Europe Roundup: Sterling hits 5-week high on upbeat economic data, Swiss franc strongest since Aug 2015 against dollar as U.S. Treasury yields ease, European shares edge down – Friday, September 8th, 2017

Market Roundup

  • EUR/USD 0.39%, USD/JPY -0.88%, GBP/USD 0.51%, EUR/GBP -0.13%
  • DXY -0.62%, DAX -0.09, FTSE -0.32%, Brent 0.57%, Gold 0.39%
  • ECB policymakers agreed on stimulus cut at meeting-sources
  • Irma powers toward Florida, leaving behind path of death, destruction
  • Stop fighting over Brexit and get real, Jim O'Neill tells the UK
  • S. Korea detects Xenon possibly from N. Korea Nuclear Test
  • Germany Jul Exports mm SA 0.20% vs -2.80%, revised-2.70%, forecast 1.25%
  • Germany Jul Trade balance 19.5bln vs 21.2bln, forecast 20.3bln
  • Great Britain Jul Industrial output mm 0.2% vs 0.5%, forecast 0.2%
  • Great Britain Jul Manufacturing output 0.5% vs 0%, forecast 0.3%
  • Great Britain Jul Goods trade balance -11.58bln vs -12.72bln, forecast -11.95bln
  • Japan Q2 GDP rev +0.6% q/q, +2.5% AR, +0.7%/+2.9% eyed, prelim +1.0%/+4.0%
  • Japan CAPEX revised down large to +0.5% from prelim +2.4%, +0.5% eyed
  • Despite GDP revision, Q3 exports-output healthy, GDP growth to continue
  • Japan Jul c/a surplus Y2.32 trln, Y2.06 trln eyed, Jun surplus Y934.6 bln
  • Japan Aug flow data – Japanese buy net Y745.3 bln for-bonds, Y1.058 trln stocks
  • Japan Foreigners sell Y1.08trln Japan stocks, buy Y2.33trln JGBs, Y2.5trln bills
  • Oil steady as Irma heads for Florida, Saudi Arabia cuts supply
  • Gold hits 1-yr peak as dollar sags, N. Korea concerns support

Economic Data Ahead

  • (0830 ET/1230 GMT) Canada's releases industrial capacity utilization data for the second quarter. The indicator stood at 83.3 percent in the previous quarter.
  • (0830 ET/1230 GMT) The Statistics Canada releases employment report for August. The economy is likely to have added 19,000 jobs, compared to a rise of 10,900 jobs in July, while the participation rate stood at 65.7 percent in the same month.
  • (0830 ET/1230 GMT) Canada's unemployment rate is expected to stay unchanged at 6.3 percent in the month of August.
  •  (1000 ET/1400 GMT) The U.S. Census Bureau is likely to report that wholesale inventories rose 0.4 percent in July after posting similar gains in the prior month.
  • N/A Mexico's government will present its 2018 fiscal budget, updating its forecasts for economic growth, the peso currency and oil production.
  • (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count. 
  •  (1500 ET/2000 GMT) The U.S. Federal Reserve is likely to report that consumer credit rose to $15.1 billion in July, from $12.40 billion the month before.

Key Events Ahead

  • (0845 ET/1245 GMT) Federal Reserve Bank of Philadelphia President Patrick Harker speaks on “Consumer Finance Issues” before the New Perspectives on Consumer Behavior in Credit and Payments Markets Conference, in Philadelphia.
  • (1145 ET/1545 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $2.05 bn)
  • (1000 ET/1400 GMT) Federal Reserve Bank of New York President William Dudley discusses the economy on CNBC's “Squawk on the Street” in New York.

FX Beat

DXY: The dollar tumbled across the board as dovish Fed speeches and a slide in U.S. Treasury bond yields weighed heavily on the dollar bulls' sentiments. The greenback against a basket of currencies traded 0.4 percent down at 91.15, having touched a low of 91.01 earlier, its lowest since Jan 2015. FxWirePro's Hourly Dollar Strength Index stood at -88.08 (Slightly Bearish) by 1000 GMT.

EUR/USD: The euro steadied after rising to a 2-1/2-year high earlier in the session following European Central Bank President Mario Draghi's remarks that policymakers will decide on tapering this autumn. The European currency traded 0.4 percent up at 1.2066, having touched a high of 1.2092 earlier, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at -8.32 (Neutral) by 1000 GMT. On the lower side, near term intraday support is around 1.1980 (4H Kijun-Sen) and any break below will drag the pair down till 1.19580/1.19298 (yesterday low)/1.18680. The near term resistance is at 1.2100 and any break above will take it till 1.2200.

USD/JPY: The dollar fell towards the 107.00 handle, hitting fresh 10-month lows as deteriorating investors' risk appetite and a sharp slide in the U.S. Treasury bond yields supported the Japanese Yen. The major was trading 1.0 percent down at 107.38, having hit an early low of 107.35, its lowest since Nov. 2016. FxWirePro's Hourly Yen Strength Index stood at 90.03 (Slightly Bullish) by 1000 GMT. On the lower side, any break below 108 confirms minor weakness, a decline till 106. The pair is facing minor resistance at 109.45 (233-H MA) and any convincing break above will take the pair till 110/110.67/111.15 (100- day MA)/112.

GBP/USD:  Sterling advanced, hitting a 5-week high just below the 1.3200 handle after data showed Britain's manufacturing output expanded at the strongest pace this year in July. Moreover, a separate report showing sign of improvement in the trade deficit supported the upside in the major. Sterling traded 0.7 percent up at 1.3195, having hit a high of 1.3197 earlier, its highest since August 3. FxWirePro's Hourly Sterling Strength Index stood at 23.04 (Neutral) by 1000 GMT. Intraday trend is bullish as long as support 1.3150 holds and any break below will drag the pair down till 1.3100 (hourly Kijun –Sen)/1.3075 (55- H EMA). On the higher side, 1.3200 will be acting as near term resistance and any break above targets 1.3268/1.3300. Against the euro, the pound was trading 0.3 percent up at 91.42 pence, having hit an over 2-week high of 91.17 pence in the previous session.

