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Europe Roundup: Sterling hits 1-month high as Brexit bill debate gets underway, euro rallies ahead of ECB policy meeting, European shares volatile – Thursday, September 7th, 2017

Market Roundup

  • EUR/USD +0.51%, USD/JPY -0.32%, GBP/USD +0.23%, EUR/GBP +0.31%
     
  • DXY -0.45%, DAX +1.04%, FTSE +0.35%, Brent +0.5%, Gold +0.42%
     
  • ECB to start laying groundwork for stimulus exit
     
  • China agrees more UN actions needed against N. Korea after nuclear test
     
  • Deadly Irma pounds Caribbean, takes aim for Florida
     
  • Germany Jul Industrial output mm 0.0% vs -1.1%, forecast 0.6%
     
  • Great Britain Aug Halifax house prices mm 1.1% vs 0.4%, revised 0.7%, forecast 0.2%
     
  • EZ Q2 GDP revised qq 0.6% vs 0.6%, forecast 0.6%
     
  • EZ Q2 GDP revised yy 2.3% vs 2.2%, forecast 2.2%
     
  • UK Brexit minister says “good prospect” of agreeing transitional deal with EU
     
  • A further 5 percent euro rise will discomfort ECB-Poll
     
  • Japan mulls extra budget as Abenomics disappoints – Nikkei
     
  • MoF flow data week-ended Sep 2 – Japanese sell net Y117.9 bln foreign bonds
     
  • Buys prev wk, sales 2 before, net Y161.4 bln stocks/Y115.2 bln bills bought
     
  • Foreigners sell Y158.3bln Japan stks, Y1.481trln bills, buy Y1.359trln JGBs
     
  • Japan end-Aug foreign reserves $1.268 trln, end-July $1.260 tln
     
  • Japan’s Tepco, Chubu Electric to buy more Aussie LNG – Nikkei
     
  • China August FX reserves, up for 7th straight month, reach $3.092 trln
     
  • Gold holds steady amid softer dollar; markets eye ECB meet
     
  • Oil dips on fears Hurricane Irma could hit crude shipments, rising Libya output

Economic Data Ahead 
 

  • (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 5,000 to a seasonally adjusted 241,000 for the week ended Sept. 1 while continuing claims for the week ended Aug. 25 is expected to rise to 1.950 million from previous 1.942 million.
     
  • (0830 ET/1230 GMT) The U.S. Labor Department will release labor costs report for the second quarter. The indicator is expected to nudge up 0.3 percent after posting a gain of 0.6 percent in the previous quarter.  
     
  • (0830 ET/1230 GMT) The U.S. Labor Department is likely to report that non-farm productivity edged higher 1.3 percent in the second quarter, from a rise of 0.9 percent in the previous quarter.
     
  • (0830 ET/1230 GMT) The Statistics Canada is likely to report that building permits dropped 1.5 percent in July, compared with a rise of 2.5 percent in June.
     
  • (0830 ET/1230 GMT) Chile's trade balance data is expected to show trade deficit of $150 million in August, after posting a surplus of $231 million in the previous month.
     
  • (0900 ET/1300 GMT) Mexican consumer prices are likely to rise 0.48 percent in August compared to a fall of 0.38 percent in July, while the core consumer price index is expected to rise 0.28 percent in August.
     
  • (1000 ET/1400 GMT) The Investor's Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of September. The indicator rose to 52.2 in August.
     
  • (1000 ET/1400 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of August. The index posted a reading of 60.8 in the prior month.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending August 28.
     
  • (1000 ET/1500 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending August 28.
     
  • (1950 ET/2350 GMT) Japan's Cabinet Office will release gross domestic product for the second quarter. The economy grew at a pace of 1.0 percent in the previous quarter.
     
  • (1950 ET/2350 GMT) Japan's Ministry of Finance is likely to report that Current Account (N.S.A) surplus expanded to 2,058.6 billion yen in July from 934.6 billion yen in June.

Key Events Ahead

  • (0830 ET/1230 GMT) ECB President Draghi releases the monetary policy statement and gives a press conference.
     
  • (1215 ET/1615 GMT) Cleveland Fed President Loretta Mester speaks on the economic outlook and monetary policy before a luncheon hosted by the Economic Club of Pittsburgh.
     
  • (1430 ET/1830 GMT) FedTrade operation 30-year Ginnie Mae (max $1.475 bn)
     
  • N/A Canadian Prime Minister Justin Trudeau will address the media at the end of a two-day meeting of legislators from his ruling Liberal Party.
     
