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Europe Roundup: Sterling hits 1-year high on better-than expected inflation, dollar index holds gains as risk sentiment improves, European shares rally – Tuesday, September 12th, 2017

Market Roundup

  • EUR/USD 0.05%, USD/JPY 0.28%, GBP/USD 0.87%, EUR/GBP -0.79%
     
  • DXY -0.03%, DAX 0.56%, FTSE -0.18%, Brent -0.19%, Gold -0.01%
     
  • Major U.S. allies in Asia welcome new U.N. sanctions on N. Korea
     
  • Floridians return to storm-battered homes as Irma flooding spreads
     
  • German economy could lose some momentum in H2 – ministry
     
  • US Aug NFIB Business Optimism 105.3 vs 105.2
     
  • Great Britain Aug Core CPI YY 2.7% vs 2.4%, 2.5% forecast
     
  • Great Britain Aug CPI YY 2.9% vs 2.6%, 2.8% forecast
     
  • Great Britain Aug PPI Input Prices YY NSA 7.6% vs 6.2%, 7.3% forecast
     
  • Great Britain Aug PPI Output Prices MM NSA 0.4% vs 0.1%, 0.2% forecast
     
  • Great Britain Aug PPI Output Prices YY NSA 3.4% vs 3.2%, 3.1% forecast
     
  • Great Britain Aug PPI Core Output Prices YY NSA 2.5% vs 2.4%, 2.3% forecast
     
  • Japan Inc busy with USD, EUR issues, eyeing higher yields abroad, weak JPY
     
  • Japan Softbank USD 7/10-yr, EUR 8/12-yr, Asahi E1.2 bln dual on tap – IFR
     
  • Oil prices slip on demand concerns following U.S. hurricanes
     
  • Gold eases as investors pile into equities
     

Economic Data Ahead

  • (1000 ET/1400 GMT) The U.S. Labor Department releases Job Openings and Labor Turnover Survey (JOLTS) report for the month of July. The report is expected to show job openings fell to 5.960 million from 6.163 million in June.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.
     
  • (1845 ET/2245 GMT) Statistics New Zealand will release food price index for the month of August. The indicator posted a fall of 0.2 percent in the prior month.
     

Key Events Ahead

  • (1430 ET/1830 GMT) FedTrade operation 30-year Ginnie Mae (max $1.475 bn)

FX Beat

DXY: The dollar hit a 1-week high against the safe-haven Japanese yen on the back of improving investor risk sentiment and rallying U.S. Treasury yields. The greenback against a basket of currencies traded 0.1 percent up at 92.01, having touched a low of 91.01 last week, its lowest since Jan 2015.

EUR/USD: The euro slumped, extending previous session losses, following yesterday's dovish comments from the ECB board member Benoît Coeuré that a persistent exchange-rate shock could weigh down inflation. The European currency traded 0.1 percent down at 1.1939, having touched a high of 1.2092 on Friday, its highest since Dec. 2014. On the lower side, near term intraday support is around 1.19450 (55 4H MA and also trend line support) and any break below will drag the pair down till 1.1900/1.18230 (Aug 31st, 2017 low). The near term resistance is at 1.2100 and any break above will take it till 1.2200.

USD/JPY: The dollar rallied to a fresh 1-week high as receding worries over North Korea and Hurricane Irma undermined safe-haven demand. Moreover, a rise in the U.S. Treasury yields also supported the upside in the pair. The major was trading 0.4 percent up at 109.81, having hit a high of 109.85 earlier, its highest since Sept. 4. On the lower side, any break below 108 confirms minor weakness, a decline till 106 likely. It is facing minor resistance at 109.85 (34- day EMA) and any convincing break above will take it till 110/110.67/111.17 (100- day MA)/112.

GBP/USD: Sterling advanced to a 1-year high after data showed British inflation hit its joint highest in more than five years in August. The economy's consumer prices overall increased by 2.9 percent compared with a year earlier, up from 2.6 percent in July and above forecast for a rise of 2.8 percent. Sterling traded 0.8 percent up at 1.3268, having hit a high of 1.3288 earlier, its highest since September 2016. Any break above 1.3268 confirms major bullishness, a jump till 1.3300/1.3345/1.3400 likely. On the lower side, minor weakness can be seen only below 1.31600 and any violation below will drag the pair down till 1.30950/1.3050/1.3000. Against the euro, the pound was trading 0.9 percent up at 89.92 pence, having hit an 89.82 pence earlier in the session, its highest since Aug. 3.

USD/CHF: The Swiss franc fell to a 1-week low against the dollar as easing worries over North Korea and Hurricane Irma sent investors towards risky assets. The major trades 0.3 percent up at 0.9592, having touched a high of 0.9603 earlier in the session, it’s highest since Sept. 5. The near term resistance is around 0.9599 (20- day MA) and any break above will take the pair to next level till 0.9635 (55- day EMA).The decline from 1.0340 will come to an end only if it breaks above 0.97730 level.