USD/CHF: The Swiss franc rose to a 2-year high as the greenback slumped amid a weaker tone around U.S. Treasury bond yields. The major trades 0.5 percent down at 0.9456, having touched a low of 0.9421 earlier, it’s lowest since Aug. 2015. FxWirePro's Hourly Swiss Franc Strength Index stood at -29.52 (Neutral) by 1000 GMT. On the lower side, any break below 0.94210 will drag the pair down till 0.93450 /0.93000. The near term resistance is around 0.9516 (23.6% retracement of 0.97730 and 0.94210) and any break above will take it till 0.9560/0.9595/0.9630.

AUD/USD: The Australian dollar rallied to multi-month highs above the 0.8100 handle amid an intense selling pressure surrounding the U.S. dollar, coupled with upbeat Chinese imports data and domestic home loans report. The Aussie trades 0.7 percent up at 0.8104, having hit a high of 0.8124 earlier, it’s strongest since May 2015. FxWirePro's Hourly Aussie Strength Index stood at -4.11 (Neutral) by 1000 GMT. On the lower side, near term support is around 0.8060 (hourly Kijun –Sen) and any break below will drag the pair till 0.8000/0.7985 (5- day MA). The near term resistance is around 0.8125 and any break above targets 0.8200/0.8235.

Equities Recap

European shares edged lower, while the euro rallied to a 2-1/2-year high as a policy meeting by the European Central Bank offered bulls reasons for short-term optimism.

The pan-European STOXX 600 index slumped 0.1 percent to 374.50 points, while the FTSEurofirst 300 index lost 0.06 percent to 1,472.31 points.

Britain's FTSE 100 trades 0.3 percent down at 7,372.59 points, while mid-cap FTSE 250 declined 0.8 percent to 19,540.04 points.

Germany's DAX eased 0.03 percent at 12,293.45 points; France's CAC 40 trades 0.2 percent lower at 5,103.85 points.

Commodities Recap

Crude oil prices rose as Hurricane Irma drove towards Florida after tearing through the Caribbean, while Harvey shut a quarter of U.S. refineries and 8 percent of U.S. oil production. International benchmark Brent crude was trading 0.6 percent up at $54.82 per barrel by 1023 GMT, having hit a high of $54.83 earlier, its strongest since Apr. 19. U.S. West Texas Intermediate was trading 0.4 percent down at $48.91 a barrel, after rising as high as $49.39 on Wednesday, its highest since Aug. 14.

Gold prices rallied to its highest in over a year as the dollar slumped after weaker-than-expected U.S. jobs data and persisting tensions over North Korea underpinned safe-haven demand. Spot gold was up 0.4 percent at $1,352.95 by 1026 GMT, after touching its highest level since August 2016 at $1,357.40 earlier and was up over 2 percent for the week. U.S. gold futures for December delivery rose 0.7 percent to $1,359.50.

Treasuries Recap

The U.S. Treasuries sharply rallied as investors await a host of FOMC member speeches through the day; members George and Harker are scheduled to speak today at 00:15GMT and 12:45GMT respectively, which shall provide detailed insight into the debt market. The yield on the benchmark 10-year Treasury slumped 2-1/2 basis points to 2.04 percent, the super-long 30-year bond yields plunged 2 basis points to 2.65 percent and the yield on short-term 2-year note traded 1-1/2 basis points lower at 1.26 percent.

The UK gilts lost Friday as investors moved away from safe-have assets, post the rise in the country’s manufacturing production for the month of July. The yield on the benchmark 10-year gilts rose nearly 1 basis point to 0.97 percent, the super-long 30-year bond yields also climbed nearly 1 basis point to 1.64 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.16 percent.

The German government bonds slumped Friday after investors have heavily shrugged-off the decline in the country’s trade balance data for the month of July. The German 10-year bond yields jumped 1 basis point to 0.32 percent, the yield on 30-year note climbed 2-1/2 basis points to 1.11 percent and the yield on short-term 2-year traded 1-1/2 basis points higher at -0.73 percent.

The Japanese government bonds jumped on the last trading day of the week after the country’s final reading of the gross domestic product (GDP) for the second quarter of this year disappointed markets, missing both consensus estimates and down from the preliminary reading. The yield on the benchmark 10-year Treasury note plunged 1-1/2 basis points to 0.001 percent, the yield on long-term 30-year slumped 2 basis points to 0.81 percent and the yield on short-term 2-year traded 1/2 basis points lower at -0.16 percent.

The New Zealand bonds ended mixed Friday as investors poured into safe-haven assets, following rising tensions over the natural health of the global economy and as the riskier assets remain heavily prone to any economic fluctuations, largely owing to natural disturbances. At the time of closing, the yield on the benchmark 10-year Treasury note slumped 2-1/2 basis points to 2.79 percent, the yield on 7-year note slipped 1 basis point to 2.65 percent while the yield on short-term 2-year ended 2 basis points higher at 2.00 percent.

The Australian bonds jumped during early Asian trading Friday, tracing its U.S. counterpart after yields rose on Thursday as weak U.S. jobless claims data and worries about the impact of hurricanes Irma and Harvey on the world’s largest economy boosted investors’ demand for safe-haven government debt. The yield on the benchmark 10-year Treasury note slumped 7 basis points to 2.59 percent, the yield on 15-year note plunged 6-1/2 basis points to 2.88 percent and the yield on short-term 2-year traded nearly 3 basis points lower at 1.86 percent.

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