News

Europe Roundup: Sterling rallies on hawkish BoE expectations, euro eases on ECB Coeure's comments, European shares advance – Monday, September 11th, 2017

Market Roundup

  • EUR/USD -0.12%, USD/JPY 0.6%, GBP/USD 0.07%, EUR/GBP -0.15%
     
  • DXY 0.11%, DAX 1.11%, FTSE 0.64%, Brent -0.56%, Gold -0.58%
     
  • U.N. Security Council to vote Monday on weakened N. Korea sanctions – diplomats
     
  • Irma churns through central Florida, leaves trail of destruction
     
  • Easy ECB policy to limit firming euro's negative impact – Coeure
     
  • ECB has seen very little price pressure in recovery – Mersch
     
  • Blocking EU repeal bill is vote for chaotic Brexit, minister warns UK lawmakers
     
  • China fiscal revenue and spending growth slow in August
     
  • Japan July core machinery orders +8.0% m/m, -7.5% y/y, +4.4%, -7.3% eyed
     
  • Japan M/m gain in core orders best since Jan ’16, first rise in hour months
     
  • Japan Aug money supply M2 +4.0% y/y, M3 +3.4%, broadest liquidity +3.7%
     
  • Investment trust assets in Japan reach new Y102.6 trln high – Nikkei
     
  • Oil weakens on fears Irma could dent U.S. demand
     
  • Gold retreats from 1-year high as dollar gains ground

Economic Data Ahead

  • (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of August. The indicator is expected to rise at a seasonally adjusted annualized rate to 216,000 after increasing 222,324 units in July.
     
  • N/A Mexico's statistics agency INEGI releases data on industrial output for the month of July. The economy's Industrial production was down 0.3 percent in June.

Key Events Ahead

  • N/A Canadian Prime Minister Justin Trudeau and his Liberal cabinet will hold a two-day retreat to discuss major issues.
     
  • (1145 ET/1545 GMT) FedTrade operation 15-year Fannie Mae / Freddie Mac (max $600 mn)

FX Beat

DXY: The dollar rose across the board as an improvement in risk sentiment prompted some investors to cover their short positions before U.S. inflation data later this week.  The greenback against a basket of currencies traded 0.2 percent up at 91.50, having touched a low of 91.01 on Friday, its lowest since Jan 2015. FxWirePro's Hourly Dollar Strength Index stood at -111.36 (Highly Bearish) by 1100 GMT.

EUR/USD: The euro declined after European Central Bank board member Benoit Coeure stated that improved euro zone growth can offset some of the negative effects of the euro's strength, but inflation could be weighed down by a persistent exchange rate shock.  The European currency traded 0.2 percent down at 1.2011, having touched a high of 1.2092 the prior session, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at -5.48 (Neutral) by 1100 GMT. On the lower side, near term intraday support is around 1.1990 (20 4H MA) and any break below will drag the pair down till 1.1970/1.19580/1.19298 (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 rebounded from 10-month lows against the Japanese yen as there were no further developments in the North Korean crisis over the weekend. The major was trading 0.6 percent up at 108.53, having hit a low of 107.32 in the previous session, its lowest since Nov. 2016. FxWirePro's Hourly Yen Strength Index stood at -99.54 (Slightly Bearish) by 1100 GMT. On the lower side, any break below 108 confirms minor weakness, a decline till 106 likely. The pair is facing minor resistance at 109.45 (20- day MA) and any convincing break above will take it till 110/110.67/111.17 (100- day MA)/112.

GBP/USD: Sterling rallied, extending gains for the fifth consecutive session, boosted by speculation that the Bank of England may sound more hawkish on interest rates this week.  The major traded 0.2 percent up at 1.3218, having hit a high of 1.3224 in the prior session, its highest since August 3. FxWirePro's Hourly Sterling Strength Index stood at 138.05 (Highly Bullish) by 1100 GMT. The near term resistance is around 1.32680 and any break above will take the pair to next level till 1.3300/1.3345. The near term support is around 1.3165 (34- H EMA) and any break below will drag it down till 1.3092 (Friday low)/1.3075/1.3050. Against the euro, the pound was trading 0.3 percent up at 90.83 pence, having hit a 3-week high of 90.82 pence earlier in the session.

USD/CHF: The Swiss franc slumped after rising to multi-month highs in the previous session, amid improving risk-on market sentiment. The major trades 0.6 percent up at 0.9495, having touched a low of 0.9421 the prior session, it’s lowest since Aug. 2015. FxWirePro's Hourly Swiss Franc Strength Index stood at -53.02 (Bearish) by 1100 GMT. The decline from 1.0340 will come to an end only if it breaks above 0.97730 level. The near term resistance is around 0.95160 (23.6% fibo) and any break above will take the pair to next level till 0.9550 (55- 4H EMA)/0.9582 (Cloud top)/0.9630.

