Date: JUNE30, 2018
Daily World Economic and Financial News
(CNBC): JUNE30, 2018---- The euro jumped on Friday after European Union leaders reached an agreement on migration that eased pressure on German Chancellor Angela Merkel, but traders said the gains may be short-lived because of deep divisions within the EU. A tense summit that dragged on into early Friday morning yielded vague pledges from EU leaders to strengthen external borders and explore new migrant centers. The deal eased concern over a standoff between Italy and the rest of the trading block and the euro subsequently rallied against the dollar, the Swiss franc, the British pound and the Japanese yen.
(CNBC): JUNE30, 2018---- The euro was up 0.84 percent against the dollar at $1.1664 and headed for its biggest daily gain in a month.
(CNBC): JUNE30, 2018---- The yen fell 0.39 percent to 110.91 to the dollar.
(CNBC): JUNE30, 2018---- Oil prices rose on Friday as U.S. sanctions against Iran threatened to remove a substantial volume of crude from world markets at a time of rising global demand. U.S. West Texas Intermediate (WTI) crude ended Friday's session up 70 cents, or 1 percent, at $74.15, its best closing price since Nov. 24, 2014. WTI hit a session peak of $74.46, also its highest level since November 2014. Brent crude rose $1.59, or 2 percent, to $79.44, just shy of a 3½-year closing price.
(REUTERS): JUNE30, 2018---- The dollar slipped to a three-day low against the euro on Friday after European Union leaders reached an agreement on migration that eased pressure on German Chancellor Angela Merkel, but the currency was set to log its best quarterly performance in six quarters.
(REUTERS): JUNE30, 2018---- China’s economy has already felt the pinch from a multi-year crackdown on riskier lending that has driven up corporate borrowing costs, promoting the central bank to pump out more cash by cutting reserve requirements for lenders. The official Purchasing Managers’ Index (PMI) released on Saturday fell to 51.5 in June, from 51.9 in May, but it remained well above the 50-point mark that separates growth from contraction for a 23rd straight month.
(EURONEWS): JUNE30, 2018---- The Bank of England's Financial Policy Committee (FPC) says banks in Britain are holding enough capital and will not need any more to face any turbulence in markets if Britain leaves the EU without a deal.
(BLOOMBERG): JUNE30, 2018---- The Indian rupee slumped to an all-time low as a resurgence in crude prices and the emerging-market selloff took a toll on the currency of the world’s third-biggest oil consumer.
The Indian currency slid as much as 0.7 percent to 69.0925 per dollar Thursday, past its previous record of 68.8650 reached in November 2016. The weakness spilled onto bonds, where the benchmark 10-year yield climbed six basis points to 7.94 percent
EUR/USD PAIR ANALYSIS
The EUR/USD pair was unable to extend its previous week's recovery and is set to close this one with modest losses around 1.1640. It was quite an intense week in terms of headlines related to the trade war, although price action around the pair had been relatively irrelevant in terms of trend. An upward move at the beginning of the week was quickly reverted on news that the US was planning to restrict Chinese investment in American businesses and prevent local companies from selling tech-sensitive technologies to the Asian country. Concerns that the effect will spill into other economies triggered a sell-off in worldwide equities, although the greenback struggled to appreciate as safe-haven, as investors doubt on what to do with the US currency in this environment. For sure, fears limited demand for the high-yielding EUR. Fears receded after Trump decided to revamp an existing law on restrictions rather than apply a harshest one, although National Economic Council Director Larry Kudlow clarified that the US did not soften its stance toward China on foreign investment. Ahead of the weekly close, equities remain depressed and Treasury yields near their weekly lows, indicating that, despite the ongoing dollar's retracement, fear still rules financial boards. And the situation is far from over, as the latest headlines on Trump's protectionism policies indicate that the US President has asked his advisors to look for ways to withdraw the US from the WTO.
Market players have been steadily ignoring data, although is clear that, while EU economic growth has stabilized after peaking last December, US health overshadows that of its counterpart. Inflation, according to Fed's favorite inflation, has reached the so-long desired target, and even surpassed it, as the core PCE price index reached 2.0%, up from 1.8% and also above market's expectations at 1.9%. And while the Fed has decided to be tolerant with inflation hovering around the 2.0%, they will likely acknowledge this reading that backs the four hikes in the dot-plot, in their upcoming meeting.
The macroeconomic calendar will be quite busy for both economies next week, with final Markit June PMI for the EU and the US, and the official US figures on Monday, and Services and Composite figures coming out next Wednesday. No doubts, however, the star of the week will be the Nonfarm Payroll report, to which the market pays attention despite having lost the ability to shake the market unless divergences are huge between the actual result and market's forecast. For this June, the economy is expected to have added 190K new jobs, while the unemployment rate is seen steady at 3.8%. Wages growth is seen up 0.3% MoM and 2.7% YoY, matching April figures. An outcome in line with market's forecast will be enough to reaffirm Fed's tightening path, and dollar supportive, regardless to where sentiment winds blow at the moment.
EUR/USD technical outlook
The weekly chart for the EUR/USD pair shows that it peaked at around the 23.6% retracement of its April/May slump at around 1.1720 before pulling back but held above the 1.1500 region, where it has bottomed in May and June. The dollar is easing, despite risk sentiment and solid inflation figures, on profit-taking ahead of the monthly and quarterly close, but technical readings in the mentioned chart keep favoring a bearish continuation, as the pair remains below a strongly bearish 20 SMA, while technical indicators present neutral-to-bearish slopes well below their midlines.
In the daily chart, the pair seems to have entered a consolidative stage after plummeting post-central banks' announcements, but the bearish trend remains firm, as the pair repeatedly met selling interest on attempts to advance beyond a mild-bearish 20 DMA. In the same chart, the 100 DMA is crossing below the 200 DMA but in the 1.20 region, supporting the ongoing trend but little relevant at the time being. Technical indicators have recovered partially within negative levels, but remain well below their weekly highs and dip into the red, suggesting that the ongoing recovery is just corrective.
The mentioned 1.1500 region is the key support, with a break below it exposing the 1.1440/60 region. Further declines below the 1.1400 figure could see the pair plummeting to 1.1320 later in the week. A recovery beyond 1.1720 on the other hand, could see the recovery extending up to the 1.1850 region, where the pair topped in May and the 38.2% retracement of the mentioned slump. (FXSTREET)
International & Financial Terms
1. Money Market: Series of national credit and deposit markets involving short term securities.
2. Open Market: Central bank sale or purchase of securities intended to influence the volume of money.
3. Redemption: Exchange of one class of securities for another.
4. Loss Leader: Goods sold by a trader at less than their cost.
5. Paper Profit: Apparent profit arising out of the unrealized increase in the value of assets.
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