Europe Roundup: Sterling eases below 1.3400 on disappointing Brexit talks, euro declines on downbeat retail sales, European shares trade in red- Tuesday, December 5th, 2017

Market Roundup

  • EUR/USD -0.01%, USD/JPY 0.04%, GBP/USD -0.49%, EUR/GBP 0.48%
  • DXY -0.06%, DAX -0.68%, FTSE 0.01%, Brent -0.24%, Gold 0.01%
  • EZ Markit Composite Final PMI Nov, 57.5, 57.5 forecast, 57.5 previous
  • EZ Markit Services Final PMI Nov, 56.2, 56.2 forecast, 56.2 previous
  • EZ Retail Sales YY Oct, 0.4%, 1.5% forecast, 3.7% previous
  • Germany Markit Composite Final PMI Nov, 57.3, 57.6 forecast,  57.6 previous
  • Germany Markit Services PMI Nov, 54.3, 54.9 forecast, 54.9 previous/
  • France Markit Composite PMI Nov, 60.3, 60.1 forecast,  60.1 previous
  • France Markit Services PMI Nov, 60.4, 60.2 forecast, 60.2 previous
  • Great Britain Markit/CIPS Services PMI Nov, 53.8, 55.0 forecast, 55.6 previous
  • Italy  Markit/ADACI Services PMI Nov, 54.7, 53.2 forecast, 52.1 previous
  • EU to decide on tax haven blacklist, assess US tax reform
  • ECB QE data offers further incentive to snap-up Italian bonds
  • Oil steadies above $62, expected fall in US inventory supports
  • Gold steadies above $1,275/oz as dollar stabilises

Economic Data Ahead

  • (0830 ET/1330 GMT) The United States releases trade balance figures for the month of October. The economy's trade deficit is expected to have expanded to $47.5 billion from 43.5 billion in September.
  • (0830 ET/1330 GMT) The Statistics Canada is likely to report that international trade deficit narrowed to C$2.70 billion in October from C$3.18 billion in September.
  • (0945 ET/1445 GMT) Financial firm Markit releases final U.S. composite PMI for the month of November. The index posted a final reading of 54.6 in the previous month.
  • (0945 ET/1445 GMT) Markit Economics reports final U.S. services PMI for the month of November. The index is expected to rise to 55.4 after posting a final reading of 54.7 in September.
  • (1000 ET/1500 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. non-manufacturing Purchasing Managers' index declined to a final reading of 59.0 in November from 60.1 in the month before.
  • (1000 ET/1500 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 December. The indicator rose to 53.6 in November.
  • (1630 ET/2130 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (0645 ET/1145 GMT) FedTrade operation 30-year Ginnie Mae (max $1.405 bn)
  • N/A The U.S. Senate Banking Committee meets to vote on the nomination of Jerome Powell to be chairman of the Federal Reserve Bank of Governors.

FX Beat

DXY: The dollar index steadied, supported by a renewed uptick in the US Treasury bond yields, while investors awaited the U.S. trade balance data and ISM non-manufacturing PMI for further momentum. The greenback against a basket of currencies traded flat at 93.10, having touched a high of 93.51 on Thursday, its highest since Nov. 22. FxWirePro's Hourly Dollar Strength Index stood at -16.65 (Neutral) by 1000 GMT.

EUR/USD: The euro eased after data released earlier showed retail sales volumes in the 19 countries that share the eurozone declined 1.1 percent month-on-month in October and rose 0.4 percent year-on-year, both below expectations of 0.7 percent down and 1.5 percent up, respectively. The European currency traded 0.05 percent down at 1.1860, having touched a high of 1.1940 on Friday, its highest since Nov. 27. FxWirePro's Hourly Euro Strength Index stood at -50.24 (Bearish) by 1000 GMT. The pair is facing resistance at 1.19615 (Nov 27th high) and any break above will take it to next level till 1.2000/1.2090. On the lower side, near-term support is around 1.1800 and any break below will drag it to next level till 1.1755/1.1700.

USD/JPY: The dollar recovered some ground after declining for two straight sessions, as a pickup in the U.S. Treasury bond yields and the ongoing record-setting rally in the U.S. equity markets continued to weigh on the safe-haven Japanese Yen. The major was trading 0.1 percent up at 112.48, having hit a high of 113.08 the day before, its highest since Nov. 17. FxWirePro's Hourly Yen Strength Index stood at -23.65 (Neutral) by 1000 GMT. On the lower side, any close below 111 confirms minor weakness, a decline till 110/108.15 likely. Any convincing close above 113.35 (Nov 16th, 2017 high) will take the pair to next level till 114/115 likely.

