US Open Preview – Data miss drag euro and pound lower; dollar hits 7-week highs versus yen

Christina Parthenidou, Melina Deltas, XM Investment Research Desk

Here are the latest developments in global markets:

  • FOREX: The British pound had a negative ride after the resignation of the UK Foreign Minister, Boris Johnson on Monday, because of disagreements with the Prime Minister, Theresa May, over the Brexit strategy. Also, pound/dollar reversed today’s gains in the wake of worse-than-expected industrial and manufacturing production figures, moving slightly lower by 0.04% on the day. The former decreased by 0.4% m/m in May after retreating by 1.0% in April, while the latter jumped by 0.4% following a decline of 1.3% m/m previously, both failing to meet expectations. Dollar/yen climbed by 0.35% to a 7-week high of 111.34 during the early European afternoon, while the US dollar index traded higher by 0.26%,  above 94.00. Euro/dollar retreated by 0.23% as German and Eurozone ZEW sentiments declined further, posting sharper falls than analysts expected. In the antipodean sphere, aussie/dollar dipped by 0.35% to 0.7440 and kiwi/dollar ticked down to 0.6817(-0.25%). Finally, dollar/loonie rose to 1.3133 (+0.20%).
  • STOCKS: European equities were trading in positive territory with the exception of the Spanish IBEX 35, which dived by 0.18%, erasing the previous days upward rally. The benchmark European STOXX 600 was up by 0.37% at 1030 GMT, while the blue-chip Euro STOXX 50 increased by 0.33%. The Italian FTSE MIB jumped by 0.48%, the French CAC 40 rose by 0.49% and the German DAX 30 moved up by 0.21%. The British FTSE 100 rose by 0.27%. US stock indices which were trading higher in the previous days are poised to open positive again according to mini futures.
  • COMMODITIES: Oil prices edged higher today on escalating concerns over potential supply shortages; in Norway, labor strikes forced the shutdown of an oilfield, while Libya said that its production has fallen more than 50% in recent months. West Texas Intermediate (WTI) crude oil advanced by 0.56% and surpassed once again the $74 per barrel. Moreover, Brent surged by 1.28% to touch $79.07, set to post the second straight bullish day. However, in precious metals, gold fully reversed yesterday’s gains, falling by 0.35% as the greenback moved higher.

Day ahead: Eyes on Brexit developments; US JOLTs Job openings & Canadian Housing figures pending

Brexit will remain on the forefront later on Tuesday as the UK Prime minister, Theresa May is seeking to unite her inner cycle over her Brexit strategy after the UK’s Brexit negotiator, David Davis, and the British Foreign minister, Boris Johnson, unexpectedly resigned on Monday, claiming that May’s plan would keep the UK tied to EU rules. The announcement came after May said on Friday that her Cabinet supported the type of Brexit she wanted to negotiate with the EU and a few days before the plan takes formal shape in a white paper on July 12. But now, just nine months before the UK officially leaves the EU, and ahead of a crucial EU summit in Brussels in October, May’s leadership is back into question, with investors anxious to see whether the British Prime Minister can save her political career by reducing the political division and achieving progress in the talks. Still, whispers support that with the number of Brexiteers being reduced a consensus could be reached faster, a fact that could bode well for sterling.

Turning to today’s economic calendar, Canadian housing stats and US JOLTs Job openings will attract the most attention in the remainder of the day. At 1215 GMT, the Canadian Housing and Mortgage Corporation is expected to show that the number of new residential buildings has increased by 210k (annualized) in June compared to a rise of 196.5k in the preceding month. A few minutes later at 1230 GMT, building permits for the month of May will also come into view.

In the US, JOLTs Job openings, which define the number of available job positions, are projected to slow down to 6.583 million in May from 6.698 million seen in April.

In oil markets, the American Petroleum Institute will report on US crude oil inventories for the week ending July 6 at 2030 GMT, bringing some volatility to oil prices which have been on the recovery the past two sessions.

Early on Wednesday, the focus will shift to PPI readings and core machinery orders out of Japan (2350 GMT Tuesday), while later at 0130 GMT, aussie traders will take a look at the Australian Westpac Consumer Sentiment index.

As of today’s public appearances, ECB executive board member Sabine Lautenschlager will be giving a speech at 1700 GMT, while San Francisco Fed executive vice president Mary Daly will be talking on the US economy and its outlook before the local CFA Society at 2200 GMT.

In equities, PepsiCo is among companies releasing quarterly results; the firm’s report will be made public before the US market open.

A pause in the exchange of trade warnings between the US and China the past two days, shifted some funds towards riskier assets, though, any negative development on this front could easily persuade traders to take long positions on safe havens.

In other news, the US President will be meeting the Russian President in Helsinki on July 16 where comments regarding the Iranian nuclear deal as well as the North Korean story will likely be of greater importance. Military developments in Syria and Ukraine will be also on the agenda. The US President will be also visiting Brussels and London this week.