Europe Week ahead: EZ GDP Releases, German ZEW, BoE QIR, UK Employ

Good Morning,

- The Japanese yen slightly drop versus the greenback on Monday, having backed off from peaks hit late last week as a slight relaxation in geopolitical tensions dampened demand for the safe-haven currencies.

- The S&P Index rose the most in five months on Friday while Treasuries fell, as speculation that Russia is de-escalating tension in Ukraine outweighed concern about crises in the Middle East.

- Israel and the Palestinians agreed on Sunday to an Egyptian proposal for a new 72-hour ceasefire in Gaza

- The easing of tension in Ukraine overshadowed reports that the U.S. carried out airstrikes against militants from Islamic State in Iraq. The escalation in U.S. involvement in the country comes as the extremist group that’s conquered swaths of northern Iraq since June extended its advance. The conflict in Iraq has spared production in Iraq’s south, home to about three-quarters of its crude output.

- The geopolitical conflicts had boosted demand for haven assets. On Friday the U.S. 10-year yield touched 2.35 percent, the lowest since June 2013, before erasing losses. Germany’s 10-year bonds advanced, leaving the rate lower for a fifth week, the longest run since June 2012. Borrowing costs also fell to record lows from France to Finland amid a surge in the euro area’s higher-rated government bonds.

- Morgan Stanley on EUR/USD: ‘’ We Stay Short EUR/USD “ . MS maintains a short EUR/USD position in its strategic portfolio from 1.3620 with a profit-stop at 1.35, and a target at 1.31. As a short-term recommendation, MS enters a fresh short today from 1.34, with a stop at 1.3460, and a target at 1.31.

- telegraph uk: Weak wage growth will force the Bank of England to revise down its pay forecasts this week, as earnings continue to lag behind price rises despite the strengthening recovery. Average weekly earnings grew by just 0.3pc in the three months to May, well below the current inflation rate of 1.9pc, according to the Office for National Statistics. The Bank currently expects wage growth to average 2.5pc this year, which has already been downgraded from a forecast of 2.75pc in February.

- Ukraine’s military demanded that pro-Russian rebels surrender and dismissed their offer of a cease-fire, as government troops pushed ahead with a campaign to defeat the uprising in the country’s east. “If there is an initiative, it should be implemented by practical means, not only with words -- by raising white flags and putting down weapons,” Andriy Lysenko, a spokesman for the country’s military, told reporters in Kiev today. “In that case no one will shoot at them.”

- Europe Week ahead: EZ GDP Releases, German ZEW, BoE QIR, UK Employ.

- The market will gauge the strength of the euro zone's fragile economy this week as escalating conflicts in Ukraine and Iraq darken the mood globally. In stark contrast to the United States and Britain, which are growing strongly, economic output in the euro bloc is likely to have all but ground to a halt in the three months to June. Its star economy, Germany, is losing momentum and Italy is sliding back into recession. The growing sanctions fight between Russia and the West over Moscow's backing of rebels in Ukraine and U.S. air strikes to block Islamist militants in Iraq are also upsetting the markets.

Have a nice Week!