Europe Roundup: Sterling gains on robust industry data, euro hits 1-week highs on ECB Lautenschlaeger's hawkish comments, European shares ease – Tuesday, October 10th, 2017

Market Roundup

  • EUR/USD 0.42%, USD/JPY -0.28%, GBP/USD 0.38%, EUR/GBP 0.08%
  • DXY -0.33%, DAX -0.05%, FTSE 0.21%, Brent 0.93%, Gold 0.51%
  • Germany Aug Trade Balance, EUR, SA 21.6B vs 19.5B, forecast 20.0B, revised 19.3B
  • Great Britain Sept BRC Retail Sales YY 1.90% vs 1.30%
  • Great Britain Aug Construction O/P Vol YY 3.5% vs -0.4%, forecast 0.2%, revised 2.7%
  • Great Britain Aug Industrial Output YY 1.6% vs 0.4%, forecast 0.8%, revised 1.1%
  • Great Britain Aug Manufacturing Output YY 2.8% vs 1.9%, forecast 1.9%, revised 2.7%
  • Great Britain Aug Goods Trade Balance GBP -14.24B vs -11.58B, forecast -11.20B, revised -12.83B
  • China says will have no problem meeting 2017 growth target, may beat it
  • BOJ Governor Kuroda pledges to stick with quantitative easing

Economic Data Ahead

  • (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of September. The indicator stood at a seasonally adjusted annualized rate of 223,200 in the previous month.
  • (0830 ET/1230 GMT) The Statistics Canada reports its building permits for the month of August. The indicator declined 3.5 percent in July.
  • (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 October. The indicator rose to 53.4 in the prior month. 
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.
  • (1930 ET/2330 GMT) The Faculty of Economics and Commerce Melbourne Institute will release Australia's Westpac consumer confidence for the month of October. The index edged up 2.5 percent in September.
  • (1950 ET/2350 GMT) Japan's machinery orders are likely to have increased 1.1 percent for the month of August after posting a rise of 8.0 percent in July.
  • N/A The International Monetary Fund releases its World Economic Outlook in Washington.

Key Events Ahead

  • (1000 ET/1400 GMT) Minneapolis Fed President Neel Kashkari gives welcome remarks before the Regional Economic Conditions Conference hosted by the Federal Reserve Bank of Minneapolis.
  • (1400 ET/1600 GMT) Catalonia regional leader Carles Puigdemont to address a session.
  • (1430 ET/1830 GMT) FedTrade operation 15-year Fannie Mae and Freddie Mac (max $500 mn)
  • (2000 ET/0000 GMT) Dallas Fed chief Robert Kaplan participates in a moderated Q&A session before the Stanford Institute for Economic Policy Research Associates Meeting in California.

FX Beat

DXY: The dollar index eased to a 1-week low following the poor performance from U.S. Treasury yields. The greenback against a basket of currencies traded 0.4 percent down at 93.39, having touched a low of 93.26 earlier, its lowest since Oct. 4. FxWirePro's Hourly Dollar Strength Index stood at -88.76 (Slightly Bearish) by 0900 GMT.

EUR/USD: The euro rallied, extending gains for the third consecutive session, following solid German industrial and trade figures. Moreover, yesterday’s hawkish comments from the ECB policymaker Sabine Lautenschläger that reaffirmed bets the eurozone economy's outlook remains robust continued to support the upward momentum. The European currency traded 0.4 percent up at 1.1787, having touched a high of 1.1789 on Friday, its highest since Oct. 2. FxWirePro's Hourly Euro Strength Index stood at 130.72 (Highly Bullish) by 0900 GMT. It should break above 1.18325 (Sep 29th high) for further bullishness and any break above this level will take the pair till 1.1870/1.1900. On the lower side, major support is around 1.17600 (55- day EMA) and any break below will take it to next level till 1.1700/1.16621 (Aug 2017 low).

USD/JPY: The dollar slumped against the Japanese yen following a slide in the U.S. Treasury bond yields. Investors sought safe-haven assets after Russia’s news agency, cited that a Russian lawmaker saying that North Korea possessed a ballistic missile with a range of 3,000 km.  The major was trading 0.3 percent down at 112.37, having hit a high of 113.43 on Friday, its highest since July. FxWirePro's Hourly Yen Strength Index stood at 89.10 (Slightly Bullish) by 0900 GMT. On the lower side, any close below 112.25 (233- day MA) confirms minor weakness, a decline till 111.13/110 likely. Any break above 113.45 confirms minor bullishness, a jump till 114/114.50.

