Europe Roundup: Sterling steadies amid Brexit talks, dollar index hits 2-week high on U.S. tax reform optimism, European shares rebound – Thursday, December 7th, 2017

Market Roundup

  • EUR/USD -0.14%, USD/JPY 0.37%, GBP/USD 0.05%, EUR/GBP -0.15%
  • DXY 0.1%, DAX 0.39%, FTSE 0.02%, Brent 0.64%, Gold -0.65%
  • EZ GDP revised QQ Q3, 0.6%, 0.6% forecast, 0.6% previous
  • EZ GDP revised YY Q3, 2.6%, 2.5% forecast, 2.5% previous
  • Germany Industrial Output MM Oct, -1.4%, 1.0% forecast, -1.6% previous
  • France Trade Balance, EUR, SA Oct, -4.96B, -4.60B forecast, -4.67B previous
  • Great Britain Halifax House Prices MM Nov, 0.5%, 0.2% forecast, 0.3% previous
  • Great Britain Halifax House Price 3M/YY Nov, 3.9%, 3.9% forecast, 4.5% previous
  • Swiss fx reserves down in Nov to 738.168bln vs 741.962
  • BOJ chief signals chance of rate hikes, warns of risks of easing 
  • In first for ECB Draghi easy money era, bond supply to match ECB demand
  • Oil shrugs off US fuel supply increase
  • Gold hits 4-month low as firmer dollar sparks range break

Economic Data Ahead

  • (0830 ET/1330 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 2,000 to a seasonally adjusted 240,000 for the week ended Dec. 1, while continuing claims for the week ended Nov. 24 is expected to decline to 1.908 million from previous 1.957 million.
  • (0830 ET/1330 GMT) The Statistics Canada is likely to report that building permits rose 1.5 percent in October, compared with 3.8 percent in the previous month.
  • (1000 ET/1500 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of November. The index posted a reading of 63.8 in the prior month.
  • (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending December 1.
  • (1500 ET/2000 GMT) The U.S. Federal Reserve is likely to report that consumer credit declined to $17.50 billion in October from $20.83 billion the month before.
  • (1850 ET/2350 GMT) Japan's Cabinet Office will release gross domestic product for the third quarter. The economy grew at a pace of 1.4 percent in the previous quarter.
  • (1850 ET/2350 GMT) Japan's Ministry of Finance is likely to report that Current Account (N.S.A) surplus narrowed to 1,720.5 billion yen in October from 2,271.2 billion yen in September.
  • (1850 ET/2350 GMT) Japan's Customs Office will release Trade Balance (BOP Basis) figures for the month of October. The economy posted a trade surplus of 852.2 billion yen in the earlier month.

Key Events Ahead

  • (0830 ET/1330 GMT) The Federal Reserve Bank of New York is expected to release the text of President William Dudley's welcome and introductory remarks before a closed conference, “Higher Education Financing and Costs and Returns of Higher Education”.
  • (1100 ET/1600 GMT) European Central Bank (ECB) President Mario Draghi's Speech. 
  • (1330 ET/1830 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.510 bn)

FX Beat

DXY: The dollar index advanced to a 2-week peak, as upbeat U.S. private-sector employment data released on Wednesday and the U.S. tax optimism continued to support dollar bulls' sentiments. The greenback against a basket of currencies traded 0.2 percent up at 93.70, having touched a high of 93.72 earlier, its highest since Nov. 22. FxWirePro's Hourly Dollar Strength Index stood at 98.63 (Slightly Bullish) by 1000 GMT.

EUR/USD: The euro tumbled to a 2-week low earlier in the day as the greenback continued to gain after the Senate passed the tax reform bill earlier in the week. The European currency traded 0.1 percent down at 1.1784, having touched a low of 1.1780 earlier, its lowest since Nov. 22. FxWirePro's Hourly Euro Strength Index stood at -35.28 (Neutral) by 1000 GMT. The near-term support is around 1.1758 (50- day MA) and any break below will drag the pair down till 1.1705/1.1660. The near-term resistance is around 1.1810 (20- day MA) and any break above will take it to 1.1835 (cloud top)/1.1880/1.1925.

