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UK Prime Minister Boris Johnson's spokesman said Johnson spoke with French President Emmnauel Macron on Thursday night. Discussions moved on to Brexit that Johnson "will be setting out the same message which he delivered in the House of Commons". That is, "the withdrawal agreement has been rejected three times by the House of Commons, it's not going to pass, so that means reopening the withdrawal agreement and securing the abolition of the backstop."

Referring to Johnson's statements in House, Ireland's Foreign Minister, Simon Coveney, said they are "very unhelpful" tot he Brexit process. Coveney said Johnson "seems to have made a deliberate decision to set Britain on a collision course with the European Union and with Ireland in relation to the Brexit negotiations." And, "the approach that the British prime minister seems to now be taking is not going to be the basis of an agreement, and that's worrying for everybody."

Frenchs State Minister for European affairs Amelie de Montchalin said Macron will hold discussion with Johnson in the coming week and "What is still to negotiate is the future relationship... We have to create a working relationship and not get into games, gestures and provocations."

The ECB on Thursday demonstrated just how tough it will be for central banks to match the appetite of markets for easing. The euro was the top performer while the New Zealand dollar lagged. The first look at Q2 US GDP is up next. Thursday's pre-ECB Premium trade in the euro (not EURUSD or EURGBP) is already 90 pips in the green. Ashraf laid out the fundamental and technical rationale for taking the trade before the ECB announcement.

The ECB essentially pre-committed to cutting rates and buying more bonds with the potential for even more in September but that left markets disappointed. The euro touched a two-year low then reversed 85 pips higher on Draghi. He sent mixed messages, saying the outlook is 'getting worse and worse' but also that 'it's difficult to be gloomy today.'

Ultimately, it wasn't the clear dovish message that markets wanted. That sparked fears about more of the same from the FOMC next week, and potentially the BOJ. The broad market theme was worry about less easing and that sent USD/JPY higher, yields higher and stock markets lower.

Economic data contributed to the sentiment as core US durable goods orders rose at the fastest pace since 2017.

Friday features a key input for the Fed with the first estimate of Q2 GDP. The consensus is 1.8% but the market is probably a tad lower after soft trade data Thursday. Still, there's wide variance in the advance release and the market tends to overreact. That will be especially true so close to the FOMC.

The market is now pricing in just a 17% chance of a 50 bps cut from the Fed, in part because the US and China are talking on trade once again. However the risk is that Powell cuts but then essentially repeats current language and gives himself an option to cut in the future without precommitting or delivering a strong hint. If so, the market reaction will look much like it did Thursday.

During Thursday, the EUR/USD currency pair tried to surpass the resistance level formed by the weekly S1 at 1.1187. During today's morning, the pair was testing the resistance level formed by the 55-hour SMA and the weekly S2 at 1.1152.

If the given resistance holds, it is expected, that a reversal south could occur within the following trading hours. In this case, the exchange rate could re-test the 2018/2019 minimum located at 1.1115. If the given level does not hold, the rate could decline to the weekly S3 at 1.1103.

It is unlikely, that bulls could prevail in the market in the nearest future, as the pair is pressured by the 100-hour SMA, currently located at the 1.1162 mark. However, if the given resistance does not hold, the rate could re-test the weekly S1.

During previous trading session, the GBP/USD exchange rate tumbled to the psychological level at 1.2440. During Friday's morning, the rate traded at the given level.

Given that the currency pair is pressured by the 55-, 100– and 200-hour SMAs, currently located circa 1.2470, it is likely, that some downside potential could prevail in the market. However, note, that the rate has to surpass the support level at the 1.2426 mark.

If the given support level does not hold, it is expected, that the pair could decline to the weekly S1 at 1.24026. Otherwise, the rate could trade sideways between the given resistance and support.

Yesterday, the USD/JPY currency pair jumped to the psychological level at 108.70. During Friday's morning, the rate was trading at the given level.

From the one hand, the exchange rate could continue to extend gain in the nearest future. In this case, note, that the rate could test the resistance level formed by the weekly R2 and the monthly R1 located circa 108.90.

On the other hand, bears could prevail in the market in the short run, and the pair could reverse south. Note, that the rate could gain the support of the 55-, 100– and 200-hour SMAs, as well the Fibonacci 38.20% retracement and the weekly R1 in the 108.05/108.44 range.

On Thursday, the price for gold fell to the psychological level at 1,415.00. During today's morning, the XAU/USD exchange rate raised to the resistance level formed by the 55-, 100– and 200-hour SMAs at 1,422.00.

If the given resistance holds, it is expected, that gold would depreciated against the US Dollar in the short run. A possible downside target is the 1,400.00/1,405.00 area. Also, the rate could trade sideways, trying to surpass the given resistance.

