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Europe Roundup: Sterling eases on downbeat economic data, dollar index near 2-week high as U.S Treasuries rise, European shares at 2-1/2 year peak – Tuesday, January 9th, 2018

Market Roundup

  • EUR/USD -0.33%, USD/JPY -0.25%, GBP/USD -0.27%, EUR/GBP -0.08%
     
  • DXY 0.22%, DAX 0.18%, FTSE 0.37%, Brent 0.03%, Gold -0.44%
     
  • EZ Unemployment Rate Nov, 8.7%, 8.7% forecast, 8.8% previous
     
  • Germany Industrial Output MM Nov, 3.4%, 1.8% forecast, -1.4% previous
     
  • Germany Exports MM SA Nov, 4.10%, 1.20% forecast, -0.40% previous
     
  • Germany Imports MM SA Nov, 2.3%, 0.8% forecast, 1.8% previous
     
  • Germany Trade Balance, EUR, SA Nov, 22.3B, 20.9B forecast, 19.9B previous
     
  • France Trade Balance, EUR, SA Nov, -5.69B, -4.70B forecast, -4.96B previous
     
  • Italy Unemployment Rate Nov, 11.0%, 11.0% forecast, 11.1% previous
     
  • UK retailers report the biggest fall in non-food spending since 2009 – BRC
     
  • Germany raises 2017 growth forecast to 2.2 percent
     
  • Japan's central bank trims bond purchases, prompting taper talk
     
  • Macron urges China, EU to avoid pitfalls of protectionism
     
  • Oil hits highest since May 2015 above $68 on tighter market
     
  • Gold prices ease on outlook for U.S. rate hikes

Economic Data Ahead

  • (0815 ET/1315 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of December. The indicator is expected to rise at a seasonally adjusted annualized rate of 212,500 after increasing 252,200 in the previous month.
     
  • (1000 ET/1500 GMT) The U.S. Labor Department releases Job Openings and Labor Turnover Survey (JOLTS) report for the month of November. The report is expected to show job openings rose to 6.038 million from 5.996 million in October.
     
  • (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 January. The indicator rose to 51.9 in December.
     
  • (1430 ET/1930 GMT) Mexico's annual inflation rate is expected to have increased to 6.75 percent in December.
     
  • (1630 ET/2130 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (1000 ET/1500 GMT) Minneapolis Fed President Neel Kashkari is scheduled to participate in a moderated Q & A session hosted by Cargill in Wayzata, Minneapolis.
     
  • (1145 ET/1645 GMT) FedTrade operation 15-year Fannie Mae / Freddie Mac (max $540 mn)

FX Beat

DXY: The dollar index rallied to a 2-week peak as the yield on the benchmark 10-year Treasuries rose 1-1/2 basis points to 2.49 percent. The greenback against a basket of currencies traded 0.2 percent up at 92.56, having touched a high of 92.58 earlier, its highest since Dec. 28. FxWirePro's Hourly Dollar Strength Index stood at 22.35 (Neutral) by 1000 GMT.

EUR/USD: The euro slumped to near 2-week lows, as the greenback rallied across the board amid hopes for at least three interest rate hikes by the Fed in 2018. The European currency traded 0.3 percent down at 1.1928, having touched a low of 1.1927 earlier, its lowest since Dec. 28. FxWirePro's Hourly Euro Strength Index stood at -106.77 (Highly Bearish) by 1000 GMT. Immediate resistance is located at 1.2027 (5-DMA), a break above targets 1.2130. On the downside, support is seen at 1.1910, a break below could drag it lower 1.1890 (21-DMA).

USD/JPY: The dollar trimmed losses after falling to 5-day lows earlier in the session following news that the Bank of Japan reduced its purchases of long-dated government bonds in market operations. The major was trading 0.2 percent down at 112.86, having hit a high of 113.38 the day before, its highest since Dec. 22. FxWirePro's Hourly Yen Strength Index stood at 88.98 (Slightly Bullish) by 1000 GMT. Immediate resistance is located at 113.38 (Jan. 8 High), a break above targets 113.75 (Dec. 12). On the downside, support is seen at 112.50, a break below could take it near 112.03 (Dec. 15 Low).

GBP/USD: Sterling slumped after rising for three consecutive sessions as UK retailers reported the biggest fall in non-food spending since 2009. The British Retail Consortium reported that the overall spending in the last three months of 2017 rose by a sluggish 1.1 percent, compared with an average annual growth rate of 1.7 percent for 2017 as a whole. Sterling traded 0.3 percent down at 1.327, having hit a high of 1.3612 last week; it’s highest since Sept. 20. FxWirePro's Hourly Sterling Strength Index stood at 43.75 (Neutral) by 1000 GMT. Immediate resistance is located at 1.3590, a break above could take it near 1.3640. On the downside, support is seen at 1.3500 (10-DMA), a break below targets 1.3450. Against the euro, the pound was trading flat at 88.16 pence, having hit a high of 88.09 pence earlier, it’s highest since Dec. 19.