USD/JPY: The dollar rallied against the Japanese yen on optimism that the United States will successfully push through a tax reform programme, while global markets regained some appetite for risk. The major was trading 0.3 percent up at 112.65, having hit a high of 113.08 on Monday, its highest since Nov. 17. FxWirePro's Hourly Yen Strength Index stood at 73.97 (Bullish) 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 rebounded from a 1-week low touched in the previous session after a Reuters poll showed that sterling's outlook is stable over the coming year, and it is likely to make significant gains if negotiations over Britain's departure from the European Union take a positive turn. The major traded 0.1 percent up at 1.3401, having hit a low of 1.3357 the day before, it’s lowest since Nov. 29. FxWirePro's Hourly Sterling Strength Index stood at 76.04 (Slightly Bullish) by 1000 GMT. The pair was facing strong resistance at 1.3550 and any convincing break above will take the pair to next level till 1.3600/1.3700 level. On the lower side, near-term support is around 1.3358 and any break below will drag it to next level till 1.3300/1.3230/1.3175. Against the euro, the pound was trading 0.2 percent up at 87.88 pence, having hit a high of 87.55 pence on Monday, it’s highest since Nov. 1.

USD/CHF: The Swiss franc plunged to a fresh 2-week low on the back data showing Switzerland's foreign currency reserves stood at 738 billion in October, below estimates of 745 billion and previous 742 billion, combined with broad-based U.S. dollar strength. The major trades 0.2 percent up at 0.9913, having touched a high of 0.9917 earlier, it’s highest since Nov. 22. FxWirePro's Hourly Swiss Franc Strength Index stood at -140.65 (Highly Bearish) by 1000 GMT. The near-term resistance is around 0.9945 and any break above will take the pair to next level till 1.000/1.00380. On the lower side, near-term support is around 0.9854 (50- day MA) and any break below will drag it to next level till 0.9805 (200- day EMA)/0.9770.

AUD/USD: The Australian dollar slumped to an over 2-week low after data showed the economy's trade surplus narrowed to AUD 105 million in October from the September figure of AUD 1604 million. The Aussie trades 0.5 percent down at 0.7526, having hit a low of 0.7520 earlier; it’s lowest since Jun. 9. FxWirePro's Hourly Aussie Strength Index stood at -93.22 (Slightly Bearish) by 1000 GMT. On the lower side, the near term support is around 0.7530 and any convincing break below will drag the pair till 0.7500/0.7435. The near-term resistance is around 0.7650 (trendline resistance) and any break above targets 0.7680/0.7730/0.7780.

Equities Recap

European shares rebounded as tech stocks recovered, while the greenback touched a 2-week high amid early signs that U.S. lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline.

The pan-European STOXX 600 index gained 0.3 percent to 387.32 points, while the FTSEurofirst 300 index rose 0.4 percent to 1,525.32 points.

Britain's FTSE 100 trades 0.2 percent higher at 7,360.13 points, while mid-cap FTSE 250 jumped 0.3 percent to 19,880.28 points.

Germany's DAX rallied 0.5 percent at 13,059.72 points; France's CAC 40 trades 0.3 percent up at 5,389.26 points.

Commodities Recap

Crude oil prices steadied as a fall in U.S. crude inventories was offset by soaring output and a rise in fuel stocks. International benchmark Brent crude was trading 0.6 percent up at $61.60 per barrel by 1013 GMT, having hit a low of $61.11 on Wednesday, its lowest since Nov. 17. U.S. West Texas Intermediate was trading 0.5 percent higher at $56.19 a barrel, after falling as low as $55.85 the day before, its lowest since Nov. 17.

Gold prices slumped to their lowest level in four months as the dollar rallied on optimism surrounding tax reform in the United States. Spot gold fell 0.5 percent to $1,256.76 an ounce by 1015 GMT, having hit its lowest since Aug. 8 at $1256.09. U.S. gold futures were also down 0.5 percent at $1,259.90.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.343 percent higher by 0.014 bps, while 5-year yield was 0.017 bps up at 2.134 percent.

The German 10-year bond yields traded 0.013 bps higher at 0.315 percent and the yield on short-term 2-year traded 0.002 basis point up at -0.743 percent.

The yield on the UK benchmark 10-year gilts rose 0.031 basis points to 1.260 percent, while the yield on the short-term 2-year traded 0.024 basis points higher at 0.518 percent.

The Japanese government bond prices edged down as risk aversion eased. The benchmark 10-year JGB yield rose half a basis point to 0.055 percent. The 20-year yield was also half a basis point higher at 0.580 percent. The 30-year yield dipped 0.5 basis point to 0.830 percent.

The Australian government bond futures were mixed, with the three-year bond contract up 1 ticks at 98.050. The 10-year contract slipped 1.5 ticks to 97.4600.

The New Zealand government bonds eased, sending yields 2.5 basis points higher at the long end of the curve.

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