If the given moving averages do not hold, it is likely, that the exchange rate could extend gains. A possible upside target is the psychological level at the 1,435.00 mark.

The US dollar is changing slightly against a basket of major currencies. The US dollar index (#DX) closed with a slight increase (+0.07%). Yesterday, optimistic economic data from the US were published. Thus, core durable goods orders rose by 1.2% in June instead of the forecasted growth by 0.2%. Initial jobless claims decreased to 206K instead of 220K.

At the same time, the euro strengthened against the US currency after the ECB decided on the interest rate. Thus, the regulator left the key marks of monetary policy unchanged. In addition, the ECB has changed its forecast for the further course of rate. It is expected that key rates will remain at the same level or will be lower at least until the end of the first half of 2020, or until inflation in the Eurozone returns to the 2% level.

The "black gold" prices continue to rise. At the moment, futures for the WTI crude oil are testing the mark of $56.30 per barrel.

Market Indicators

• Yesterday, aggressive sales were observed in the US stock markets: #SPY (-0.48%), #DIA (-0.45%), #QQQ (-0.95%).
• The 10-year US government bonds yield has been growing. Currently, the indicator is at the level of 2.07-2.08%.

The news feed for 2019.07.26:

• GDP data in the US at 15:30 (GMT+3:00).

It seems the heat isn't the only thing that's taken it out of investors on the final day of the week as markets show signs of fatigue following a busy few days.

The killer blow came from Mario Draghi on Thursday who wasn't his usual dovish self, or more accurately, failed to live up to the high level of expectation that the market has set. I fear this is going to be a recurring theme as central banks try to appease markets while at the same time trying not to be pushed into easing at a faster rate than they're comfortable with.

Investors appear to have got this impression yesterday as well, with there being plenty of suggestions that we could see a repeat from the Fed next Wednesday. Investors have been very stubborn with the Fed and refuse to accept what is right in front of them. There have been repeated efforts to pare back expectations but they're still falling on deaf ears a little, with markets pricing in an 18% chance of a 50 basis point cut.

This number could rise as well today if we get a bad second quarter GDP reading. It seems investors are quite pleased to see weaker data at the moment as it further builds the case for aggressive rate cutting. I can't see today's GDP release changing much though, unless it's a really shocking number, for example one that opens up the possibility of recession in three months time.

Central banks building a bullish case for gold

It's clear that traders will be paying close attention to the GDP release today and that means we could see some big moves in the dollar, especially if we see a decent miss or beat given how jittery traders are at the moment. The dollar has recovered strongly recently as traders have pared back expectations but that could change quickly, traders are all too keen for more cuts.

This has taken some of the shine off gold but it hasn't fallen too far which suggests there's more at play here than just the dollar. With central banks around the world exploring additional easing and the ECB looking at bond buying again, gold is becoming increasingly attractive compared to the growing list of debt yielding negative returns. It came as low as $1,410 yesterday but has once again found support at a higher level than it did previously, possibly a bullish signal for the yellow metal.

Oil steady even as news keeps flowing

Oil looks a little lost at the moment as it continues to hover around the mid-point of the range it's traded in since early June. There's no shortage of factors driving price at the moment, be it downbeat global growth outlook, record US output, tensions in the Persian Gulf, outages in the Gulf of Mexico to name just a few. But all of this has contributed to the stagnation rather than spur volatility with traders perhaps thinking everything is now reasonably priced in.

Bitcoin taking a break after weeks of intense scrutiny

Bitcoin is trading back below $10,000 after settling down a little over the last week or so. Cryptocurrencies have been very much back in the headlines in recent months and bitcoin has definitely been one of the big winners of this. It's also come under increased scrutiny from officials that are quite hostile to the prospect of something that aims to usurp the US dollar. It's been much quieter over the last week though which has brought a little calm back to price action. I doubt that will last.

Cable remains biased lower following double upside rejection under falling 20DMA (1.2508) and fresh probe below triangle support line (1.2448), with bearish daily studies supporting scenario.

Initial enthusiasm after Boris Johnson became new Britain’s Prime Minister is fading and negative sentiment is returning to play.

The facts that the EU sticks to existing Brexit plan and that Boris Johnson won’t get new divorce agreement without solution for Irish problem, lead to two possible scenarios.

The first one is new Brexit referendum (not favored) and the second will be UK general election, which would be the only way to break Brexit deadlock, as the parliament is likely to block attempts for exit from the EU without a deal.

The pair is on track for bearish weekly close that adds to negative outlook.

Daily close below triangle support would generate negative signal and expose two-year low at 1.2381, violation of which would spark further weakness.

Alternative scenario requires close above 20DMA to sideline immediate downside risk and allow for further recovery towards pivotal barriers at 1.2560/79 (30DMA / 12 July high).

US GDP data today are in focus for fresh signals.

