Rates: Greece launches new 7-yr bond
The Greek treasury profits from the latest spread compression triggered by the ECB early June to keep all easing options alive. They launch a new 7-yr syndicated bond today. US retail sales and production data are expected to at least meet the consensus bar today, but won’t alter thinking about Fed policy. US Treasuries can nevertheless underperform Bunds.

Currencies: EUR/USD cemented in middle of the 1.11/1.14 consolidation pattern
The dollar lost modest ground last week as Powell confirmed market expectations for a July pre-emptive rate cut. However, the USD correction was modest. Today’s eco data might be slightly USD supportive, but probably won’t trigger a breach of technically important levels. EUR/GBP easily returned to the 0.90 area after last week’s temporary ‘dip’.

The Sunrise Headlines

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  • Wall Street ended a lacklustre trading session virtually unchanged with the Nasdaq (+0.17%) ‘outperforming’. Asian stocks trade mixed. Japan (-0.7%) underperforms following a long weekend.
  • The EU is said to consider concessions to the UK for it to avoid a hard Brexit. Meanwhile, EC president to be (?) von der Leyen said she would support a further extension of Brexit if more time is required.
  • US Treasury Secretary Mnuchin said the government is “very close” to a deal on raising/suspending the debt ceiling. It has been estimated that the government would run out of cash in early September (‘X-date’) otherwise.
  • Minutes of the RBA’s July policy meeting showed that the board will “continue to monitor” eco developments and that they could cut rates even further “if needed” to support employment, wages and inflation.
  • EU officials said they expected the WTO to approve a US demand to slap tariffs on products worth $5-7 bn as soon as the summer in their ongoing dispute over alleged illegal aircraft subsidies.
  • Germany’s von der Leyen will resign as minister of Defense and offered European socialists, greens and liberals last minute concessions in a bid to win over support during tonight’s vote on the EC’s presidency.
  • Today’s eco calendar contains US retail sales, UK’s May unemployment report and the German ZEW investor confidence. A slew of central bankers (ECB, Fed, BoE) are scheduled to speak. JP Morgan, GS & Wells Fargo report earnings.

Currencies: EUR/USD Cemented In Middle Of The 1.11/1.14 Consolidation Pattern

EUR/USD cemented in the 1.11/1.14 range

EUR/USD lost a few ticks in the 1.12 figure yesterday, but there was no driver to support a real directional USD or euro move. Interest rate differentials widened in favour of the dollar as Bunds outperformed Treasuries, but the spread was only of second tier significance for FX trading. At the kick-off off the earnings season, Citigroup earnings printed slightly better than expected and the NY Empire manufacturing also beat consensus. Both events triggered a tentative intraday USD bid, but the dollar held within established ranges. EUR/USD closed at 1.1259 (from 1.1270). USD/JPY finished unchanged at 107.91.

This morning, Asian equities are trading mixed in thin holiday market conditions. EUR/USD (1.1260) and USD/JPY (107.95) are going nowhere. The Aussie dollar is holding well north of the 0.70 mark. The RBA continues to monitor the labour market and might cut rates further of needed, but an additional cut probably won’t happen in the very near future, providing a floor for the Aussie dollar short term.

Today, the eco calendar is well filled. German ZEW investor confidence is expected to stay at rather depressed levels. US June retail sales are expected at 0.2% (headline)/0.3% (control group). This reference should be achievable and that also applies to the US production data. Also keep an eye at the NAHB housing sentiment. The data might be a marginally USD supportive. That said, we have to impression that the dollar is currently slightly more sensitive to price rather than activity data. In Europe, the approval process of the new EC commission head might also create some (euro negative?) political noise. EUR/USD drifted lower in the 1.11/1.14 range but rebounded from recent lows after Powell paving the way for a July rate cut. A rebound to the 1.13 would further ease the downside momentum. With the most important eco data before the FOMC July meeting printed, we expect little inspired trading. End of last week, sentiment on sterling turn less negative and EUR/GBP drifted (temporarily) off the 0.90 area. However, any GBP rebound is still used to sell the UK currency as investors expect Brexit related tensions to return soon. Today, UK labour data are expected to remain solid despite mediocre activity data of late. We don’t expect today’s data to improve fortunes for sterling in a profound/lasting way. The EUR/GBP EUR/GBP cross rate is still attacted to the 0.90 area.

EUR/USD rebounded from recent lows after Powell paved the way for a July rate cut

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This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.


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