USD/CHF: The Swiss franc fell to a near 2-week low as a rise in the U.S. Treasury yields boosted the greenback against its major peers. The major trades 0.6 percent up at 0.9827, having touched a high of 0.9831 earlier, it’s highest since Dec. 28. FxWirePro's Hourly Swiss Franc Strength Index stood at -71.05 (Slightly Bearish) by 1000 GMT. On the higher side, near-term resistance is around 0.9844 (21-DMA) and any break above will take the pair to next level till 0.9865/0.9900/0.9970 (Dec 8th, 2017 high)/1.000. The near-term support is around 0.9748 (5-DMA) and any close below that level will drag it to next level till 0.9635/ 0.9600.

AUD/USD: The Australian dollar extended losses for the third straight session, as the greenback rallied across the board. The Aussie trades 0.3 percent down at 0.7815, having hit a high of 0.7874 on Friday; it’s highest since Oct. 20. FxWirePro's Hourly Aussie Strength Index stood at -116.56 (Highly Bullish) by 1000 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7811 (10-DMA), a break below targets 0.7765 (Dec. 28 Low). On the upside, resistance is located at 0.7880, a break above could take it near 0.7940.

Equities Recap

European shares rose to new 2-1/2 year highs as strong retailer results boosted consumer sentiment, while the greenback rallied across the board amid Fed rate hike expectations.

The pan-European STOXX 600 index advanced 0.3 percent to 399.67 points, while the FTSEurofirst 300 index rallied 0.3 percent to 1,570.71 points.

Britain's FTSE 100 trades 0.03 percent higher at 7,717.29 points, while mid-cap FTSE 250 gained 0.1 percent to 20,882.16 points.

Germany's DAX rose 0.2 percent at 13,392.92 points; France's CAC 40 trades 0.5 percent up at 5,514.70 points.

Commodities Recap

Crude oil prices hit their highest since 2015 again, boosted by OPEC-led production cuts and a fall in American drilling activity. International benchmark Brent crude was trading 0.1 percent down at $67.78 per barrel by 0943 GMT, having hit a high of $68.25 on Thursday, its highest since May 2015. U.S. West Texas Intermediate was trading 0.1 percent lower at $61.80 a barrel, after rising as high as $62.53 earlier, its highest since May 2015.

Gold prices declined to a 5-day low amid expectations for more U.S. interest rate hikes this year. Spot gold was 0.4 percent down at $1,314.67 an ounce by 0946 GMT, having touched its highest since Sept. 15 at $1,325.79 on Thursday. U.S. gold futures were down 0.1 percent at $1,318.80 an ounce.

Treasuries Recap

The U.S. Treasuries plummeted Monday in a relatively quiet trading day that brings only the NFIB small business confidence survey and the JOLTS job openings. The yield on the benchmark 10-year Treasuries rose 1-1/2 basis points to 2.49 percent, the super-long 30-year bond yields jumped 2 basis points to 2.83 percent and the yield on the short-term 2-year traded nearly flat at 1.95 percent.

The UK gilts plunged as investors’’ worries over Brexit agreement eased to a certain extent, thus waning them away from safe-haven instruments. The yield on the benchmark 10-year gilts, jumped 2 basis points to 1.25 percent, the super-long 30-year bond yields also climbed 2 basis points to 1.79 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points higher at 0.52 percent.

The German bunds slumped after the country’s industrial production as well as trade balance for the month of November beat market expectations, also surpassing the readings in October. The German 10-year bond yields, which move inversely to its price, rose 1 basis point to 0.44 percent, the yield on 30-year note climbed nearly 2 basis points to 1.27 percent and the yield on short-term 2-year traded nearly flat at -0.61 percent.

The New Zealand government bonds closed narrowly mixed as investors remained side-lined in any major trading activity amid a muted week that is scheduled to witness data of minor economic significance. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 4-1/2 basis points to 2.83 percent, the yield on 20-year slipped 1-1/2 basis points to 3.27 percent and the yield on short-term 2-year ended 1 basis point lower at 1.97 percent.

The Japanese bonds edged lower after Bank of Japan cuts its purchases of long-term bonds in its today open market operation. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 0.069 percent, the yield on new long-term 40-year also climbed 2 basis points to 0.997 percent and the yield on short-term 2-year up 1/2 basis point at -0.133 percent.

The Australian government bonds slumped following upbeat building approvals data. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 3 basis points to 2.650 percent, the yield on the long-term 30-year note jumped 2 basis points to 3.346 percent and the yield on short-term 2-year climbed 3 basis points to 2.019 percent.


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