Res: 1.2469, 1.2487, 1.2508, 1.2560
Sup: 1.2417, 1.2400, 1.2381, 1.2365

Notes/Observations

• Focus turns to US Q2 Advance GDP data in the session and its impact on next week’s Fed decision; growth expected to decline from Q1 levels
• ECB Survey lowered its revised down inflation by 0.1% across also horizon period (through 2021)

Asia:

• Some BOJ officials said to express doubt over the potency of stronger guidance as they saw little to be gained from reinforcing their interest rate pledge at next week’s meeting. BOJ members would accept a change if pressed on the matter but worry it reinforced how little firepower the BOJ has

Europe/Mideast:

• ECB Policymakers said to see a deposit rate cut in September as almost certain with more govt bond purchases likely. Still needed to be convinced about tiering system and QE comprising of equity and banking-sector bonds seen as a non-starter
• EU Brexit negotiator Barnier told UK officials that elimination of Brexit backstop was unacceptable and that PM Johnson's first speech was combative
• UK Govt Spokesman stated that PM Johnson told Juncker the Withdrawal Agreement (WA) had been rejected 3 times by Parliament and would not pass in its current form. If an agreement was to be reached, the backstop must be abolished

Americas:

• House of Representatives passed the 2-year budget deal that suspends the debt ceiling (as expected) despite despite GOP dissent as 100 House Republicans voted 'no'. Bill now goes to the Senate

Energy:

• US Govt official stated that was aware of projectile launched by Iran earlier in the week (Wed). Shabaab-3 missile did not pose a threat to shipping or US bases in area but intelligence assessment was the launch was that its part of Iran’s efforts to improve the range and accuracy

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.10% at 389.92, FTSE +0.19% at 7,503.44, DAX +0.14% at 12,379.42, CAC-40 +0.18% at 5,588.27, IBEX-35 -0.79% at 9,216.25, FTSE MIB -0.53% at 21,786.50, SMI +0.81% at 9,957.50, S&P 500 Futures +0.20%]

Market Focal Points/Key Themes:

• European Indices trade mostly higher after a mixed session in Asia and higher US futures as earnings continue to take center stage.
• Shares of Vodafone outperform this morning, trading over 7% higher following their Q1 update and announcement of creation of a separate towers company and possible future IPO. Vivendi gains overs 4.5% after a top and bottom line beat, with Suez, Nestle, EDF among other notable names gaining on earnings.
• Meanwhile fashion name Kering underperforms after weaker Q2 growth, Michelin declines on earnings and affirmed outlook on declining car production, while Signify is another notable decliner as the company’s comparable sales missed forecasts. Other notable decliners include Eni, Carrefour, and Renault.
• In other news Anglo American declines over 5% as investor Volcan Investments to sell 24.7M shares in placing; Shield Therapeutics gains over 50% on FDA approval of Feraccru, while in the US notable overnight earnings include Amazon which trades slightly lower in the premarket on Eps miss, while
• Alphabet trades over 7% higher after strong Rev and EPS beat. Starbucks, Intel and T-Mobile other other names gaining on earnings in the premarket.
• Looking ahead notable earners include Twitter, McDonald’s, Abbvie and Colgate-Palmolive among others.

Equities

• Consumer discretionary: Kering [KER.FR] -6.5% (earnings), Michelin [ML.FR] -3% (earnings), Carrefour [CA.FR] -5.5% (earnings), Vivendi [VIV.FR] +5.5% (earnings), Mothercare [MTC.UK] -11.5% (trading update), Nestle [NESN.CH] +2% (earnings)
• Energy: Eni [ENI.IT] -1% (earnings), EDF [EDF.FR] +3% (earnings)
• Healthcare: Bayer [BAYN.DE] +1.5% (US judge cuts verdict sum), Shield Therapeutics [STX.UK] +61% (FDA approval)
• Industrials: Renault [RNO.FR] -1% (earnings; outlook cut), Pearson [PSON.UK] +5.5% (earnings; raises outlook)
• Technology: Signify [LIGHT.NL] -5% (earnings)
• Telecom: Vodafone [VOD.UK] +7.5% (earnings)

Speakers

• ECB Survey of Professional Forecasters cut its inflation view for the horizon period by 0.1% across the board. Now saw 2019 EU Harmonized inflation at 1.3%, 1.4% and 1.5% for 2019-21 period. ECB cut its Euro zone long term inflation expectations (2022) from 1.8% to 1.7%
• Italy Dep PM Salvini (League) reiterated view that the domestic economy needed a strong fiscal shock. f Fin Min Tria said there was no room for tax cut in 2020 budget then one of them had a problem
• Italy Dep PM Di Maio (5-Star): Have not seen funding for proposed flat tax at this time; country needs to reduce its tax burden
• US ambassador to UK Woody Johnson: US President Trump keen to negotiate trade deal with UK
• South Africa Central Bank (SARB) Gov Kganyago noted that callsl for looser monetary policy was not surprising given the country's constrained growth environment
• Turkey President Erdogan: S-400 aircraft to be operative by April 2020; reiterated view that hope US act with good sense on the issue. Interest Rate cut by CBRT was not enough and its needed to continue with gradual rate cuts
• China Foreign Ministry Spokeswoman Hua Chunying reiterated support for Hong Kong govt

