25 July 2016 at 11:09 GMT
German business sentiment may have weakened in July, but this morning's Ifo index release showed that the decline was less drastic than expected, boosting sentiment.
This latest report from the European Union's economic heart contrasts with the dismal PMI data posted by the UK last Friday with the narrative at this point being that the Brexit vote has hit Britain harder than it has the EU.
The Ifo business climate index fell to 108.3 in July from 108.7 in June; economists at the Wall Street Journal had forecasted a tumble to 107.5. European equity indices are trading higher following a soft Asian session.
- US July Dallas Fed Manufacturing Activity (-10.0 expected, 1430 GMT)
EURUSD is firmer after solid German Ifo data, and traded at day highs of 1.0995. The pair saw a weekly close below 1.1000 for the first time since February, exposing the next level of key support at 1.08 should USD strength continue.
USDJPY holds above 106.00 ahead of a crucial Bank of Japan meeting this week after expectations of further stimulus by the BoJ in addition to fiscal measures by the cabinet placed JPY on the defensive lately.
JPY options have been sold/offered in general throughout the day; EURJPY three-month was given 14.5.
The EURUSD curve is unchanged but it's hard to get a decent bid for very short-dated options.
FX Options volatilities
The Ifo surprise has boosted risk sentiment and in turn weakened bunds which are making another attempt to break free of negative yield territory.
Corporate bonds remain in solid demand in light trading so far with credit spreads seen a few basis points tighter across curves and sectors.
Italy is a slight underperformer on the day ahead of bank stress test results announced for this upcoming Friday.
European indices are trading in positive territory after having opened higher earlier this morning as market attention turns towards this week’s Federal Reserve and Bank of Japan policy meetings.
Shares in Ryanair rose 5% as the low-cost carrier announced that it remains on track to deliver its highest profit to date despite the uncertainty caused by last month’s UK referendum.
Airbus and Lufthansa, however, trade lower on broker downgrades.
William Hill jumped almost 10% after confirming that 888 Holdings and Rank Group had bid for the UK bookmaker.
Luxury goods group LVMH rallied 1.5% this morning as it announced plans to sell off Donna Karan International to G-III in a $650m deal.
US index futures point towards a flat opening for the Street today and notable earnings are to be expected from Sprint Nextel, Roper Technologies, Kimberley-Clark, and Wabtec.
The replay of our Morning Call can be found here.
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
The German business climate is doing better than expected, according to the latest Ifo release, boosting risk sentiment in Europe. Photo: iStock
— Edited by Michael McKenna