Narrow range continued for the euro
The euro (FXE) remained in a narrow trading range against the US dollar (UUP) between the levels of 1.130 and 1.115 for the last five weeks. The shared currency closed at 1.112 with gains of 0.02% against the US dollar in the previous week. The euro appreciated against the US dollar after the FOMC statement as markets digested the surprise from the US Fed. Economic data from the European Union came in as expected except for the German ZEW Economic Sentiment Index, which came in lower at 18.6 against a market expectation of 21.5. European inflation continued to improve with May inflation at 1.4%.
European indexes remained in the red in the previous week as markets digested the prospects of rising interest rates from the US. The German DAX (DAX) closed 0.49% lower in the previous week, while the SPDR Euro Stoxx 50 ETF (FEZ) closed 1.2% lower.
Long euro bets continue to increase
The net speculative bullish long positions on the euro continued to increase, according to this week’s Commitment of Traders (or COT) report. There was an addition of 5,044 long euro contracts, taking the total net speculative long positions to 79,053. Currency traders keep betting that the euro will continue to appreciate as the outlook for the US dollar (USDU) is becoming murkier. An impressive rebound in European economic indicators, the possibility of a softer Brexit after the British elections, and stability in Europe’s political climate are adding to the positive outlook for the euro.
Brexit talks set to begin
Brexit talks between the EU and the UK are scheduled to begin this week. Article 50 negotiations will begin on June 19, and the leaders of 27 EU countries will meet on June 22 to review the latest developments and discuss the steps for EU’s exit from the UK. The economic calendar from the EU contains PMI readings as well as current account and balance of payment data.
In the next part of this series, we’ll analyze how markets are positioned ahead of Brexit negotiations.
On Friday, June 16, the Bank of Japan (or BOJ) left its policy rate and economic assessment unchanged.
Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.
The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.
Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.
Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.
As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.
Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.