XM Group | Jul 09, 2018 04:08AM ET
Here are the latest developments in global markets:
The dollar tumbled on Friday, following the US employment report for June, which was a touch softer than expected. While nonfarm payrolls came in above expectations, wage growth disappointed. Average hourly earnings rose at the same pace as previously in yearly terms, missing the forecast for a slight acceleration. The unemployment rate unexpectedly jumped to 4.0% from 3.8%, though that was probably owed to a similar jump in the labor force participation rate. Fed rate-hike odds barely moved; one more 25bps rate hike is fully priced in for this year, while markets see a 40% probability for a second one, according to the Fed funds futures.
On the trade front, while the US-China trade standoff escalated on Friday, with the two nations imposing tariffs on $34bn worth of products, markets paid little attention. US stock indices closed higher, while the Japanese yen – widely considered a haven asset – ended the day lower against the euro and the pound. The move was well-signaled in advance and hence, came as no surprise. What matters now, is whether the two sides will continue imposing measures on each other in tit-for-tat fashion, entering a vicious loop of escalation as neither wants to back down, or whether the prospect of more dialogue and negotiations will reappear. While markets have been surprisingly calm so far, the same may not hold true if the situation truly escalates.
In the commodity currencies, the Loonie jumped on Friday after stronger-than-expected employment data from Canada likely sealed the deal for a rate increase by the BoC later this week. Meanwhile, Aussie/dollar and Kiwi/dollar are up by 0.48% and 0.22% respectively today, recovering some of the notable losses they posted recently.
July’s Sentix index that gauges investor sentiment in the eurozone is slated for release at 0830 GMT. The measure is anticipated to record its sixth straight monthly decline. Specifically, it is projected to stand at 8.2, its lowest since September 2016. Political uncertainty in Italy and rising protectionist rhetoric on the front of global trade by the US have been factors weighing on investor morale in previous months.
US consumer credit data for May are due at 1900 GMT; a rise in credit is expected during the month.
Remaining in the background during Monday’s trading are concerns over global trade and Brexit-related uncertainty after the resignation of Brexit Secretary David Davis (see Major movers section).
ECB President Mario Draghi will be speaking at the EU Parliament’s ECON committee at 1300 GMT, while he will be returning to the rostrum at 1500 GMT.
Meanwhile, a news conference at 1300 GMT featuring German Chancellor Angela Merkel and Chinese PM Li Keqiang after German-Sino consultations might be of interest, especially in the aftermath of the latest trade developments.
The Sentix index does not typically act as a major market mover but still an upbeat report could boost the pair. Resistance to advances could come around the 1.18 round figure, before the attention starts to increasingly turn to the two-month high of 1.1850 from around mid-June.
On the downside and in case of a downbeat survey by Sentix, support could come from the zone around the 1.1750 level which was somewhat congested in the past. Notice this region failed to provide resistance earlier in the day and may instead act as support. Further below, the attention would turn to the areas around the current levels of the Tenkan-sen (1.1729) and Kijun-sen (1.1699) lines for additional support.
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