GBP/USD: Sterling slumped below the 1.3400 handle as Prime Minister Theresa May failed to seal a deal on Monday to open talks on post-Brexit free trade with the European Union. Moreover, weaker than expected UK Markit service PMI, which came in at 53.8 in November, versus estimates of 55.0 and previous 55.6 undermined the bid tone around the major. Sterling traded 0.5 percent down at 1.3410, having hit a low of 1.3370 earlier, it’s lowest since Nov. 29. FxWirePro's Hourly Sterling Strength Index stood at -34.54 (Neutral) by 1000 GMT. The pair was facing strong resistance at 1.3550 and any convincing break above will take it to next level till 1.3600/1.3700 level. On the lower side, near-term support is around 1.3375 (233- HMA) and any break below will drag it to next level till 1.3300/ 1.3230/ 1.3175. Against the euro, the pound was trading 0.5 percent down at 88.45 pence, having hit a low of 88.67 pence earlier, it’s lowest since Nov. 29.

USD/CHF: The Swiss franc eased, extending previous session losses, as the greenback steadied following a rise in the U.S. Treasury yields.  The major trades 0.1 percent up at 0.9854, having touched a low of 0.9735 on Friday, it’s lowest since Oct. 16. FxWirePro's Hourly Swiss Franc Strength Index stood at -109.37 (Highly Bearish) by 1000 GMT. The pair is facing strong resistance around 0.98825 (233- 4H MA) and any break above will take it to next level till 0.9945/1.000. On the lower side, major support stands at 0.9705 (Oct 13th, 2017 low) and any break below will drag it till 0.9655 (61.8% fibo)/0.9600.

AUD/USD: The Australian dollar advanced to a three-week high above the 0.7600 handle, boosted by better-than-expected economic retail sales, Chinese service PMI figures and not so dovish RBA monetary policy statement. The Aussie trades 0.6 percent up at 0.7644, having hit a high of 0.7653 earlier; it’s highest since Nov. 13. FxWirePro's Hourly Aussie Strength Index stood at 86.49 (Slightly Bullish) by 1000 GMT. On the lower side, the near term support is around 0.7580 and any broke below will drag the pair till 0.7530/ 0.7500/ 0.7435. The near-term resistance is around 0.7650 (trend line resistance) and any break above targets 0.7680/0.7730/0.7780.

Equities Recap

European shares slumped, weighed down by losses in tech and mining sectors, while sterling slumped below the 1.3400 handle as investors were disappointed after Britain failed to secure a deal with EU officials.

The pan-European STOXX 600 index declined 0.2 percent to 386.82 points, while the FTSEurofirst 300 index fell 0.1 percent to 1,521.02 points.

Britain's FTSE 100 trades 0.1 percent higher at 7,348.40 points, while mid-cap FTSE 250 declined 0.2 percent to 19,905.36 points.

Germany's DAX eased 0.1 percent at 13,048.40 points; France's CAC 40 trades 0.2 percent down at 5,378.61 points.

Commodities Recap

Crude oil prices declined to 2-week lows, undermined by the impact of rising U.S. crude output. International benchmark Brent crude was trading 0.1 percent down at $62.35 per barrel, having hit a low of $62.12 earlier, its lowest since Nov. 21. U.S. West Texas Intermediate was trading 0.3 percent lower at $57.25 a barrel, after falling as low as $57.17, its lowest since Nov. 30.

Gold prices continued to consolidate within a tight range amid a steady dollar as investors awaited the next steps over U.S. tax reform legislation. Spot gold traded flat at $1,275.13 an ounce by 1015 GMT, holding between $1.276.96 and $1,274.20 so far this session. U.S. gold futures were steady at $1,277.80.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.375 percent higher by 0.013 bps, while 5-year yield was 0.025 bps up at 2.141 percent.

The German 10-year bond yields traded 0.01 bps lower at 0.327 percent and the yield on short-term 2-year traded 0.017 basis point down at -0.714 percent.

The yield on the UK benchmark 10-year gilts fell 0.022 basis points to 1.265 percent, while the yield on the short-term 2-year traded 0.018 basis points lower at 0.488 percent.

The Japanese government bonds slipped, pressured by U.S. Treasuries. The benchmark 10-year cash JGB yield added one basis point to 0.045 percent. The 2-year JGB yield rose 1.5 basis points to minus 0.135 percent, and the 5-year JGB yield also gained 1.5 basis points to minus 0.100 percent. The 20-year yield added one basis point to 0.585 percent, while the 30-year yield rose half a basis point to 0.840 percent.

The Australian government bond futures slipped, with the three-year bond contract down 5.5 ticks at 97.980. The 10-year contract eased 5 ticks to 97.39.

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