Europe Round Up: DXY falls to 1-month lows, GBP hits 7-month high on retail sales - June 18th, 2015

Market Roundup

• GBP/USD hits 7 month high at 1.5930 after UK retail sales data.
  
  
• Dollar index to 1 month low at 93.643 after Fed refrains from clearer rate liftoff.
  
  
• NOK falls after Norges cuts rates, EUR/NOK up to 8.8130 from 8.6520.
  
  
• Merkel- Euro has always been more than a currency.
  
  
• Greek CB playing with political fire.
  
  
• France Sapin- Grexit would be catastrophe for Greece.
  
  
• UK May Retail sales 0.2% m/m, 4.6% y/y vs previous 0.9%/4.6% revised. 0.0%/4.8% expected.
  
  
• Euro Zone Q1 labour costs 2.2% y/y vs previous 1.2% revised.
  
  
• Euro Zone Q1 Wages in EZ 2.2% vs previous 1.1% revised.
  
  
• Switzerland May Trade balance 3433mln vs previous 2658mln revised.
  
  
• Norges bank cuts interest rates by 25bp to 1%, says rates could be lowered further.
  
  
• SNB keeps target rate for 3-mth libor unchanged at -0.25%.
  
  
• SNB lifts 2015/2016 inflation forecasts by 0.1% to -1.0%/-0.4%.
  
  
• Jordan- SNB expects negative interest rates to weaken CHF.
  
  
• Zurbruegg- Swiss monetary landscape is acceptable, no immediate need to influence it.

Economic Data Ahead

• (0830 ET/1230 GMT) US CPI (May) consensus +0.5% m/m, 0.0% y/y; previous +0.1% m/m, -0.2% y/y.
  
  
• (0830 ET/1230 GMT) US CPI ex-food/energy (May) consensus +0.2% m/m, +1.8% y/y; previous +0.3% m/m, +1.8% y/y.

• (0830 ET/1230 GMT) US Real Average Weekly Earnings (May) previous 0.0% m/m.
  
  
• (0830 ET/1230 GMT) US Current Account (Q1) consensus -$117.0 bn, previous -$113.5 bn.
  
  
• (0830 ET/1230 GMT) US Initial Claims (week June 13) consensus 275k, previous 279k.
  
  
• (0830 ET/1230 GMT) US Continued Claims (week June 6) consensus 2.200 mn, previous 2.265 mn.
  
  
• (1000 ET/1400 GMT) US Philly Fed Manufacturing Survey (June) consensus +8.0, previous +6.7.
  
  
• (1000 ET/1400 GMT) US Leading Indicators (May) consensus +0.4% m/m, previous +0.7% m/m.
  
  
• (1130 ET/1530 GMT) US Cleveland Fed Median CPI (May) previous +0.2% m/m.

Key Events Ahead

• (1145 ET/1545 GMT) Fed Trade operation 15-yr Fannie Mae/Freddie Mac (max $650 mn).
  
  
• (1430 ET/1830 GMT) Fed Trade operation 30-yr Ginnie Mae (max $850 mn).

FX Recap

EUR/USD is supported around 1.1400 levels and currently trading at 1.1403 levels. It has made intraday high at 1.1419 and low at 1.1329 levels. The dollar index shed 0.6 percent to hit a one-month low on Thursday after the Federal Reserve disappointed investors who had hoped for a clearer signal on when the U.S. central bank will lift interest rates. Greece returns to the spotlight in European trading hours as Euro zone finance ministers gather for a meeting in Luxembourg. Greek 10-year bond yields advanced to levels unseen since April, reflecting building funding stress. Meanwhile, the 1-year CDS spread - a proxy for the perceived likelihood of default - jumps to a three-week high. Later in the day, May's US CPI data will enter the spotlight. The core year-on-year inflation rate is expected to remain unchanged at 1.8 percent. Leading survey data suggests a pickup in input price inflation has yet to meaningfully translate into recovering output charges, setting the stage for a subdued outcome. Initial support is seen around 1.1297 and resistance is seen around 1.1437 levels. Option expiries are at 1.1150-60 (1.2BLN), 1.1200 (475M), 1.1275 (512M), 1.1300 (788M), 1.1400 (512M).

USD/JPY is supported below 123.00 levels and posted a high of 123.59 levels. It has made intraday low at 122.58 and currently trading at 122.53 levels. The downward revision of the end-2016 median rate forecast by the Fed triggered a sell-off in the USD, which has been extended today during the European session. Consequently, the USD/JPY pair extended losses to a low of 122.53 levels. The uptick in the Yen also found support from the weakness in the Treasury yields. Near term resistance is seen at 124.57 and support is seen at 122.10 levels. Option expiries are at 122.00 (1.2BLN), 123.00 (495M), 123.50 (410M), 124.00 (1BLN).

GBP/USD is supported above $1.5900 levels. It made an intraday high at 1.5928 and low at 1.5804 levels. Pair is currently trading at 1.5915 levels. Sterling hit a seven-month high against a broadly weaker dollar on Thursday after better-than-expected UK retail sales data, which followed strong wage growth numbers and hawkish comments from a Bank of England policymaker. Sterling rose to $1.5928 after the retail sales data, from $1.5904 before its release, before weakening a touch to $1.5896, still up 0.4 percent on the day. Against the euro it was flat at 71.67 pence. Initial support is seen at 1.5744 and resistance is seen around 1.5939 levels.

USD/CHF is supported below 0.9200 levels and trading at 0.9169 levels and made intraday low at 0.9154 and high at 0.9224 levels. Today SNB maintained its policy of negative interest rates and penalties for holding Swiss francs in cash and said it would remain active in currency markets to keep the "significantly overvalued" franc down. The interest rate to be charged on sight deposit account balances is now at a record low of -0.75%. The target range for the three-month Libor is also in negative territory, currently at between -1.25% and -0.25%. However, Zurbruegg gave hints on the SNB's view of future interventions if faced with an unfavourable outcome to Greece's talks with its creditors. Near term support is seen at 0.9113 levels and resistance is seen at 0.9289 levels.

AUD/USD is supported above 0.7800 levels and trading at 0.7818 levels. It has made intraday high at 0.7832 levels and low at 0.7709 levels. A broad based sell-off in the USD pushed the commodities higher today. Base metals space advanced more than 0.5% today. Iron futures are still moderately weak; however AUD traders ignored weakness in iron ore to advance against the Greenback. Initial support is seen at 0.7568 and resistance at 0.7838 levels. Option expiries are at 0.7700 (1.5BLN), 0.7750 (276M), 0.7820 (400M).