AUD/USD: The Australian dollar eased after rising to multi-month highs above the 0.8100 handle in the previous session as the greenback rebounded across the board.  The Aussie trades flat at 0.8049, having hit a high of 0.8125 on Friday, it’s strongest since May 2015. FxWirePro's Hourly Aussie Strength Index stood at 31.31 (Neutral) by 1100 GMT. On the lower side, near term support is around 0.8034 (20- 4H MA) and any close below will drag the pair till 0.8000/0.7937 (233 4H MA). The near term resistance is around 0.8125 and any break above targets 0.8200/0.8235.

Equities Recap

European shares rallied as the downgrade of Hurricane Irma in the U.S. raised the expectations that costs for the insurance industry may be lower than initially expected.

The pan-European STOXX 600 index gained 0.9 percent to 379.10 points, while the FTSEurofirst 300 index climbed 0.9 percent to 1,489.31 points.

Britain's FTSE 100 trades 0.6 percent up at 7,422.72 points, while mid-cap FTSE 250 advanced 0.6 percent to 19,717.64 points.

Germany's DAX rallied 1.1 percent at 12,441.67 points; France's CAC 40 trades 1.2 percent higher at 5,175.31 points.

Commodities Recap

Crude oil prices edged lower, extending previous session losses on concerns that Hurricane Irma's pounding of heavily populated areas of Florida could dent oil demand in the United States. International benchmark Brent crude was trading 0.6 percent up at $53.42 per barrel by 1011 GMT, having hit a high of $54.83 in the previous session, its strongest since Apr. 19. U.S. West Texas Intermediate was trading 0.6 percent up at $47.68 a barrel, after rising as high as $49.39 on Wednesday, its highest since Aug. 14.

Gold prices declined after hitting its highest in over a year in the previous session, as the dollar against a basket of currencies recovered from recent lows. Spot gold was trading 0.6 percent down at $1,338.21 an ounce by 1025 GMT, having hit a high of $1,357.40 on Friday, the highest since Aug. 16, 2016. U.S. gold futures for December delivery were also down 0.9 percent at $1,339.40 an ounce.

Treasuries Recap

The U.S. Treasuries plunged as investors wait to watch the country’s 3-year and 10-year note auction, scheduled to be held today and on September 12 by 17:00GMT respectively. The yield on the benchmark 10-year Treasury, jumped nearly 3-1/2 basis points to 2.09 percent, the super-long 30-year bond yields climbed nearly 3 basis points to 2.70 percent and the yield on short-term 2-year note traded nearly 1-1/2 basis points higher at 1.29 percent

The German bunds plunged as investors remain cautioned ahead of the country’s 10-year auction and the release of consumer price-led inflation index for the month of August, scheduled on September 13. The benchmark German 10-year bond yields rose 1-1/2 basis points to 0.33 percent, the yield on 30-year note climbed 2-1/2 basis points to 1.14 percent and the yield on short-term 2-year note traded nearly 1 basis point higher at -0.75 percent.

The UK gilts plummeted Monday on hopes of a rise in the country’s consumer price inflation index (CPI) for the month of August amid an encouraging employment report for July, although unemployment rate is seen remaining unchanged at 4.4 percent for July. The yield on the benchmark 10-year gilts jumped 3-1/2 basis points to 1.03 percent, the super-long 30-year bond yields also climbed nearly 3-1/2 basis points to 1.68 percent and the yield on the short-term 2-year too traded 3-1/2 basis points higher at 0.20 percent.

The Japanese government bonds slid on the first trading day of the week, tracking weakness in the U.S. counterpart after tensions over the Korean Peninsula subsided, pulling down demand for safe-haven instruments. The yield on the benchmark 10-year Treasury note rose1 basis point to 0.006 percent, the yield on long-term 30-year hovered around 0.81 percent and the yield on short-term 2-year traded 1/2 basis point higher at -0.15 percent.

The Australian bonds slumped after China’s consumer price-led inflation index for the month of August beat market expectations, sharply jumping during the period, with a broader rise in the country’s producer price index for the same period. Australia is the biggest commodity importer of China. The yield on the benchmark 10-year Treasury note jumped 5-1/2 basis points to 2.62 percent, the yield on 15-year note also surged 5-1/2 basis points to 2.92 percent and the yield on short-term 2-year traded nearly 3-1/2 basis points higher at 1.88 percent.

The New Zealand bonds closed mixed on varied economic signals in the global economy after tensions over missile attacks from North Korea eased amid heightened uncertainty over the recent flow of hurricanes over the US territory, although the warnings have softened. At the time of closing, the yield on the benchmark 10-year bond jumped 2 basis points to 2.82 percent, the yield on 7-year note also climbed 2 basis points to 2.68 percent while the yield on short-term 2-year note ended 1/2 basis point lower at 2.02 percent.


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