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Europe Roundup: Sterling off 1-year high on weaker than expected wage growth, euro gains on upbeat economic data, European shares ease – Wednesday, September 13th, 2017

Market Roundup

  • EUR/USD 0.08%, USD/JPY -0.14%, GBP/USD -0.17%, EUR/GBP 0.28%
     
  • DXY -0.03%, DAX 0.04%, FTSE -0.35%, Brent 0.52%, Gold 0.1%
     
  • N. Korea defiant over UN sanctions as Trump says tougher steps needed
     
  • Juncker urges EU for tighter union amidst Brexit and economic upswing
     
  • Juncker wants EU finance minister, no separate euro budget or Parliament
     
  • Germany Aug CPI Final YY 1.8% vs 1.8%, forecast 1.8%
     
  • Germany Aug HICP Final YY 1.8% vs 1.8%, forecast 1.8%
     
  • Germany Aug Wholesale Price Index YY 3.2% vs 2.2%
     
  • UK Jul Claimant Count unem Chng -2.8% vs -4.2%, revised -2.9k, forecast 0.6k
     
  • UK Jul ILO Unemployment Rate 4.3% vs 4.4%, forecast 4.4%
     
  • UK Jul Avg Week Earnings 3M YY 2.1% vs 2.1%, forecast 2.3%
     
  • EZ Q2 Employment QQ 0.4% vs 0.4%, revised 0.5%
     
  • EZ Q2 Employment YY 1.6% vs 1.5%, revised 1.6%
     
  • EZ July Industrial Production YY 3.2% vs 2.6%, revised 2.8%, forecast 3.4%
     
  • Canada PayNet Small Business Lending Index rose to 126.2 in July
     
  • Japan PM Abe– Next BoJ Gov must focus on meeting CPI goal, trust in Kuroda
     
  • Japan-China-South Korea CB governors meeting in Seoul today, tomorrow
     
  • Japan Aug domestic corp goods prices unch m/m, +2.9% y/y, +0.1/+3.0% eyed

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. producer price index is likely to have increased 0.3 percent in August, while in the 12 months through the same period, it is expected to have advanced 2.5 percent. PPI excluding food and energy probably edged up 0.2 percent afterdeclining 0.1 percent in July.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending September 4.
     
  • (1400 ET/1800 GMT) The U.S. reports its monthly budget statement for the month of August. The government is likely to show a deficit of $119.5 billion after posting a deficit of $43 billion in the previous month.
     
  • (1901 ET/2301 GMT) The Royal Institution of Chartered Surveyors (RICS) will report Britain's Housing Price Balance for the month August. The indicator is expected to have remained flat after rising 1 percent in July.
     
  • (1950 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending September 4.
     
  • (1950 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending September 4.
     

Key Events Ahead

  • (1145 ET/1545 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.9 bn)
     
  • (1915 ET/2315 GMT) Reserve Bank of Australia Assistant Governor Guy Debelle's Speech.

FX Beat

DXY: The dollar retreated from a near 2-week high versus the Japanese yen as investors remained cautious amid persisting geopolitical uncertainty over North Korea. The greenback against a basket of currencies traded 0.1 percent down at 91.80, having touched a low of 91.01 last week, its lowest since Jan 2015. FxWirePro's Hourly Dollar Strength Index stood at 65.64 (Bullish) by 1000 GMT.

EUR/USD: The euro extended previous session gains after data showed Eurozone's employment change rose at an annualized rate of 1.6 percent in second quarter, beating forecast of 1.4 percent. Moreover, upbeat industrial production figures, which came in at 0.1 percent, in line with estimates further provided support to the ongoing upward momentum. The European currency traded 0.1 percent up at 1.1975, having touched a high of 1.2092 on Friday, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at -52.98 (Bearish) by 1000 GMT. On the lower side, near term intraday support is around 1.19250 (61.8% retracement of 1.18230 and 1.20920) 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 the pair till 1.2200.

USD/JPY: The dollar eased after rising to a near 2-week highs earlier in the day as investors turned cautious due to the potential of fresh geopolitical tensions from North Korea, especially after the UN Security Council imposed new sanctions. Markets now await U.S. producer price index figures for further momentum. The major was trading 0.1 percent down at 110.04, having hit a low of 107.31 on Friday, its lowest since Nov. 2016. FxWirePro's Hourly Yen Strength Index stood at -91.75 (Slightly Bearish) 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 110.28 (55- day EMA) and any convincing break above will take the pair till 110.67/111.17 (100- day MA)/112.

GBP/USD: Sterling retreated after rising to a one-year high earlier in the day as weaker than expected Britain's wage growth data undermined British pound bulls' sentiment.  However, the downside was capped as UK's unemployment rate unexpectedly fell further to 4.3 percent from 4.4 percent, its lowest since 1975 during the three months to July. Sterling traded 0.2 percent down at 1.3253, having hit a high of 1.3328 earlier, its highest since September 2016. FxWirePro's Hourly Sterling Strength Index stood at 73.10 (Bullish) by 1000 GMT. On the higher side, near term resistance is around 1.3365 (trend line joining 1.30476 and 1.32449) and any break above will take the pair to next level till 1.3400/1.3445. The near term support is around 1.32500 and any break below will drag it down till 1.3200/1.3160 (Sep 11th low)/1.3095/1.3075.  Against the euro, the pound was trading 0.3 percent down at 90.33 pence, having hit a high of 89.51 pence in the previous session, its highest since Aug. 3.

