News

Europe Roundup: Sterling rebounds from 1-week lows, dollar index steadies ahead of U.S. non-farm payroll report, European shares volatile – Friday, August 4th, 2017

Market Roundup

  • EUR/USD +0.08%, USD/JPY +0.02%, GBP/USD +0.14%, EUR/GBP -0.04%
     
  • DXY -0.12%, DAX +0.15%, FTSE +0.02%, Brent -0.75%, Gold +0.11%
     
  • Germany Jun Industrial orders m/m, 1.0% vs forecast 0.5%, previous 1.0% revised 1.1%
     
  • BoE's Broadbent: UK “a little bit” better placed to cope with higher interest rates-BBC
     
  • Broadbent: Brexit-related Sterling fall is reason for higher rates of UK inflation
     
  • Japan's GDP seen expanding for 6th straight quarter on domestic demand
     
  • Nothing cold about sub-zero rates, IMF researchers find
     
  • Oil prices fall as OPEC oil exports rise
     
  • Gold steady near 7-week highs ahead of U.S. jobs data

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Labor Department releases nonfarm payrolls report for the month of July. The report is likely to show 183,000 jobs were added compared with an increase of 222,000 in June.
     
  • (0830 ET/1230 GMT) The U.S. Bureau of Labor Statistics will release labor force participation rate for the month of July. The rate stood at 62.8 percent in the previous month.
     
  • (0830 ET/1230 GMT) The U.S. Labor Department is expected to report that unemployment rate slightly eased to 4.3 percent in July from of 4.4 percent in June.
     
  • (0830 ET/1230 GMT) The United States' average hourly earnings are likely to rise 0.3 percent in July after climbing 0.2 percent in the month before.
     
  • (0830 ET/1230 GMT) The United States releases trade balance figures for the month of June. The economy's trade deficit is expected to have narrowed to $45.0 billion from 46.5 billion in May.
     
  • (0830 ET/1230 GMT) The Statistics Canada is likely to report that international trade deficit widened to C$1.35 billion in June from C$1.09 billion in the prior month.
     
  • (0830 ET/1230 GMT) The Statistics Canada releases employment report for July. The economy is likely to have added 10,000 jobs, compared to a rise of 45,300 jobs in June, while the participation rate stood at 65.9 percent in the same month.
     
  • (0830 ET/1230 GMT) Canada's unemployment rate is expected to remain unchanged at 6.5 percent in July.
     
  • (1000 ET/1400 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of July. The index posted a reading of 61.6 in the prior month.
     
  • (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events Ahead

  • (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae (max $1.375 bn)

FX Beat

DXY: The dollar consolidated within narrow ranges versus its major peers, as investors refrained from taking big positions ahead of the U.S. non-farm payroll data. The greenback against a basket of currencies traded flat at 92.80, having touched a low of 92.55 on Wednesday, it’s lowest since May 3, 2016. FxWirePro's Hourly Dollar Strength Index stood at -53.63 (Bearish) by 1000 GMT.

EUR/USD: The euro rallied, extending gains for the third straight day, as the greenback continued to weaken ahead of U.S. nonfarm payrolls data due later and amid current U.S. political uncertainty. Additionally, better-than-expected German factory orders also supported the bid tone around the major. The European currency traded 0.1 percent up at 1.1879, having touched a high of 1.1909 on Wednesday, its highest since Jan 5, 2015. FxWirePro's Hourly Euro Strength Index stood at 72.27 (Bullish) by 1000 GMT. The near term resistance is around 1.1910 and any break above will take the pair till 1.1925/1.1975 (2015 yearly high). On the lower side, 1.18300 (trend line joining 1.14792 and 1.16125) will be acting as near term support and any break below will drag it down till 1.17680 (23.6% Retracement of 1.13123 and 1.19098)/1.1745 (10- day MA).

USD/JPY: The dollar rebounded after tumbling to a 1-1/2 month low earlier in the session, as traders awaited the crucial nonfarm payrolls report due later in the session for further cues on the strength of the U.S. labor market. The U.S. nonfarm payrolls report is likely to show that 183,000 jobs were added in July as compared with an increase of 222,000 in June. The major was trading flat at 110.05, having hit a low of 109.84 earlier, its lowest since Jun 15. FxWirePro's Hourly Yen Strength Index stood at 57.08 (Bullish) by 1000 GMT. On the lower side, the pair is facing major support at 110 and any break below will drag the pair down till 108. The upside remains capped at 111.10 and any break above will take it till 111.50 (100- day MA).

GBP/USD: Sterling recovered after declining from an 11-month high hit in the previous session, as some investors consolidated positions after the Bank of England kept interest rates at record lows and lowered its growth, wages and inflation forecasts. On Thursday, the Bank of England voted 6-2 in favor of keeping the current monetary conditions and lowered its 2017 growth forecasts to 1.7 percent from 1.9 percent in May. Sterling traded flat at 1.3144, having hit a high of 1.3267 on Thursday, its highest since Sept. 16. FxWirePro's Hourly Sterling Strength Index stood at -62.32 (Bearish) by 1000 GMT.  A break below 1.2930 low made on Jul 20th confirms that it has formed a top at 1.32680 and a decline till 1.28110 (Jul 12th, 2017 low) likely. On the higher side, near term minor resistance is around 1.3160 and any break above will take it till 1.3190 (Support turned into resistance )/1.3268. Against the euro, the pound was little changed at 90.34 pence, having hit a near 9-week low of 90.48 the prior day.