AUD/USD: The Australian dollar steadied after tumbling below the 0.8000 handle on the back of weaker Australian NAB Business survey. The Aussie trades flat at 0.8027, having hit a high of 0.8124 on Friday, it’s strongest since May 2015. On the lower side, near term support is around 0.8000 (55- 4H EMA) and any close below will drag the pair till 0.7940 (233 4H MA). The near term resistance is around 0.8125 and any break above targets 0.8200/0.8235.

Equities Recap

European shares advanced as easing tensions over North Korea and signs that Hurricane Irma was causing less damage than expected in the U.S. boosted risk appetite.

The pan-European STOXX 600 index gained 0.6 percent to 381.86 points, while the FTSEurofirst 300 index climbed 0.6 percent to 1,500.39 points.

Britain's FTSE 100 trades 0.3 percent down at 7,391.73 points, while mid-cap FTSE 250 declined 0.2 percent to 19,625.55 points.

Germany's DAX rallied 0.5 percent at 12,544.75 points; France's CAC 40 trades 0.6 percent higher at 5,208.56 points.

Commodities Recap

Crude oil prices declined as Hurricane Irma's dampening effect on demand offset refinery restarts in the wake of Hurricane Harvey. International benchmark Brent crude was trading 0.1 percent down at $53.86 per barrel by 1042 GMT, having hit a high of $54.83 on Friday, its strongest since Apr. 19. U.S. West Texas Intermediate was trading 0.3 percent down at $47.92 a barrel, after rising as high as $49.39 last week, its highest since Aug. 14.

Gold prices slumped to their lowest in more than a week as easing concerns over North Korea's nuclear ambitions and the impact of Hurricane Irma supported risk on market sentiment. Spot gold was trading 0.2 percent down at $1,323.66 an ounce at 0922 GMT, having hit its lowest since Sept. 1 at $1,322.3 in early trade. U.S. gold futures for December delivery were down $4.90 an ounce at $1,330.80.

Treasuries Recap

The U.S. Treasuries nose-dived Tuesday as investors wait to watch the country’s 10-year auction, scheduled to be held today by 17:00GMT, besides, the JOLTs job openings report, due by 14:00GMT. The yield on the benchmark 10-year Treasury jumped nearly 3-1/2 basis points to 2.16 percent, the super-long 30-year bond yields climbed 2-1/2 basis points to 2.76 percent and the yield on short-term 2-year note traded nearly 1 basis point higher at 1.33 percent.

The UK gilts plunged Tuesday after the country’s consumer price inflation index (CPI) for the month of August exceeded market hopes, adding to possibilities of an interest rate hike by the Bank of England (BoE) at its upcoming monetary policy meeting on September 14. The yield on the benchmark 10-year gilts, jumped 3 basis points to 1.07 percent, the super-long 30-year bond yields climbed 2-1/2 basis points to 1.72 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points higher at 0.23 percent.

The German government bonds trended lower Tuesday as investors wait to watch the country’s 10-year auction, scheduled to be held on September 13 by 09:35GMT. The German 10-year bond yields, which moves inversely to its price, jumped 3 basis points to 0.36 percent, the yield on 30-year note climbed 2-1/2 basis points to 1.15 percent and the yield on short-term 2-year traded 1/2 basis point higher at -0.74 percent.

The Japanese government bonds plunged during early Asian trade Tuesday on increasing risk appetite of investors after tensions eased, concerning worries over North Korea’s missile attack, which did not happen over the weekend and as the strength of Hurricane Irma weakened as well. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 3 basis points to 0.03 percent, the yield on long-term 30-year climbed 2 basis points to 0.83 percent and the yield on short-term 2-year traded 1-1/2 basis points higher at -0.13 percent.

The New Zealand bonds closed narrowly mixed Tuesday as investors remained side-lined in any major trading activity amid lack of major economic data. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, remained flat at 2.82 percent, the yield on 7-year note rose 1/2 basis point to 2.68 percent while the yield on short-term 2-year ended 1 basis point lower at 2.00 percent.

The Australian bonds continued to slump Tuesday, following improving risk sentiments among investors after Wall Street remained sharply higher on Monday in a broad rally led by technology and financial stocks, especially insurers, on relief that Irma weakened to a tropical storm and North Korea did not conduct a nuclear test as was anticipated. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 2 basis points to 2.63 percent, the yield on 15-year note also climbed 2 basis points to 2.84 percent and the yield on short-term 2-year traded 1/2 basis point higher at 1.87 percent.


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