GBP/USD: Sterling rose above the 1.3200 handle after data showed British factories had their strongest two months of 2017 in July and August, indicating the Bank of England remains on track to hike interest rates soon. However, the upside was limited as a separate report showed the deficit in trade in goods hitting an all-time high. Sterling traded 0.4 percent up at 1.3193, having hit a low of 1.3027 on Friday, its lowest since Sept. 6. FxWirePro's Hourly Sterling Strength Index stood at 19.61 (Neutral) by 0900 GMT.  The intraday term trend is slightly bullish as long as 1.3130 (50- day MA) and any convincing break above 1.3200 will take the pair to next level till 1.3230/1.3280 (daily Kijun-Sen)/1.3300. On the lower side, near-term major support is around 1.3130 (50- day MA) and any break below will drag it down till 1.3070/ 1.3270 / 1.3015 (100- day MA). Against the euro, the pound was trading 0.1 low at 89.38 pence, having hit a low of 89.92 pence on Friday, its lowest since Sept. 14.

USD/CHF: The Swiss franc rose after declining in the previous session following a slide in the U.S. Treasury bond yields and on rising geopolitical tensions between the U.S. and North Korea. The major trades 0.3 percent down at 0.9765, having touched a high of 0.9836 on Friday, it’s highest since May 17. FxWirePro's Hourly Swiss Franc Strength Index stood at 80.47 (Slightly Bullish) by 0900 GMT. On the lower side, 0.9770 will be acting as major support and any break below will drag the pair to next level till 0.9744 (233- HMA)/0.9700. The near-term resistance is around 0.9840 and any break above will take it to next level till 0.9900.

AUD/USD: The Australian dollar rose following the release of the National Bank of Australia business surveys, which showed Business Confidence index rose to 7 for September, while business conditions index held steady at 14 during the same period. The Aussie trades 0.5 percent up at 0.7789, having hit a low of 0.7733 on Friday, it’s lowest since Jul. 14. FxWirePro's Hourly Aussie Strength Index stood at -104.73 (Highly Bearish) by 0900 GMT. On the lower side, near-term support is around 0.7730 and any convincing close below will drag the pair till 0.77186/0.7685. The near-term resistance is around 0.7795 (100- H MA) and any break above targets 0.7825 (23% retracement of 0.8125 and 0.77330) /0.7875 (55- day EMA).

Equities Recap

European shares declined following a slightly weaker session on Wall Street, while the greenback declined to a 1-week low following a drop in the U.S. Treasury yields.

The pan-European STOXX 600 index fell 0.1 percent to 389.95 points, while the FTSEurofirst 300 index declined 0.1 percent to 1,532.71 points.

Britain's FTSE 100 trades 0.1 percent up at 7,515.16 points, while mid-cap FTSE 250 rose 0.2 percent to 20,149.31 points.

Germany's DAX eased 0.2 percent at 12,954.30 points; France's CAC 40 trades 0.04 percent down at 5,363.69 points.

Commodities Recap

Crude oil prices rallied, extending previous session gains, as OPEC said there were clear signs the market was rebalancing. International benchmark Brent crude was trading 0.9 percent up at $56.12 per barrel by 0932 GMT, having hit a low of $55.04 the day before, its weakest since Sept. 19. U.S. West Texas Intermediate was trading 0.6 percent higher at $49.84 a barrel, after falling as low as $49.11 in the previous session, its lowest since Sept. 13.

Gold prices advanced to their highest in more than a week, supported by geopolitical tensions and a softer dollar. Spot gold was 0.4 percent up at $1,289.02 an ounce by 0935 GMT, after hitting its highest since late September at $1,289.35 earlier in the session. U.S. gold futures for December delivery climbed 0.4 percent to $1,290 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.353 percent lower by 0.015 bps, while 5-year yield was 0.017 bps down at 1.951 percent.

The Spanish government bond yields held above one-week lows as investors awaited a speech from Catalonia's secessionist leader. Spain's 10-year bond yield rose as much as 3 basis points to nudge just above 1.70 percent, while German equivalents flatlined at 0.45 percent.

The Japanese government bond prices dipped as Tokyo stocks hit a two-year high and reduced investor demand for safe-haven debt. The benchmark 10-year JGB yield was half a basis point higher at 0.055 percent.

The Australian government bond futures eased, with the three-year bond contract down 2 ticks at 97.84. The 10-year contract fell 1 tick to 97.1400. The New Zealand government bonds slipped, sending yields 2.5 basis points higher at the long-end of the curve.

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