Dollar falls as economic data disappoints – Binary Options Daily review

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Markets Report

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Monday 17th July 2017
Prepared by Barry Jenkins, MarketsWorld Binary Options Analyst

 
Market Index Closing Level Move on day Intraday Market Range
CAC 5,235.11 – 0.09 5,215.98 – 5,246.78
DAX 12,631.72 – 9.61 12,577.30 – 12,662.00
Dow Jones 21,637.74 + 84.65 21,521.72 – 21,681.53
FTSE 7,378.39 – 35.05 7,363.77 – 7,419.81
IBEX 10,655.10 – 3.20 10,619.30 – 10,704.30

Closing Markets Summary

Dow Jones

Stocks in the US closed higher on Friday with the Dow Jones and the S&P 500 recording fresh record closing highs. Stocks were higher despite a mixed batch of corporate bank results and poor data on retail-sales and inflation, which led investors to speculate that the Federal Reserve will not raise rates again as soon as previously thought. Economic data showed that inflation was flat in June, while a reading of retail sales came in weaker than forecast, emphasizing persistent weakness in that sector and underlining consumer reluctance to spend. The data raises some questions about the Federal Reserve’s ability to quickly normalize monetary policy, as it hopes to do, despite signs of anaemic growth and stubbornly low inflation. The lacklustre economic data led to a drop in 10-year Treasury yields, yields fell to 2.28% at one point before settling at 2.32%. Companies that featured included banking stocks with J.P. Morgan down 0.9% after results showed they came in ahead of forecasts on both revenue and profit, but shares gave up an early initial gain to close 0.9% lower. Citigroup Inc. closed down 0.5% after reporting earnings that were better than forecast, but it did show signs of a slowdown in trading, with overall trading revenue down 4% and fixed-income trading revenue off 6%. Wells Fargo & Co. fell 1.1% despite reporting second-quarter results that were better than forecast. CyberArk Software Ltd. fell 16% after the cybersecurity firm reported weaker than forecast earnings. The Dow Jones closed up 84.65 points at 21,637.74, its third record close in a row and the 25th record close for the average this year. For the week the index was up 1%. The S&P 500 closed up 11.44 point at a record 2,459.27. For the week the index was up 1.4%. The Nasdaq Composite closed up 38.03 to close at 6,312.47, for its sixth-straight positive close. The index finished just shy of its closing record of 6,321.76 set on June 8. For the week the index was up 2.6%.

Europe

European equity markets finished mainly lower on Friday as bank shares took a hit after their US peers kicked off a new earnings season, but regional equities over the week posted their best weekly performance in more than two months. Benchmarks indexes in Germany, France, Spain, Italy and the UK all closed lower, but the Pan-European Stoxx Europe 600 index managed to finish higher by 0.2%, with commodity shares among best performers. The index was helped by Greek stocks, whose rise left the Athex GD up 0.3% at 856.47. For the week, Stoxx 600 finished up by 1.8%, the largest percentage gain since the beginning of May. Banking stocks fell after the release of second-quarter figures from Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. Those big banks each posted higher than forecast profit, but reported weaker trading revenue, falling short of what the market had forecast and raising questions about what European lenders will say about such revenue when they begin releasing financial results in the coming weeks. Among major European banks, shares of Deutsche Bank AG BNP Paribas and Banco Santander SA all fell 0.9%. Companies that featured included Skanska AB which fell 6.2% after the Swedish construction company said its writing down roughly 780 million Swedish kronor in certain US and UK operations in the second quarter. Operating income for the period is expected at 1.5 billion Swedish kronor, down from 1.7 billion Swedish kronor in the year-ago period. On regional markets the CAC closed down 0.09 of a point at 5,235.11, the DAX closed down 9.61 points at 12,631.72 and the IBEX closed down 3.20 points at 10,655.10.