Currencies/ Fixed Income

• EUR/USD was slightly softer in quiet trade after ECB’s fresh commitment to embark on more monetary stimulus measures. On Thursday. Dealers had noted Draghi’s stark warning that the economic outlook in the euro-area was “getting worse and worse” and would likely underscored by official GDP data next week. The pair could not sustain any downward momentum yesterday as Draghi's statement was viewed as dovish, but markets had expected clearer dovish tones. The release of ECB SPF Survey showed the decline inflation expectations from the ECB target in the coming years and that more stimuli was forthcoming in Sept.
• GBP/USD was softer and back towards the bottom end of the recent July trading range as concerned lingered that the UK would leave EU without a deal after EU officials reiterated that the current agreement wasn't open for renegotiation. PM Johnson had stated numerous time since taken office this week that the Irish backstop must go. The current 2-year low in the pair stands at 1.2377 area.

Economic Data

• (SG) Singapore Jun Industrial Production M/M: +1.2% v -0.8%e; Y/Y:-6.9% v -8.5%e
• (DE) Germany Jun Import Price Index M/M: -1.4% v -0.7%e; Y/Y: -2.0% v -1.3%e
• (DE) Denmark Jun Retail Sales M/M: +0.5% v -0.3% prior; Y/Y: -1.1% v -0.7% prior
• (FR) France July Consumer Confidence: 102 v 102e
• (FR) France Jun PPI M/M: -0.5% v -0.4% prior; Y/Y: 0.2% v 0.7% prior
• (ES) Spain May Total Mortgage Lending Y/Y: +18.8% v -2.5% prior; House Mortgage Approvals Y/Y: +11.2% v -0.1% prior
• (CN) Weekly Shanghai copper inventories (SHFE): 149.2K v 154.5K tons prior
• (SE) Sweden Jun Retail Sales M/M: 1.0% v 1.0%e; Y/Y: 3.8% v 3.5%e
• (SE) Sweden Jun Trade Balance (SEK): 2.9B v 7.9B prior
• (RU) Russia Narrow Money Supply w/e July 19th (RUB):10.55 T v 10.53T prior
• (IT) Italy July Consumer Confidence Index: 113.4 v 109.6e; Manufacturing Confidence: 100.1 v 100.5e; Economic Sentiment: 101.2 v 99.3 prior
• (IT) Italy Jun Hourly Wages M/M: 0.1% v 0.0% prior; Y/Y: 0.7% v 1.4% prior

Fixed Income Issuance

• (IN) India sold total INR170B vs. INR170B indicated in 2021, 2026, 2031, 2039 and 2059 bonds

Looking Ahead

• 05:30 (PL) Poland to sell Bonds
• 05:30 (ZA) South Africa to sell ZAR760M in I/ L bonds
• 06:00 (IE) Ireland Jun Retail Sales Volume M/M: No est v 0.0% prior; Y/Y: No est v 1.4% prior
• 06:00 (UK) DMO sells £6.0B in 1-month, 3-month and 6-month bills
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: expected to cut the Key 1-Week Auction Rate by 25bps to 7.25%
• 07:00 (MX) Mexico Jun Trade Balance: $0.4Be v $1.0B prior
• 07:00 (MX) Mexico IGAE Economic Activity Index (Monthly GDP) M/M: -0.3%e v +0.1% prior; Y/Y: -0.8%e v -1.4% prior
• 07:00 (BR) Brazil July FGV Construction Costs M/M: 0.8%e v 0.4% prior
• 07:30 (IN) India Weekly Forex Reserves w/e July 19th: No est v $428.8B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
• 08:30 (US) Q2 Advance GDP Annualized Q/Q: 1.8%e v 3.1% prior; Personal Consumption: 4.0%e v 0.9% prior
• 08:30 (US) Q2 Advance GDP Price Index: 2.0%e v 0.9% prior; Core PCE 2.0%e v 1.2% prior
• 09:30 (BR) Brazil Jun Total Outstanding Loans (BRL): No est v 3.287T prior; M/M: 0.9%e v 0.6% prior; Personal Loan Default Rate: 4.8%e v 4.8% prior
• 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Finland; S&P on Finland; Canada Rating Agency DBRS on Netherlands; EFSF
• 11:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 4.25%
• 13:00 (US) Weekly Baker Hughes Rig Count