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Europe Roundup: Sterling hits 1-week low on concerns over PM May's leadership, dollar index steadies amid U.S. tax reform uncertainty, European shares slide – Monday, November 13th, 2017

Market Roundup

  • EUR/USD -0.11%, USD/JPY -0.22%, GBP/USD 0.74%, EUR/GBP 0.63%
     
  • DXY 0.15%, DAX -0.58%, FTSE 0.07%, Brent -0.24%, Gold 0.22%
     
  • IMF says Europe's growth more durable, warns of 'disruptive' Brexit threat
     
  • PM May wants to agree outline Brexit transition in next few months
     
  • Trump vaunts trade progress, red carpets on “fruitful” Asia trip
     
  • Fed's Harker stands by call for rate hike next month
     
  • Over half of Spaniards want early national election -poll
     
  • Germany Oct Wholesale Price Index YY 3% vs 3.4%
     
  • Venezuela to meet creditors in bid to dodge default
     
  • EU markets agency warns new crypto coins could prove worthless
     
  • OPEC, allies unlikely to delay decision on oil cut extension
     
  • Oil steadies near two-year highs as geopolitics offset U.S. supply

Economic Data Ahead

  • (1400 ET/1900 GMT) The U.S. reports its monthly budget statement for the month of October. The government is likely to show a budget deficit of $50 billion after posting a surplus of $8 billion in the previous month.
     

Key Events Ahead

  • (1045 ET/1545 GMT) FedTrade Operation 30-year Fannie Mae / Freddie Mac (max $1.665 bn)
     
  • (1130 ET/1630 GMT) France's Le Maire speaks at a conference – Paris

FX Beat

DXY: The dollar index nudged up, retreating from 2-week lows touched in the previous session on expectations of a third interest rate hike by the U.S. Federal Reserve this year. The greenback against a basket of currencies traded 0.2 percent up at 94.57, having touched a high of 95.15 on Tuesday, its highest since Oct. 27. FxWirePro's Hourly Dollar Strength Index stood at 43.94 (Neutral) by 1000 GMT.

EUR/USD: The euro declined, reversing some of its previous session gains, amid the latest comments from the European Central Bank Vice-President Constancio, noting that an ample degree of monetary stimulus was still required. The European currency traded 0.2 percent down at 1.1640, having touched a high of 1.1677; its highest since Nov. 3. FxWirePro's Hourly Euro Strength Index stood at 37.66 (Neutral) by 1000 GMT. The low made after Nonfarm payroll will be acting as near-term support at 1.1599 and any break below will drag the pair too next level till 1.1500/1.1460/1.1430. On the higher side, minor bullishness can be seen above 1.16700 (100- 4H MA) and any break above will take it to next level till 1.170/ 1.1720/ 1.1755.

USD/JPY: The dollar eased, surrendering early session gains as a slide in the U.S. Treasury bond yields revived demand for the traditional safe-haven asset. The major was trading 0.1 percent down at 113.36, having hit a low of 113.09 on Thursday, its lowest since Oct. 31. FxWirePro's Hourly Yen Strength Index stood at 154.96 (Highly Bullish) by 1000 GMT. On the lower side, any close below 113.33 (20-day MA) confirms minor weakness, a decline till 122.25/111.60 (55- day EMA)/111.13 likely. Any convincing close above 114.50 (161.8% fib) confirms minor bullishness, a jump till 116 likely.

GBP/USD: Sterling slumped to a 1-week low below the 1.3100 handle after the Sunday Times reported that 40 members of parliament from British Prime Minister Theresa May's Conservative Party have agreed to sign a letter of no-confidence in her. The major traded 0.9 percent down at 1.3075, having hit a low of 1.3061 earlier, its lowest since Oct. 6. FxWirePro's Hourly Sterling Strength Index stood at -59.33 (Bearish) by 1000 GMT. Any break below 1.30270 temporary bottom formed on Oct 6th, 2017 low will confirm major trend reversal and a dip till 1.3000/1.29235 (161.8% fibo) is possible. On the higher side, major resistance is around 1.3145 (4- H Kijun-Sen) and any violation above will drag it to next level till 1.3180/1.3230 (61.8% retracement of 1.3320 and 1.30390). Against the euro, the pound was trading 0.4 percent down at 88.60 pence, having hit a low of 88.89 pence earlier, its lowest since Nov. 3.

USD/CHF: The Swiss franc edged down, extending previous session losses, as the greenback rose on the back of expectations of series of interest rate hikes by the U.S. Federal Reserve this year and in 2018. The major trades 0.2 percent up at 0.9970, having touched a low of 0.9921 on Thursday, it’s lowest since Oct. 26. FxWirePro's Hourly Swiss Franc Strength Index stood at -6.61 (Neutral) by 1000 GMT. The near-term support is around 0.9908 (20- day MA) and any break below will drag the pair to next level till 0.98948 (23.6% fibo and trend line support)/0.98550. The major resistance is around 1.0040 and any break above will take it to next level till 1.0100/1.0174.