FTSE

The FTSE closed lower on Friday but stocks still finished the week higher overall. Stocks were pressured on Friday by a stronger Pound and weak bank stocks. The Pound moved higher after the release of data in the US that showed inflation and retail sales numbers came in below expectations. The Pound moved up over 1% against the Dollar, reaching an intraday high of $1.3094, to put itself of course for its highest settlement of the year. A stronger Pound can hurt shares of multinationals on the FTSE as those companies make the bulk of their revenue and earnings in overseas markets. In Brexit news the UK government late Thursday published its first draft legislation on Brexit, designed to revoke a 1972 law that made European Union law applicable in the UK The bill marks the first step in what is expected to be a tough battle negotiating the UK’s exit from the EU. Companies that featured included mining stocks which were the top performers with Anglo American PLC up 2.1%, copper producer Fresnillo PLC rose 1.6%, Randgold Resources Ltd rose 1.3% and Rio Tinto PLC rose 0.8%. UK bank shares followed losses for banks on Wall Street Friday as investors pored over the first wave of financial results for the second-quarter earnings season for any read-through on what could be in store for UK and European lenders, many of which have US operations. J.P. Morgan Chase & Co. fell 1.07%, Citigroup Inc. dropped 0.5% and Wells Fargo & Co. dropped 1.21% after they all posted higher-than-anticipated profit, but they also reported weaker trading revenue, falling short of market forecasts. In the UK, Royal Bank of Scotland Group PLC fell 1.7%, HSBC Holdings declined 1.4% and Barclays PLC dropped 1.3%. Sky PLC finished 0.5% lower as investors watched for news on whether the £11.7 billion proposed takeover of the telecom and media company by 21st Century Fox would be referred to the UK’s competition authority. Sky shares dropped 2.1% on Thursday following a Guardian newspaper report that 21st Century wouldn’t offer further concessions to Britain’s culture secretary to fast track the proposed deal. The FTSE closed down 35.05 points at 7,378.39.

Economic News Expected Today

 USA

Type Period Forecast Previous Importance
NY Empire State Manufacturing Index July 15.00 19.80 Medium

Economic News Expected Today

EU  Eurozone

Type Period Forecast Previous Importance
CPI (Eurozone) June 1.3% y/y -0.1% m/m; 1.3% y/y High
Core CPI (Eurozone) June 1.1% y/y -0.1% m/m; 1.1% y/y Medium

Economic News Expected Today

UK United Kingdom

Type Period Forecast Previous Importance
Rightmove House Price Index July   -0.4% m/m Medium

Other Global Economic Data Expected

 

Type Period Forecast Previous Importance
GDP (China) Q2 1.7% q/q; 6.8% y/y 1.3% q/q; 6.9% y/y High
Industrial Production (China) June 6.5% y/y 6.5% y/y High
Retail Sales (China) June 10.6% y/y 10.7% y/y Medium

Economic News Round Up MarketsWorld Bars

US annualized consumer price inflation eased in June and the core CPI repeated its prior reading, the US Commerce Department reported that consumer prices was unchanged in June from a month earlier, compared to forecasts for 0.1% increase. Year-over-year, consumer prices increased 1.6% last month, below forecasts for a 1.7% increase. Consumer prices, excluding food and energy costs, increased by a seasonally adjusted 0.1% last month, compared to forecast for a 0.2% increase. Core CPI increased at an annualized rate of 1.7% in June, in line with forecasts. US retail sales fell in June, underlining concern about consumer spending being able to push economic growth. The US Commerce Department reported that retail sales fell 0.2% in June from the prior month, below forecasts for a gain of 0.1%. May’s retail sales decreased by 0.1% which was an upward revision from an initial 0.3% decline. Core retail sales decreased by a seasonally adjusted 0.2% in June, missing forecasts for a 0.2% advance. Industrial production in the US rose more than forecast in June, the Federal Reserve reported that industrial production increased by 0.4% from the previous month, above forecasts for a 0.3% rise and compared to a gain of 0.1% in May that was revised from an initial unchanged reading. Manufacturing production increased by a seasonally adjusted 0.2% last month, in line with forecasts for a 0.2% rise and following a decline of 0.4% in May. The capacity utilization rate edged up to 76.6% in June from 76.4%, forecasts were for it to increase to 76.7%. US consumer sentiment fell more than forecast in July, the preliminary publication of the data for July from the University of Michigan’s Consumer Survey Center showed that consumer sentiment fell to 93.1 from 95.1 in the previous month. Forecasts were for a reading of 95.0. The current conditions indicator registered an increase to 113.2 in July, forecasts were for an unchanged reading of 112.5. Consumer expectations fell to 80.2 in July, from the prior reading of 83.9. Forecasts were for a reading of 84.0. US business inventories rebounded in May as sales recorded their biggest drop in 10 months, the Commerce Department reported that business inventories increased 0.3% after an unrevised 0.2% decrease in April. Sales fell 0.2%, the biggest decline since July 2016, after being unchanged in April.