USD/CHF: The Swiss franc consolidated within a narrow range as investors were reluctant to take big positions ahead of Swiss National Bank's policy meeting. The major trades flat at 0.9597, having touched a high of 0.9618 in the previous session, it’s highest since Sept. 1. FxWirePro's Hourly Swiss Franc Strength Index stood at -153.72 (Highly Bearish) by 1000 GMT. The near term resistance is around 0.9620-0.9633 (trend line resistance and 55- day EMA) and any break above 0.9635 will take the pair to next level till 0.9680/0.9700. The decline from 1.0340 will come to an end only if it breaks above 0.97730 level.

AUD/USD: The Australian dollar rallied after slumping for two consecutive sessions, as domestic consumer sentiment in September rose on the back of growing optimism about the economic outlook. The Aussie trades 0.3 percent up at 0.8040, having hit a high of 0.8124 on Friday, it’s strongest since May 2015. FxWirePro's Hourly Aussie Strength Index stood at- 25.30 (Neutral) by 1000 GMT. 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 declined, weighed down by weakness in mining stocks, while the dollar retreated from a near 2-week high against the Japanese yen amid persisting geopolitical uncertainty over North Korea.

The pan-European STOXX 600 index dropped 0.3 percent to 380.46 points, while the FTSEurofirst 300 index fell 0.3 percent to 1,495.35 points.

Britain's FTSE 100 trades 0.5 percent down at 7,361.47 points, while mid-cap FTSE 250 declined 0.5 percent to 19,573.25 points.

Germany's DAX eased 0.02 percent at 12,522.40 points; France's CAC 40 trades 0.05 percent higher at 5,211.64 points.

Commodities Recap

Crude oil prices rose, extending gains for the third straight session after the International Energy Agency said the global oil surplus was starting to reduce due to robust global demand and an output decline from OPEC and non- OPEC producers. International benchmark Brent crude was trading 0.8 percent up at $54.66 per barrel by 0935 GMT, having hit a high of $54.83 on Friday, its strongest since Apr. 19. U.S. West Texas Intermediate was trading 0.7 percent down at $48.70 a barrel, after rising as high as $49.39 last week, its highest since Aug. 14.

Gold prices steadied amid firmer equities and a softer dollar, however, U.S. President Donald Trump's latest comments over North Korea supported the safe-haven's demand. Spot gold was little changed at $1,331.491 an ounce by 0939 GMT, having hit its low since September 1 at $1,322.53 in the previous session. U.S. gold futures for December delivery were up 0.2 percent at $1,335.70 an ounce.

Treasuries Recap

The U.S. Treasuries gained as investors wait to watch the country’s 30-year auction, scheduled to be held today by 17:00GMT, besides, the producer price index for the month of August, due today by 12:30GMT will provide further direction to the bond market. The yield on the benchmark 10-year Treasury skid 1 basis point to 2.16 percent, the super-long 30-year bond yields fell 1-1/2 basis points to 2.76 percent while the yield on short-term 2-year note hovered around 1.34 percent.

The UK gilts jumped after the country’s unemployment rate fell in July while wage inflation registered a weaker-than-expected increase. Further, the Bank of England’s (BoE) monetary policy decision, scheduled to be unveiled on September 13, will add direction to the country’s debt market. The yield on the benchmark 10-year gilts fell 1-1/2 basis points to 1.12 percent, the super-long 30-year bond yields also slipped 1-1/2 basis points to 1.77 percent and the yield on the short-term 2-year traded nearly 1 basis point lower at 0.26 percent.

The German government bonds climbed after the country’s consumer price-led inflation index (CPI) met market expectations for the month of August, coming in at 0.1 percent m/m. Also, eurozone’s industrial production for July, rebounded 0.1 percent, from down -0.6 percent in June. The German 10-year bond yields slipped 1 basis point to 0.39 percent, the yield on 30-year note fell nearly 1-1/2 basis points to 1.20 percent and the yield on short-term 3-year traded flat at -0.66 percent.

The Japanese government bonds traded flat in muted trading session as investors shifted towards riskier assets including equities and oil. Also, rise in US Treasury yields post the tepid 10-year auction added to further sluggishness in Japanese bonds. The yield on the benchmark 10-year Treasury note hovered around 0.02 percent, the yield on long-term 30-year rose 1/2 basis point to 0.83 percent and the yield on short-term 2-year traded flat at -0.14 percent.

The New Zealand bonds slumped at the time of closing on slight improvement in investors’ risk appetite after a new poll on the country’s upcoming election showed the National Party on 10 points lead of the Labour counterpart, with the numbers to potentially govern alone. At the time of closing, the yield on the benchmark 10-year Treasury note jumped 4-1/2 basis points to 2.86 percent, the yield on 7-year note surged 4 basis points to 2.72 percent and the yield on short-term 2-year ended 1-1/2 basis points higher at 2.02 percent.

The Australian bonds slumped, tracking weakness in the U.S. Treasuries, after the latter rose for a third straight session as softer demand for benchmark 10-year notes pressured overall bond prices at the latest 10-year auction held overnight. The yield on the benchmark 10-year Treasury note jumped 4-1/2 basis points to 2.69 percent, the ield on 15-year note climbed nearly 4 basis points to 2.98 percent and the yield on short-term 2-year traded 3 basis points higher at 1.91 percent.


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