Market Roundup
• U.S. Treasury's Mnuchin says new investment curbs not specific to China.
• U.S. May New Home Sales-Units, 0.667 mln, 0.662 mln previous, 0.646 mln revised.
• U.S. May New Home Sales Chg MM, 0.7%, -1.5% previous, -3.7% revised.
• U.S. May Build Permits R Number, 1.301 mln, 1.301 mln previous.
• U.S. Jun Dallas Fed Mfg Bus Index, 36.50, 26.80 previous.
• Facing U.S. blowback, Beijing softens 'Made in China 2025' message.
• China to pursue more trade with France, EU raises "difficult issues".
• EU watchdog tells banks to speed up 'inadequate' Brexit preparations.
• Eurogroup head to seek EU summit's guidance on easier debt restructuring
Looking Ahead - Economic Data (GMT)
• 26 Jun 22:45 New Zealand May Trade - Imports NZD, 4.79 bln previous
• 26 Jun 22:45 New Zealand May Trade Balance NZD, -3.76 bln previous
• 26 Jun 22:45 New Zealand May Trade - Exports NZD, 5.05 bln previous
Looking Ahead - Events, Other Releases (GMT)
• 07:00 Riksbank executive board meeting in Stockholm
• 09:00 Bank of England external member of the Monetary Policy Committee Jonathan Haskel's Treasury Select Committee Monetary Policy pre-appointment hearing in London
• 10:00 Chair of the Court of the Bank of England Bradley Fried's Treasury Select Committee Chair of Court pre-appointment hearing in London
• 12:00 Introductory remarks by ECB Vice President Luis de Guindos at the Bond Market Contact Group (BMCG) organized by the ECB in Frankfurt
• 17:45 Fed's Robert Kaplan participates in moderated question-and-answer session before the Greater Houston Partnership State of Talent, in Houston, Texas
• 18:00 Fed's Raphael Bostic participates in an armchair chat before the Birmingham Civil Rights Institute, in Birmingham, Ala
• N/A A valedictory lecture with Ian McCafferty, member of the Bank of England's monetary policy committee in London
• N/A Irish Central Bank Governor Philip Lane speaks at "The Euro at 20" joint conference in Dublin
Currency Summaries
EUR/USD is likely to find support at 1.1624 levels and currently trading at 1.1702 levels. The pair has made session high at 1.1712 and hit lows at 1.1650 levels. The euro strengthened against US dollar on Monday as worries about escalating trade tensions between the United States and other leading economies kept risk appetite in check. The U.S. Treasury Department is drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with industrially significant technology, a government official briefed on the matter said on Sunday. U.S. Treasury Secretary Steven Mnuchin said on Monday that forthcoming investment restrictions from the Treasury will not be specific to China but would apply to all countries that are trying to steal our technology. The news added to the sense of caution felt after U.S. President Donald Trump on Friday threatened to impose a 20 percent tariff on cars imported from the European Union. The euro was 0.05 percent higher at $1.1662 after gaining about 0.5 percent on Friday. The single currency was lifted after Friday's upbeat German and French business activity data and fresh assurances by Italian politicians that their nation would not leave the single currency. The dollar index against a basket of six major currencies stood at 94.515 having retreated from 95.529, its highest level since July 2017 scaled early on Friday.
GBP/USD is supported in the range of 1.3200 levels and currently trading at 1.3280 levels. It reached session high at 1.3292 and dropped to session low at 1.3255 levels. Sterling edged higher against the dollar on Monday as weaker dollar and worries about rising trade tensions between the United States and other leading economies kept risk appetite in check. But broad moves were limited before a crucial EU summit this week as investors booked profits from a short rally after a Bank of England meeting last week revived expectations of a rate hike in the coming months. The central bank kept interest rates on hold but the decision by chief economist Andy Haldane to join two other policymakers in calling for rates to rise to 0.75 percent lifted the pound off a seven-month low as expectations grew that the BoE could tighten policy in August. Markets now see more than a 50 percent likelihood of the BoE raising interest rates in August by 25 basis points and a 90 percent chance of a rate hike happening by the end of 2018. Sterling edged 0.1 percent higher at $1.3281. In early trades, it had fallen a quarter of a percent to $1.3222, not far away from a mid-November 2017 low of $1.3102 hit last Thursday.
