment. U.S. President Donald Trump's administration unveiled a plan for a stronger security review process of foreign investors acquiring American technology, easing its tone from previous remarks indicating it would specifically block Chinese investments. An escalating trade dispute between the United States and China has hit global stock markets, but has so far not triggered demand for Japanese yen, usually seen as a safe haven to invest during times of uncertainty. The greenback is near 2018 highs against other currencies, in part due to expectations that the U.S. Federal Reserve will hike interest rates again after raising them in June for the second time this year. The head of the Dallas Federal Reserve said the U.S. central bank could raise rates at least twice more before its monetary policy stopped being accommodative, while the chief at the Atlanta Fed said he might rule out a fourth rate hike this year if the U.S.-China trade dispute worsens. The dollar index, which measures the greenback against a basket of six other currencies, was up 0.63 percent at 95.249, on pace for its second straight day of gains. The Japanese yen weakened 0.15 percent versus the greenback to 110.21 per dollar.
Equities Recap
Relief that the trading dispute between China and the United States was on course to de-escalate pushed European shares higher on Wednesday after a start in negative territory.
UK's benchmark FTSE 100 closed up by 1 percent, the pan-European FTSEurofirst 300 ended the day up by 0.81 percent, Germany's Dax ended up by 0.9 percent, France’s CAC finished the day up by 0.9 percent.
U.S. stocks reversed course on Wednesday, falling on renewed uncertainty regarding the U.S. stance on Chinese investments in American technology companies.
Dow Jones closed down by 0.69 percent, S&P 500 ended down 0.87 percent, Nasdaq finished the day up by 1.55 percent.
Treasuries Recap
U.S. Treasury yields fell to four-week lows on Wednesday on concerns that trade wars will harm economic growth, even after U.S. President Donald Trump indicated that he would not impose restrictions on Chinese investments in U.S. technology firms.
Benchmark 10-year notes gained 13/32 in price on the day to yield 2.833 percent, the lowest since May 31 and down from 2.880 percent late on Tuesday.
The yield curve between two-year and 10-year notes flattened to 32 basis points, the lowest level since 2007.
Commodities Recap
Gold prices dipped to a fresh six-month low on Wednesday as the U.S. dollar strengthened, making bullion more expensive for buyers using other currencies.
Spot gold declined 0.3 percent at $1,255.17 per ounce by 1:35 p.m. EDT (1735 GMT), after hitting its lowest since mid-December at $1,252.04.
U.S. gold futures for August delivery settled down $3.80, or 0.3 percent, at $1,256.10 per ounce.
Oil prices jumped on Wednesday as plunging U.S. crude stockpiles compounded supply worries in a market already uncertain about Libyan exports, a production disruption in Canada and Washington's demands that importers stop buying Iranian crude from November.
U.S. crude futures rose $2.23, or 3.16 percent, to settle at $72.76 a barrel. The contract touched $73.06 a barrel, the highest since Nov. 28, 2014. Brent crude rose $1.31, or 1.7 percent, to settle at $77.62 a barrel.
