Europe Roundup: Sterling rallies on BoE rate vote split, dollar touches 5-week trough as Fed disappoints bulls, investors eye weekend G20 meeting – Friday, March 17th, 2017

Market Roundup

  • EUR/USD +0.05%, USD/JPY -0.05%, GBP/USD +0.3%, DXY -0.2%
  • DAX -0.05%, CAC +0.4%, Brent +0.2%, Gold +0.2%, Copper +0.2%
  • Dollar poised for weekly losses after Fed disappoints bulls
  • G20 finance heads to repeat FX assurances, no deal yet on rejecting protectionism
  • Oil prices dip as doubts remain over OPEC supply cuts
  • London copper set for biggest weekly gain in five as dollar drops
  • EZ Jan Eurostat Trade NSA -0.6billion vs previous 28.1billion
  • EZ exports rise in Jan, but trade balance in deficit (1st time in 3 years)
  • BoE MPC Forbes: Weak wage growth may reflect temporary Brexit caution – Telegraph
  • An independent Scotland could abandon sterling union – Salmond tells FT

Economic Data Ahead

  • (0830 ET/1230 GMT) Statistics Canada releases manufacturing shipments data for the month of January. Manufacturing sales are likely to have decreased by 0.4 percent after rising 2.3 percent in December.
  • (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production rose 0.2 percent in February after falling 0.3 percent in the prior month.
  • (0915 ET/1315 GMT) The United States' manufacturing output is likely to have increased 0.4 percent in February after a 0.2 percent gain in January.
  • (0915 ET/1315 GMT) The Federal Reserve Board is expected to report that capacity utilization edged up to 75.5 percent in February from 75.3 percent in January.
  • (1000 ET/1400 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index gained to 97.0 in March, after posting a final reading of 96.3 in February.
  • (1000 ET/1400 GMT) The Conference Board is likely to report that U.S. leading indicator rose 0.4 percent in the month of February after posting a gain of 0.6 percent in December.
  • (1100 ET/1500 GMT) The Fed releases its labor market conditions index (LMCI) for the month of February. The indicator posted a rise of 1.3 in the previous month.
  • (1400 ET/1800 GMT) Baker Hughes reports U.S. Oil Rig Count.

Key Events Ahead

  • (1145 ET/1545 GMT) FedTrade 30-year Fannie Mae/Freddie Mac (max $1.15 bn)
  • (1320 ET/1720 GMT) German Chancellor Angela Merkel and President Donald Trump press conference, Washington.
  • N/A Canada Minister of International Trade Francois-Philippe Champagne meets Mexican authorities and investors in Monterrey, Mexico.

FX Beat

DXY: The dollar continued to slump across the board after the Federal Reserve kept its original forecast of three rate hikes this year, disappointing investors who expected four rate hikes in 2017. The greenback against a basket of currencies traded 0.02 percent down at 100.22, having hit a low of 100.14 earlier in the session, its lowest since Feb. 9. FxWirePro's Hourly Dollar Strength Index stood at -147.77 (Highly Bearish) by 1000 GMT.

EUR/USD: The euro gained, hitting a fresh 5-week high after European Central Bank policymaker rekindled talk of a possible rate hike. ECB policymaker Ewald Nowotny stated that the central bank will decide at a later time whether to hike interest rates before or after concluding its bond purchase programme. The European currency traded 0.1 percent higher at 1.0773, having hit a high of 1.0782 earlier, its highest since Feb. 6. FxWirePro's Hourly Euro Strength Index stood at -8.40 (Neutral) by 0900 GMT. On the lower side, near-term minor support is around 1.0750 and any break below will drag the pair down till 1.0703 (21- 4H EMA)/1.06700 (61.8% retracement of 1.05998 and 1.07825)/1.06000 (61.8% retracement of 1.04948 and 1.07825). The nearby resistance is around 1.0785 and any break above targets 1.08288 (Feb 2 high)/1.08735. It should break above 1.0873 for bullish continuation.

USD/JPY: The dollar edged down as the greenback tumbled to a fresh five-week low after the U.S. Federal Reserve signalled fewer interest rate hikes this year, slashing dollar bulls’ expectations of four hikes in 2017. However, a modest recovery in the U.S. Treasury bond yields limited the downside in the major. The pair traded lower at 113.28, after declining as low as 112.90 on Thursday, its lowest since Mar 1. FxWirePro's Hourly Yen Strength Index stood at 49.62 (Neutral) by 0900 GMT. On the higher side, any break above 113.65 (21- day MA) will take the pair till 114.30/114.95. The near term support is around 112.35 (100 day EMA) and any break below will drag it till 111.59.

GBP/USD: Sterling rallied to an over two-week high earlier in the session, after Bank of England policymaker Kristen Forbes unexpectedly voted in favor of a rate hike at the bank's March meeting. Moreover, the major also found support from board based U.S. dollar weakness, despite higher treasury yields. Sterling trades 0.2 percent higher at 1.2389, having hit an early high of 1.2398, its highest since Mar. 1. FxWirePro's Hourly Sterling Strength Index stood at 77.66 (Slightly Bullish) by 1000 GMT. Any break above 1.2380 confirms minor bullishness, a jump till 1.24075 (50% retracement of 1.2706 and 1.2109)/1.24450 (trend line joining 1.27060 and 1.25695)/1.2520. On the lower side, near term support is around 1.2300 and any break below targets 1.2283 (100- 4H EMA)/1.2250 level. Against the euro, the pound traded 0.1 percent up at 86.96 pence, having hit a high of 86.63 earlier in the week.