USD/CHF: The Swiss franc edged up, extending previous session gains, as prevalent cautious environment lent support to the safe-haven assets. The major trades flat at 0.9683, having touched a high of 0.9726 last week, it’s highest since Jun. 27. FxWirePro's Hourly Swiss Franc Strength Index stood at 24.27 (Neutral) by 1000 GMT. The minor bullishness can be seen only above 0.9726 (trend line joining 0.98252 and 0.9808) and any break above will take the pair till 0.9785 (38.2% retracement of 1.03432 and 0.9435)/0.9808 (May 30th, 2017 high). On the lower side, minor reversal can be seen below 0.9595 and any break below will drag it till 0.9545 (61.8% retracement of 0.9345 and 0.97260)/0.9500.

AUD/USD: The Australian dollar rose, rebounding from a 1-week low hit in the prior sessions as the better-than-expected release of Australian retail sales figure offset RBA's concerns over the negative effect of the strong Aussie dollar. The major trades 0.3 percent up at 0.7968, having hit a low of 0.7914 the prior day, it’s weakest since July 26. FxWirePro's Hourly Aussie Strength Index stood at 93.88 (Slightly Bullish) by 1000 GMT. On the lower side, near term support is around 0.7870 (21- day EMA) and any break below will drag the pair till 0.7800/0.7760. The near term resistance is around 0.8070 and any break above targets 0.8100/0.8150.

Equities Recap

European shares traded in a volatile market as investors focused on a raft of mixed company results, while the greenback steadied against a basket of currencies as investors awaited the U.S. non-farm payroll data.

The pan-European STOXX 600 index climbed 0.1 percent to 379.30 points, while the FTSEurofirst 300 index added 0.1 percent to 1,461.02 points.

Britain's FTSE 100 trades 0.01 percent down at 7,473.66 points, while mid-cap FTSE 250 declined 0.2 percent to 19,873.96 points.

Germany's DAX rose 0.2 percent at 12,184.81 points; France's CAC 40 trades 0.2 percent higher at 5,140.40 points.

Commodities Recap

Crude oil prices declined, extending losses for the second straight session, weighed down by rising output from the United States as well as producer cartel OPEC. International benchmark Brent crude was trading 0.6 percent down at $51.61 per barrel by 0932 GMT, having hit a high of $52.90 on Tuesday, its strongest since May 25. U.S. West Texas Intermediate was trading 0.7 percent lower at $48.59 a barrel, after rising as high as $50.40 on Tuesday, its strongest since May 25.

Gold prices steadied after rebounding from a one-week low in the previous session, as the dollar eased to near multi-month lows ahead of U.S. nonfarm payrolls data due later and amid continuing U.S. political uncertainty. Spot gold gained 0.1 percent to $1,268.88 per ounce by 0948GMT, having touched a low of $1,256.79 on Thursday, its lowest since July 27. U.S. gold futures for December delivery climbed 0.1 percent to $1,275.30 per ounce.

Treasuries Recap

The U.S. Treasuries gained ahead of the non-farm payrolls data, scheduled for release today by 12:30GMT, besides the unemployment rate for July, also due by today. The yield on the benchmark 10-year Treasury, hovered around 2.23 percent, the super-long 30-year bond yields up nearly 1 basis point to 2.81 percent and the yield on short-term 2-year note traded nearly flat at 1.35 percent.

The UK gilts traded lower in silent session after the ECB announced its decision yesterday, plunging from extreme highs. The yield on the benchmark 10-year gilts, rose nearly 1 basis point to 1.16 percent, the super-long 30-year bond yields also climbed 1 basis point to 1.80 percent and the yield on the short-term 2-year jumped 1-1/2 basis points to 0.23 percent.

The Eurozone periphery bonds remained narrowly mixed Friday as investors remain muted in any trading activity on the lack of significant economic data. The benchmark German 10-year bond yields, which moves inversely to its price, hovered around 0.45 percent, the French 10-year bond yields also climbed nearly 1 basis point higher to 0.73 percent, Irish 10-year bond yields slipped nearly 1 basis point to 0.74 percent, Italian up around 1 basis point to 1.99 percent, Netherlands 10-year bond yields flat at 0.57 percent, Portuguese equivalents jumped 4-1/2 basis points to 2.88 percent and the Spanish 10-year yields remained steady at 1.44 percent.

The Japanese bonds traded nearly flat Friday as market awaits 30-year JGB auction scheduled for Tuesday, August 8 at 0345 GMT. Also, little trading activity is observed in the light of no important economic data or events. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat 0.065 percent, the yield on long-term 40-year note remained steady at 1.09 percent and the yield on short-term 3-year hovered around -0.1 percent.

The New Zealand bonds closed higher Friday as markets took their cues from yesterday’s weak U.S. session following drop in U.S. 10-year treasury yields to one-month low. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 6-1/2 basis points to 2.910 percent, the yield on 5-year note slid 4-1/2 basis points to 2.50 percent and the yield on short-term 2-year ended nearly 2-1/2 basis point lower at 2.040 percent. The 10-year US Treasury yield fell 5 basis points during Thursday’s session to a one-month low.

The Australian 10-year bond yields reached its highest in our weeks Friday after the Reserve Bank of Australia (RBA) slightly downgraded its economic growth forecast of the country for this year. However, a tad higher-than-expected retail sales for the month of June was largely shrugged off by investors. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 4 basis points to 2.64 percent, the yield on 15-year note plunged nearly 4-1/2 basis points to 2.94 percent while the yield on short-term 2-year traded nearly flat at 1.79 percent.


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