USD/CAD is likely to find support at 1.3260 levels and is trading at 1.3291 levels. It has made intraday high at 1.3324 and lows at 1.3277 levels. The Canadian dollar weakened against its U.S. counterpart on Monday as worries over an escalating trade dispute between the United States and other leading economies weighed on Canadian dollar. Trade war fears were stoked by reports that the Treasury was drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with industrially significant technology. U.S. Treasury Secretary Steven Mnuchin said on Monday that forthcoming investment restrictions from the Treasury will not be specific to China but would apply to all countries that are trying to steal our technology. Canada exports many commodities, including oil, and runs a current account deficit so its economy could also be hurt if the flow of trade or capital slows. Oil fell as investors prepared for an extra 1 million barrels per day in output to hit the markets after OPEC and its partners agreed to raise production. The Canadian dollar was last trading 0.2 percent lower at C$1.3291 to the greenback. The currency traded in a range between C$1.3277 and C$1.3315. On Friday, it touched its weakest in one year at C$1.3384.
AUD/USD is supported around 0.7343 levels and currently trading at 0.7408 levels. It hit session high at 0.7432 and made session lows at 0.7395levels. The Australian dollar dipped against its U.S. counterpart on Monday as trade fights between the United States and other leading economies worsened. U.S. Treasury Secretary Steven Mnuchin on Monday said forthcoming investment restrictions would apply to all countries that are trying to steal our technology. His remarks, posted on Twitter, came a day after a U.S. government official told US Treasury is developing rules that would bar firms with at least 25 percent Chinese ownership from buying U.S. technology companies. The proposal would limit Chinese ownership of U.S. companies with industrially significant technology. A government official briefed on the matter emphasized that the Chinese ownership threshold may change before the restrictions are announced on Friday. The Aussie dollar dipped to $0.7407, having been as high as $0.7443 at one stage. That was still up on late week's one-year trough of $0.7345, hit after President Donald Trump announced new tariffs on imports from China and Europe. The news knocked U.S. stock and chilled risk appetites generally. There was no Australian economic data of note on Monday and very little in the diary for the whole week.
Equities Recap
European shares slid further on Monday as investors on both sides of the Atlantic grew increasingly fearful of the threat of a global trade war and its impact on the world economy.
UK's benchmark FTSE 100 closed down 2.3 percent, the pan-European FTSEurofirst 300 ended the day down by 2.12 percent, Germany's Dax ended down by 2.4 percent, France’s CAC finished the day down by 1.8 percent.
An escalating trade dispute between the United States and other leading economies battered U.S. stocks on Monday, sending the S&P 500 and Nasdaq to their steepest losses in more than two months.
Dow Jones closed up by 1.34 percent, S&P 500 ended down by 1.38 percent, Nasdaq finished the day down by 2.09 percent.
Treasuries Recap
The U.S. Treasury yield curve flattened to its lowest level in over 10 years on Monday as concerns about trade wars and divisions within the euro zone boosted demand for longer-dated safe-haven debt.
Benchmark U.S. 10-year notes gained 5/32 in price to yield 2.884 percent, down from 2.900 percent late on Friday. The yield curve between 2-year and 10-year notes flattened to 33 basis points, the lowest level since 2007.
Commodities Recap
Gold hovered near last week's six-month low on Monday as investors flocked to U.S. Treasuries rather than bullion, amid concerns over a global trade war ratcheting higher after a report said the United States plans to bar Chinese companies from investing in its technology firms.
Spot gold was down 0.2 percent at $1,266.29 per ounce by 1:35 p.m. EDT (1735 GMT).U.S. gold futures for August delivery settled down $1.80, or 0.1 percent, at $1,268.90 per ounce.
Oil fell on Monday as investors prepared for an extra 1 million barrels per day (bpd) of oil to hit the markets after OPEC agreed to raise production and as U.S. equity markets slipped on trade war fears.
Brent crude futures fell $1.35 to $74.20 a barrel by 12:30 p.m. EDT (1630 GMT). U.S. light crude retreated after an early rise to trade down 41 cents to $68.17 a barrel.
