MORNING ROLL CALL
Dollar slumps to nine month low versus euro, as Draghi comments stimulates euro versus peers
Mario Draghi the president of the ECB, gave a ‘hawkish’ speech in Portugal on Tuesday, during which he suggested that the Eurozone’s economy was possibly now strong enough to consider raising the key interest rate, from its zero floor and also reducing the monetary stimulus, in the form of asset purchasing, which is currently running at €60b a month. Investors and currency speculators took this as an opportunity to bid up the euro. EUR/USD ended the trading day at circa 1.1346, up circa 1.5% on the day and reaching a nine month high, smashing through R3 at 1.1259, shortly after 10am London time.
The euro also made considerable gains versus most of its peers, EUR/GBP ended the day at circa 88.48, breaching R3 and up circa 1% on the day. Versus the: Loonie, Aussie, Yen and Kiwi the pattern was repeated; euro breaching the third level of resistance. Only versus Swissie did the euro fail to make gains, staying close to flat and near the daily pivot point line. European indices ended the day down sharply; STOXX 50 down 0.66%, DAX down 0.79% and CAC down 0.70%.
Sterling also enjoyed a positive day, but similar to the euro’s performance, the gains were not necessarily because of economic calendar news, although the CBI’s trend surveys were bullish, but due to the head a central bank sounding hawkish. The BoE governor Mark Carney suggested that domestic retail banks and finance companies needed to rein in the credit appetite of the UK’s consumers, as credit growth is outgrowing economic growth. In short; similar to the pre credit crises of 2007-2009, UK consumers are using credit to plug income gaps. He cited car loans and mortgages as two key areas of concern.
Sterling rose strongly due to these comments, investors translated Carney’s comments that he may encourage the MPC of the BoE to intervene, by raising the UK’s base interest rate from 0.25%. GBP/USD closed the day’s trading sessions out at circa 1.2826, up circa 1%, having breached R3 and reached an intraday high of 1.2862, the highest level witnessed in approximately a week. The UK’s FTSE closed down 0.17%.
Economic calendar news relating to the USA was thin on the ground on Tuesday; the Case Shiller house price index missed the forecast coming in at 5.67%, below the expectations of 5.9%. Consumer confidence came in ahead of forecast at 118.9 and the Richmond Fed index also came in ahead of prediction, at 7.
USD/JPY ended the day at circa 112.33, up circa 0.7%, receding from reaching the R2 intraday high of 112.46. The DJIA closed down 0.46%, SPX down 0.81% and the NASDAQ sold off sharply. Alphabet, (Google) sold off by 2.5% on the tech heavy NASDAQ, after suffering a circa €3b fine from European authorities for anti trust behaviour; in effect Google abused their monopolistic position by hiding website results of sites that didn’t benefit Google financially.
WTI (West Texas Intermediate crude) rose by circa 1.5% on Tuesday to $43.65 a barrel, continuing crude’s three day rally, after oil recently entered into a bear market; officially classed as a 20% unbroken fall from a recent peak, without a significant interim recovery. Gold ended the day close to flat at $1,246 an ounce. The precious metal sank almost 1% on Monday, when price briefly fell through the 200 SMA, on the daily chart.
Economic calendar events for June 28th, all times quoted are London GMT time
12:30, currency impacted USD. Advance Goods Trade Balance (MAY). This specific deficit is expected to show a modest improvement to -$66.0b, from -$67.6 in April.
12:30, currency impacted USD. Wholesale Inventories (MAY P). The forecast is for an improvement to 0.2%, from -0.5% recorded in April.
14:00, currency impacted USD. Pending Home Sales (YoY) (MAY). A significant improvement on the -5.4% reading registered in April is expected.
14:30, currency impacted USD DOE U.S. Crude Oil Inventories (JUN 23). Oil has made a modest recovery over recent days, therefore any stockpile figure relating to the USA, will be carefully monitored. Last week’s figure came in at -2451k.
23:50, currency impacted JPY. Retail Trade (YoY) (MAY). The prediction is for a fall to 2.8%, from a reading of 3.2% registered in April.
23:50, currency impacted JPY. Large Retailers’ Sales (MAY). The expectation is for a fall to -0.4%, from a reading of 1.1% recorded in April.
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