Eurozone’s trade improved in May with both exports and imports of goods to the rest of the world growing markedly, in a new sign that global commerce was in good health. The European Union, the world’s main trader, also saw its trade increase with all its main partners, with a surge of exchanges with Russia despite economic sanctions on Moscow. The European Union statistics office Eurostat reported that the 19-country currency area in May exported goods worth €189.6 billion to the rest of the world, an increase of 12.9% on the year. Imports also grew yearly by 16.4% for a total volume of €168.1 billion, according to data not adjusted for seasonal factors. Both figures were the second highest ever-recorded for the Eurozone after the peak reached in March when exports were above €200 billion and imports stood at €176 billion. The faster growth of imports compared to exports slightly reduced the bloc’s trade surplus which stood at €21.4 billion in May, lower than the 23.4 billion surplus recorded in May 2016. Eurostat reported that the European Union as a whole also recorded a 15.9% surge of exports to the rest of the world in May year-on-year and a 17.2% increase of imports.

Forex Round Up MarketsWorld Bars

The Dollar was lower on Friday as weak economic data could keep the fed from raising interest rates as soon as expected. Data showed that the US consumer price index remained unchanged on a monthly basis in June after contracting 0.1% in May, missing the market consensus of 0.1% expansion. The CPI on a yearly basis fell to 1.6% from 1.9%. The weakening inflation is seen as a factor that could keep the Fed on the dovish side. Retail sales eased to $473.5 billion in June, contracting by 0.2% on a monthly basis.

The EUR/USD was up 0.48% at $1.1454. The weak Dollar gave sterling a boost with the GBP/USD up 1.14% at $1.3087. The Dollar was weaker against the Yen with the USD/JPY down 0.66% at ¥112.53.

The Australian dollar was higher with the AUD/USD up 1.05% at $0.7812. The USD/CAD was down 0.46% at $1.2664. The US Dollar Index fell to its worst level since September 2016, at 94.97. The index was last down 0.58% at 95.01.

 
Commodity Round Up MarketsWorld Bars

Gold prices rose on Friday to settle at their highest level since June 30th as weak US economic data dulled prospects for another interest-rate hike this year. For the week prices ended up around 1.5% after posting five-straight weeks of losses. August gold rose $10.20 to settle at $1,227.50 per ounce. Silver for September rose $0.209 to settle at $15.90 per ounce, for a gain of around 3.0% on the week.

Oil prices rose on Friday to score a weekly gain of more than 5% on Friday, as reports of supply issues in Nigeria and a higher forecast for crude demand helped to push prices up for a fifth straight session in a row. August West Texas Intermediate crude rose $0.46 to settle at $46.54 per barrel it highest level in two weeks and for again of around 5.2% for the week. September Brent crude rose $0.49 to $48.91 per barrel, for a gain of around 4.7% on the week.

The MarketsWorld Overview MarketsWorld Bars

According to the initial figures, the Eurozone consumer price index rose by 1.3% y/y in June and core CPI advanced by 1.1%. Both figures were better than forecast and both are likely to be confirmed in the final read, even though Spain’s CPI was upgraded in its final read. Monitor the Dollar for Binary Options trading.

 

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The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects Barry Jenkins’ (MarketsWorld Analyst) current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterized by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable. This message is intended for recipient only and not for further distribution without the consent of MarketsWorld.

 

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Written by Barry Jenkins

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