  • (1900 ET/2300 GMT) New York Fed chief William Dudley speaks on “The U.S. Economic Outlook and the Implications for Monetary Policy” before the Money Marketeers of New York University, in New York.
     
  • (2015 ET/0015 GMT) Kansas City Fed Chief Esther George speaks on the economic outlook and the Omaha Branch Centennial before an economic forum hosted by the Federal Reserve Bank of Kansas City Omaha Branch.

FX Beat

DXY: The dollar slumped versus the euro as investors cautiously awaited the European Central Bank meeting, where policymakers are likely to lay the groundwork to wind back its asset purchase programme. The greenback against a basket of currencies traded 0.4 percent down at 91.81, having touched a low of 91.62 last week, its lowest since Jan 2015. FxWirePro's Hourly Dollar Strength Index stood at -141.41 (Highly Bearish) by 1000 GMT.

EUR/USD: The euro rallied to a 1-week high after data showed the Eurozone economy grew at a robust rate of 0.6 percent in the three months to June compared to the first quarter. Investors now await the European Central Bank policy meeting, where it is expected to scale back its more than 2 trillion euro stimulus programme. The European currency traded 0.5 percent up at 1.1978, having touched a high of 1.1982 earlier, its highest since Aug. 30. FxWirePro's Hourly Euro Strength Index stood at 111.05 (Highly Bullish) by 1000 GMT. On the lower side, near term intraday support is around 1.1928 (34- H EMA) and any break below will drag the pair down till 1.18670/1.18230 (Aug 31st low)/1.17750. The near term resistance is at 1.19795 high made on Friday and any break above will take it till 1.200/1.2030/1.2070 (Aug 29th 2017 high).

USD/JPY: The dollar eased below the 109.00 handle as the ongoing crisis over North Korea continued to underpin the Japanese Yen's safe-haven appeal. The major was trading 0.3 percent down at 108.85, having hit a low of 108.45 in the previous session, its lowest since Aug. 29. FxWirePro's Hourly Yen Strength Index stood at -43.14 (Neutral) by 1000 GMT. On the lower side, any break below 108 confirms minor weakness, a decline till 106 likely. The pair is facing minor resistance at 110.67 (55- day EMA) and any convincing break above will take the pair till 111.15 (100- day MA)/112.

GBP/USD: Sterling rose to a fresh 1-month high as markets turned bullish, with the UK Prime Minister Theresa May’s Brexit bill debate gets underway in parliament. Moreover, better-than expected UK Halifax HPI data combined with positive sentiment around the European equities also supported the bid tone around the major. Sterling traded 0.4 percent up at 1.3089, having hit a high of 1.3092 earlier, its highest since August 4. FxWirePro's Hourly Sterling Strength Index stood at 65.36 (Bullish) by 1000 GMT. Intraday trend is bullish as long as support 1.3025 (55- H EMA) holds and any break below will drag the pair down till 1.2980/1.2938 (233 H MA)/1.2900. On the higher side, 1.310 will be acting as near term resistance and any beak above targets 1.3160/1.3200. Against the euro, the pound was trading 0.2 percent down at 91.48 pence, having hit an over 2-week high of 91.23 pence in the previous session.

USD/CHF: The Swiss franc advanced to a 1-week peak amid persistent geopolitical tension and renewed greenback selling pressure. The major trades 0.4 percent down at 0.9521, having touched a low of 0.9516 earlier, it’s lowest since Aug. 29. FxWirePro's Hourly Swiss Franc Strength Index stood at 39.20 (Neutral) by 1000 GMT. Any break below 0.95160 will drag the pair down till 0.94285/0.9345. The near term resistance is around 0.9560 and any break above will take it to next level till 0.9595/0.9630.

AUD/USD: The Australian dollar climbed, extending gains for the third consecutive session, despite the figures on domestic retail sales and international trade missing forecasts. The Aussie trades 0.3 percent up at 0.8023, having hit a high of 0.8028 on Tuesday, it’s strongest since Aug. 1. FxWirePro's Hourly Aussie Strength Index stood at 21.69 (Neutral) by 1000 GMT. On the lower side, near term support is around 0.7951 (233- H MA) and any break below will drag the pair till 0.7870/0.7800. The near term resistance is around 0.8030 and any break above targets 0.8070 /0.8100/0.8150.

