EUR/USD near 2-year highs aided by broad USD weakness

Notes/Observations

- EUR/USD near 2-year highs aided by broad USD weakness

Overnight

Asia:

- RBA Dep Gov Debelle: Discussion of neutral rates had no implications for policy. Reiterated RBA view that a rising A$ was not welcomed and complicated the economy's adjustment

- New Zealand Fin Min Joyce: 'Unperturbed' by NZD strength, kiwi dollar strength reflects strong economy

Europe:

- ECB tapering decision reportedly may not be made until Oct

- UK govt reportedly to offer EU citizens free movement for up to 2 years under plans devised by Chancellor Hammond

- IMF confirmed approval of $1.8B conditional loan for Greece (as expected) but would not disburse any bailout until Europe details their debt relief plan

Americas:

- Special counsel Mueller reportedly expanding Russia probe into Trump business transactions, as well as financial dealings of Trump associates

- President Trump said to have made changes to legal team

Economic Data

- (JP) Japan Jun Nationwide Dept Sales Y/Y: 1.4% v 0.0% prior; Tokyo Dept Store Sales Y/Y: +1.1% v -1.1% prior

- (NL) Netherlands Jun House Price Index M/M: 0.7 v 0.8% prior; Y/Y: 8.0 v 7.8% prior

- (UK) Jun Public Finances (PSNCR): £18.3B v £13.4B prior; Public Sector Net Borrowing: £6.3B v £4.2Be , Central Government NCR: 17.8B v £9.8B prior, PSNB ex Banking Groups: £6.9B v £4.9Be

**Fixed Income Issuance:

- (IN) India sold total INR150B in 2022, 2029, 2033 and 2051 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 +0.1% at 384, FTSE 0.3% at 7511, DAX +0.1% at 12457, CAC-40 +0.2% at 5208, IBEX-35 -0.1% at 10556, FTSE MIB flat at 21441, SMI +0.2% at 9046, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European Equities trade slightly higher across the board in a releatively lackluster session. The FTSE 100 outperforms with help from Vodafone which trades higher after Q1 results. Elsewhere Philips lighting, Accel Holdings and Sartorius Stedim trade sharply lower following results. In the M&A space Paysafe trade higher after confirming a bid

Equities

- Consumer discretionary [Accel [ACCEL.NL] -7.5% (Earnings)]

- Industrials: [Valeo [FR.FR] -4.0% (Earnings), Philips Lighting [LIGHT.NL] -7.5% (Earnings)]

- Financials: [Paysafe [PAYS.UK] +7.5% (Receives take over approach)]

- Technology: [Landis & Gyr [LAND.CH] +1.0% (IPO), Fingerprint Cards [FINGB.SE] +10% (Earnings)]

- Telecom: [Vodafone [VOD.UK] +1.6% (Q1 Earnings)]

- Healthcare: [Sartorius Stedim [DIM.FR] -7.6% (Earnings), Ypsomed [YPSN.CH] -23% (Ends distribution agreement with Insulet Corp)]

Speakers

- ECB Survey of Professional Forecasters (SPF) cut its inflation outlook for the 2017-19 period and bumped up its growth forecasts (**Note: moves in-line with the most recent Staff Projections).

- Turkey Econ Min Zeybekci reiterated govt view that interest rates were higher than they should be

- South Korea govt said to discuss issues on possible tax hike in 2018

Currencies

- EUR/USD probed near 2-year highs early in the session. EUR/USD tested 1.1677 for its highest level since August 2015. Dealers noted that the spike up in the Euro during the press conference was likely related to Draghi ducking the question about the recent EUR currency strength. Draghi failed to communicate any unwanted deflationary implications of EUR strength. Also providing a catalyst was expectations that the ECB announcement on plan to taper its stimulus will occur in September.

- AUD currency was weaker after RBA Dep Gov Debelle noted that the central bank far from tightening its policy (differs from recent minutes)

Fixed Income

- Bund futures trade at 162.38 up 41 ticks after dovish ECB survey. Resistance lies near the 162.10 level followed by 162.75. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.

- Gilt futures trade at 126.29 higher by 1 tick after being capped by key resistance from the 126.51 level. Price finds key support at the 125.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.51 region, followed by 127.50.

- Friday's liquidity report showed Thursday's excess liquidity fell to €1.640T a drop of €7B from €1.647T prior. Use of the marginal lending facility rose to €280M from €272M prior.

- Corporate issuance saw $3.2B come to market via 2 issuers headlined by Canadian Imperial Bank $1.75B covered bond offering and Church & Dwight $1.425B 4-part senior unsecured note offering. This week's issuance is at $46.9B. For the week ending July 19th Lipper US fund flows reported IG funds net inflows $3.8B bringing YTD inflows to $75.2B, High yield funds reported outflows of $2.2B bringing YTD outflows to $6.6B.

Looking Ahead

- (UR) Ukraine Jun Industrial Production M/M: No est v 3.4% prior; Y/Y: No est v 1.2% prior

- 06:00 (IE) Ireland Jun PPI M/M: No est v -0.8% prior; Y/Y: No est v 1.1% prior

- 06:00 (UK) DMO to sell combined £3.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £2.0B respectively)

- 06:45 (US) Daily Libor Fixing

- 07:30 (IN) India Weekly Forex Reserves

- 08:00 (PL) Poland Jun M3 Money Supply M/M: 0.6%e v 0.5% prior; Y/Y: 5.9%e v 6.2% prior

- 08:15 (UK) Baltic Dry Bulk Index

- 08:30 (CA) Canada Jun CPI M/M: -0.1%e v +0.1% prior; Y/Y: 1.1%e v 1.3% prior

- 08:30 (CA) Canada Jun CPI Core- Common Y/Y: 1.3%e v 1.3% prior, CPI Core- Trim Y/Y: No est v 1.2% prior, CPI Core- Median Y/Y: No est v 1.5% prior, Consumer Price Index: No est v 130.5 prior

- 08:30 (CA) Canada May Retail Sales M/M: 0.3%e v 0.8% prior; Retail Sales Ex Auto M/M: 0.0%e v 1.5% prior

- 09:00 (MX) Mexico Jun Unemployment Rate (Seasonally Adj): 3.5%e v 3.5% prior; Unemployment Rate (Unadj): 3.5%e v 3.6% prior

- 09:30 (BR) Brazil Jun Current Account: $1.4Be v $2.9B prior; Foreign Direct Investment (FDI): $2.5Be v $2.9B prior

- 11:00 (EU) Potential sovereign ratings after European close

- 13:00 (US) Weekly Baker Hughes Rig Count Data

- 15:00 (CO) Colombia May Economic Activity Index (Monthly GDP) Y/Y: 1.4%e v 1.4% prior