AUD/USD: The Australian dollar extended prior session losses, as the market seems to have ignored a mildly positive trading sentiment around commodity bloc, and track the U.S. dollar price dynamics. The Aussie trades 0.1 percent down at 0.7647, having hit a low of 0.7638 on Tuesday; it’s lowest since Oct. 27. FxWirePro's Hourly Aussie Strength Index stood at -88.18 (Slightly Bearish) by 1000 GMT. On the lower side, the pair should close below 0.7624 for further weakness. Any close below targets 0.7600/0.7550. The near-term resistance is around 0.7701 (100- 4H MA) and any break above targets 0.7730/0.7780.

Equities Recap

European shares eased as investors waited to see whether a U.S. tax deal would be agreed upon soon, while sterling slumped to a 1-week low on growing concern about the future of Prime Minister Theresa May.

The pan-European STOXX 600 index edged down 0.3 percent to 387.69 points, while the FTSEurofirst 300 index fell 0.2 percent to 1,526.38 points.

Britain's FTSE 100 trades 0.3 percent higher at 7,451.23 points, while mid-cap FTSE 250 eased 0.4 percent to 19,950.23 points.

Germany's DAX rose 0.05 percent at 13,132.96 points; France's CAC 40 trades 0.1 percent down at 5,376.71 points.

Commodities Recap

Crude oil prices declined, as traders remained cautious amid ongoing tensions in the Middle East and after a rising rig count in the United States indicated producers there are preparing to increase output. International benchmark Brent crude was trading 0.2 percent down at $63.42 per barrel by 0921 GMT, having hit a high of $64.62 on Tuesday, its highest since June 2015. U.S. West Texas Intermediate was trading 0.3 percent down at $56.67 a barrel, after rising as high as $57.67 on Tuesday, its highest since Jun. 2015.

Gold prices rose but held near the previous session's low, pressured by a firmer dollar and expectations of a third interest rate hike by the U.S. Federal Reserve this year. Spot gold was trading 0.2 percent down at $1,277.31 per ounce at 0925 GMT, having dropped 0.7 percent for its biggest one-day percentage fall since Oct. 26 on Friday.  U.S. gold futures for December delivery were up 0.2 percent at $1,277.10.

Treasuries Recap

The U.S. Treasuries climbed on worries over the country’s delayed tax reform plan until at least 2019. The yield on the benchmark 10-year Treasury slumped 2-1/2 basis points to 2.37 percent, the super-long 30-year bond yields plunged 3 basis points to 2.84 percent and the yield on short-term 2-year note traded nearly 1 basis point lower at 1.65 percent.

The UK gilts surged as investors poured into safe-haven instruments on prevailing worries over the smooth transition of the Brexit process. The UK 10-year bond yields, which move inversely to its price, plunged 3-1/2 basis points to 1.30 percent, the yield on 30-year note slumped 3 basis points to at 1.86 percent and the yield on short-term 2-year traded 2 basis points lower at 0.46 percent.

The German bunds jumped as investors wait to watch the country’s Q3 GDP, scheduled to be released on November 14 by 07:00GMT, besides, the ZEW economic sentiment index for the month of November, due on the same day by 10:00GMT. The German 10-year bond yields, which move inversely to its price, slumped 2-1/2 basis points to 0.38 percent, the yield on 30-year note also plummeted 2-1/2 basis points to 1.27 percent while the yield on short-term 2-year traded flat at -0.74 percent.

The New Zealand government bonds closed tad higher as investors remained side-lined in any major trading activity amid lack of economically significant data throughout the week. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1/2 basis point to 2.95 percent, the yield on the 15-year note also slid 1/2 basis point to 3.31 percent and the yield on short-term 2-year too ended 1/2 basis point lower at 2.05 percent.

The Japanese bonds slumped following higher-than-expected producer inflation data for October. In addition, markets will now focus on the upcoming third-quarter gross domestic product (GDP) data. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 0.051 percent, the yield on long-term 40-year climbed 2 basis points to 0.984 percent and the yield on short-term 2-year up over 1 basis point to -0.167 percent.

The Australian bonds yields moved a tad higher following an optimistic speech from the Reserve Bank of Australia Deputy Governor Guy Debelle. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1/2 basis point to 2.629 percent, the yield on the long-term 30-year note jumped 1 basis point to 3.406 percent and the yield on short-term 2-year climbed 1/2 basis point to 1.807 percent.


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