Equities Recap

European shares rose, reversing early session losses, while the euro gained ahead of the European Central Bank policy meeting that is expected to provide details on plans to cut monetary stimulus.

The pan-European STOXX 600 index climbed 0.3 percent to 374.97 points, while the FTSEurofirst 300 index advanced 0.3 percent to 1,474.49 points.

Britain's FTSE 100 trades 0.5 percent up at 7,390.69 points, while mid-cap FTSE 250 declined 0.2 percent to 19,613.81 points.

Germany's DAX rose 1.05 percent at 12,343.86 points; France's CAC 40 trades 0.7 percent higher at 5,134.52 points.

Commodities Recap

Crude oil prices traded near multi-week highs as U.S. refiners restarted after Tropical Storm Harvey increased their crude processing. International benchmark Brent crude was trading 0.5 percent up at $54.42 per barrel by 1016 GMT, having hit a high of $54.64 earlier, its strongest since Apr. 19. U.S. West Texas Intermediate was trading 0.4 percent lower at $48.97 a barrel, after rising as high as $49.39 the prior session, its highest since Aug. 14.

Gold prices rose, reversing most of its previous session losses, underpinned by a weaker dollar and lingering concerns over North Korea, while investors awaited the outcome of a European Central Bank policy meeting later in the day. Spot gold traded 0.4 percent up at $1,339.17 per ounce at 1021 GMT, after touching its highest since September 2016 at $1,344.26 on Tuesday. U.S. gold futures for December delivery were also flat at $1,339.10.

Treasuries Recap

The U.S. Treasuries sharply rebounded as investors await the country’s initial jobless claims and a host of FOMC member speeches through the day; members Mester and Dudley are scheduled to speak today at 16:15GMT and 23:00GMT respectively, which shall provide detailed insight into the debt market. The yield on the benchmark 10-year Treasury slumped 2 basis points to 2.08 percent, the super-long 30-year bond yields also plunged 2 basis points to 2.70 percent and the yield on short-term 2-year note traded 1-1/2 basis points lower at 1.29 percent.

The UK gilts plunged Thursday as investors wait to watch the country’s manufacturing production for the month of July, scheduled to be released on September 8 by 08:30GMT amid an otherwise silent trading day that witnessed no data of prime economic significance. Also, the country’s trade balance for the month of July, due on the same day will add further direction to the debt market. The yield on the benchmark 10-year gilts, jumped 2 basis points to 1.02 percent, the super-long 30-year bond yields also climbed nearly 2 basis points to 1.68 percent and the yield on the short-term 2-year traded flat at 0.17 percent.

The German government bonds slumped Thursday after investors moved away from safe-haven assets, following the rise in Eurozone’s Q2 gross domestic product (GDP) and as market participants have shrugged-off the decline in the country’s industrial production for the month of July, besides, the European Central Bank’s (ECB) monetary policy decision, due by 11:45GMT, which will add further direction to the debt market. The German 10-year bond yields, which moves inversely to its price, jumped nearly 2 basis points to 0.35 percent, the yield on 30-year note climbed 1-1/2 basis points to 1.12 percent and the yield on short-term 2-year traded 1 basis point higher at -0.72 percent.

The Japanese government bonds traded tad lower Thursday as investors wait to watch the country’s final estimate of second-quarter gross domestic product (GDP) due later today by 23:50GMT. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, remained flat at 0.003 percent, the yield on long-term 30-year steady around 0.82 percent and the yield on short-term 2-year hovered around -0.15 percent.

The New Zealand bonds ended lower Thursday tracking the weakness in its U.S. counterpart after the proposal from top Congressional Democrats sought to fund the government to avert a shutdown as well as programs aimed to help those affected by Hurricane Harvey. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1-1/2 basis points to 2.82 percent, the yield on 7-year note also slipped 1-1/2 basis points to 2.67 percent and the yield on short-term 2-year ended 1 basis point lower at 1.98 percent.

The Australian bonds slumped during early Asian trading Thursday, tracing its U.S. counterpart after yields rose on Wednesday as a congressional fiscal plan that includes a three-month suspension of the debt ceiling gained support from President Donald Trump, reducing safe-haven demand among investors worried about a short-term default. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 5-1/2 basis points to 2.65 percent, the yield on 15-year note climbed nearly 5 basis points to 2.95 percent and the yield on short-term 2-year also traded nearly 5 basis points higher at 1.88 percent.


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