USD/CHF: The Swiss franc rallied, extending gains for the third consecutive session, as the greenback fell to a fresh 5-week low after the Fed indicated it was unlikely to speed up monetary tightening. The major traded 0.2 percent lower at 0.9944, having touched a low of 0.9942 earlier, its weakest since Feb. 9. FxWirePro's Hourly Swiss Franc Strength Index stood at 88.20 (Slightly Bullish) by 1000 GMT. The pair should break above 1.0000 for a minor jump till 1.00295/1.0060. On the lower side, 0.9908 will be acting as immediate support and any break below will drag it down till 0.9860.

AUD/USD: The Australian dollar rose, however, failed to take out the 0.7700 handle, despite broad-based U.S. dollar weakness. Moreover, bearish trading sentiment around European equity markets limited the upside in the major. The Aussie trades 0.17 percent up at 0.7689, drifting towards a high of 0.7719 touched on Wednesday, it’s highest since Feb. 24. FxWirePro's Hourly Aussie Strength Index stood at 98.28 (Slightly Bullish) by 1000 GMT. On the lower side, the next immediate support stands at 0.7660 (23.6% retracement of 0.74910 and 0.77193) and any break below will drag the pair down till 0.7605 (21- day EMA). The major resistance is around 0.7740 (Feb 23rd 2017 high) and break above will take it till 0.7800.

Equities Recap

European shares tumbled in early deals, weighed down by mining stocks, while the dollar slumped to a fresh 5-week low after the Federal Reserve did not alter its earlier forecast for a total of three rate increases this year.

The pan-European STOXX 600 index declined 0.16 percent to 377.12 points, while the FTSEurofirst 300 index eased 0.14 percent to 1,487.12 points.

Britain's FTSE 100 trades 0.05 percent down at 7,412.04 points, while mid-cap FTSE 250 shed 0.11 percent to 19,005.30 points.

Germany's DAX edged down 0.19 percent at 12,060.70 points; France's CAC 40 trades 0.03 percent higher at 5,014.73 points.

Tokyo's Nikkei fell 0.35 percent to 19,521.59 points, Australia's S&P/ASX 200 index rose 0.18 percent to 5,796.30 points and South Korea's KOSPI gained 0.79 percent to 2,133.78 points.

Shanghai composite index eased 1.0 percent to 3,237.45 points, while CSI300 index dropped 1.0 percent to 3,445.81 points. Hong Kong’s Hang Seng added 0.1 percent to 24,309.93 points.

Commodities Recap

Crude oil prices steadied after declining from a 6-day high hit in the previous session, as investors awaited for more hints on the effectiveness of OPEC production cuts in absorbing a global supply glut. International benchmark Brent crude was trading 0.15 percent up at $51.79 per barrel by 0918 GMT, having hit a high of $52.62 on Thursday, its highest since Mar. 10. U.S. West Texas Intermediate crude rose 0.25 percent to $48.86 a barrel, after rising to a peak of $49.59 the day before, its strongest since Mar. 10.

Gold prices roses, extending gains for the third consecutive session and were on course for their first weekly gain in three, as the dollar slumped to fresh five-week lows after the Federal reserve signaled a slower pace of rate increases this year. Spot gold edged up 0.1 percent at $1,227.48 per ounce by 0923 GMT after rising as high as $1,233.44 in the previous session, the highest since March 6. U.S. gold futures were little changed at $1,226.20.

Treasuries Recap

The U.S. Treasuries dived, after first-time claims for U.S. unemployment benefits saw a modest decrease in the week ended March 11, according to a report released by the Labor Department on Thursday. The yield on the benchmark 10-year Treasury rose nearly 1 basis point to 2.53 percent, the super-long 30-year bond yield hovered around 3.14 percent and the yield on short-term 2-year note traded 1 basis point higher at 1.33 percent.

The UK gilts plunged, following expectations of a rise in the consumer price inflation during the month of February. The yield on the benchmark 10-year gilts, jumped 2 basis points to 1.27 percent, the super-long 30-year bond yields rose 1 basis point to 1.84 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points higher at 0.10 percent.

German bunds slumped in quiet trading session as investors booked profits on the last trading day of the week. The yield on the benchmark 10-year bond, which moves inversely to its price, jumped 3 basis points to 0.44 percent, the long-term 30-year bond yields also climbed 3 basis points to 1.20 percent and the yield on the short-term 2-year bonds rose 1 basis point to -0.79 percent.

The New Zealand bonds remained weak at the time of closing, tracking softness in the U.S. counterparts amid a quiet trading session that witnessed data of little economic significance. The yield on the benchmark 10-year bond, rose 1 basis point to 3.29 percent at the time of closing, the yield on 7-year note jumped nearly 1-1/2 basis points to 2.86 percent while the yield on short-term 2-year note also dived 1 basis point higher at 2.13 percent.

The Australian bonds relapsed as investors cashed in profits on the last trading day of the week after witnessing a long rally through the week. The yield on the benchmark 10-year Treasury note, jumped 5 basis points to 2.87 percent, the yield on 15-year note also climbed 5 basis points to 3.26 percent and the yield on short-term 2-year traded nearly 2-1/1 basis points higher at 1.84 percent.

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