News

Europe Roundup: Sterling hits 2-weeks low on Brexit uncertainty, dollar rebounds after China dismisses U.S. bonds report, European shares slump – Thursday, January 11th, 2018

Market Roundup

  • Eurozone Nov industrial production mm increase to 1 % (forecast 0.8 %) vs previous 0.4 % (revised from 0.2 %)
     
  • Eurozone Nov industrial production yy decrease to 3.2 % (forecast 3 %) vs previous 3.9 % (revised from 3.7 %)
     
  • UK lenders expect the biggest fall in proportion of unsecured loan applications for approval over next 3 months since q4 2008 – BOE
     
  • UK lenders expect significant decrease in supply of unsecured lending to consumers in next 3 months, credit score criteria to tighten significantly in q1 – BOE
     
  • German statistics office says statistical overhang at end of 2017 estimated at 1.0 pct
     
  • German Q4 GDP in 2017 estimated at 0.5 pct q/q – statistics office
     
  • Russian finance ministry says forex purchases will be equivalent to 15.1 bln roubles per a day between Jan 15 and Feb 6
     
  • Russian finance ministry says to buy total of 257.1 bln roubles of forex in period between Jan 15 and Feb 6

Economic Data Ahead

  • (0830 ET/1330 GMT) The U.S. producer price index is likely to have increased 0.2 percent in December, while in the 12 months through the same period, it is expected to have advanced 3.0 percent. PPI excluding food and energy probably edged up 0.2 percent after posting similar gains in November.
     
  • (0830 ET/1330 GMT) The number of Americans filing for unemployment benefits is likely to have decreased by 5,000 to a seasonally adjusted 245,000 for the week ended Jan. 6, while continuing claims for the week ended Dec. 29 is expected to rise to 1.915 million from previous 1.914 million.
     
  • (0830 ET/1330 GMT) The Statistics Canada releases its New Housing Price Index (NHPI) for the month of November. The index rose 0.1 percent in October.
     
  • (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending January 5.
     
  • (1400 ET/1900 GMT) The U.S. reports its monthly budget statement for the month of December. The government is likely to show a budget deficit of $40 billion after posting a deficit of $139 billion in the previous month.
     
  • (1645 ET/2145 GMT) The Statistics New Zealand releases building permits seasonally adjusted data for the month of November. The index posted a fall of 9.6 percent in October.
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending January 5.
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending January 5.
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance is likely to report that Current Account (N.S.A) surplus narrowed to 1,836.1 billion yen in November from 2,176.4 billion yen in October.
     
  • (1850 ET/2350 GMT) Japan's Customs Office will release Trade Balance (BOP Basis) figures for the month of November. The economy posted a trade surplus of 430.2 billion yen in the earlier month.

Key Events Ahead
 

  • (1530 ET/2030 GMT) New York Fed President William Dudley gives keynote before the event, “U.S. Economic Outlook: What's In Store for 2018” in New York, organized by the Securities Industry and Financial Markets Association.

FX Beat

DXY: The dollar index rose despite the yield on the benchmark 10-year Treasuries sliding 1 basis point to 2.53 percent. The greenback against a basket of currencies traded 0.1 percent up at 92.45, having touched a high of 92.64 on Wednesday, its highest since Dec. 29

EUR/USD: The euro eased as the greenback bounced back from previous session’s decline. The European currency traded flat at 1.1947, having touched a low of 1.1916 on Tuesday, its lowest since Dec. 28. The near-term is around 1.1905 (20- day MA) and any break below will drag the pair down till 1.1854 (61.8% fib)/1.1800. Minor weakness can be seen only below 1.1800. On the higher side, near-term resistance is around 1.2025 (61.8% fib) and any break above will take it till 1.20520/1.20920.    

USD/JPY: The dollar rebounded from 2-week lows hit in the previous session after China's regulator dismissed a report that the country could halt its buying of U.S. Treasuries. The major was trading 0.2 percent down at 111.65, having hit a low of 111.27 the day before, its lowest since Dec. 28. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. producer price index, unemployment benefit claims and Fed William Dudley's speech for further momentum. The pair should close above 112 for further bullishness and any break above 113.40 will take it to next level till 112.58/113. Any daily close below 110.84 will take the pair to next level till 110.

GBP/USD: Sterling slumped to 2-week lows amid looming uncertainty over the Brexit deal. The major traded 0.3 percent down at 1.3468, having hit a low of 1.3465 earlier in the session; it’s lowest since Dec. 29. On the lower side, near-term support is around 1.3468 (38.2% fibo) and any break below will drag the pair to next level till 1.3430/1.34020 (61.8% retracement). The short-term bullish invalidation is only below 1.3330. The near-term resistance is around 1.355 and any break above will take it to next level till 1.3600/1.3700. Bullish continuation only above 1.3650. Against the euro, the pound was trading 0.3 percent down at 88.73 pence, having hit a high of 88.08 pence on Tuesday, it’s highest since Dec. 19.

USD/CHF: The Swiss franc slightly eased as the greenback rebounded across the board. The major trades 0.1 percent up at 0.9790, having touched a high of 0.9845 the day before, it’s highest since Dec. 28. On the higher side, near-term resistance is around 0.9855 (trendline resistance) and any break above will take the pair to next level till 0.9900/0.9970 (Dec 8th, 2017 high)/1.000. It should break above 1.0040 for short-term bullishness. The near-term support is around 0.9750 (61.8% fibo) and any close below that level will drag it to next level till 0.9730/ 0.9690.

AUD/USD: The Australian dollar rose to a three-month peak after the economy's retail sales climbed 1.2 percent in November, three times the market forecast and the biggest gain since early 2013. The Aussie trades 0.4 percent up at 0.7871, having hit a high of 0.7886 earlier; it’s highest since Oct. 20.  On the lower side, the near term support is around 0.7819 (4H 55- EMA) and any convincing break below will drag the pair till 0.7731 (200- 4H EMA)/0.7650. The near-term support is around 0.76788. The near-term resistance is around 0.7900 and any convincing break above targets 0.7950/0.8000.

Equities Recap

European shares slumped on concerns over protectionism, while the dollar rebounded after China's regulator dismissed a report that the country could halt its buying of U.S. Treasuries.

The pan-European STOXX 600 index slumped 0.05 percent to 398.50 points, while the FTSEurofirst 300 index edged down 0.1 percent to 1,567.79 points.

Britain's FTSE 100 trades 0.1 percent higher at 7,757.87 points, while mid-cap FTSE 250 eased 0.2 percent to 20,716.84 points.

Germany's DAX declined 0.2 percent at 13,256.36 points; France's CAC 40 trades 0.05 percent down at 5,503.89 points.

Commodities Recap

Crude oil prices rallied to multi-year highs despite warnings that a 13 percent rally since early December was close to running its course. International benchmark Brent crude was trading 0.5 percent up at $69.47 per barrel by 1121 GMT, having hit a high of $69.57 earlier, its highest since May 2015. U.S. West Texas Intermediate was trading 0.7 percent higher at $63.96 a barrel, after rising as high as $64.0 earlier, its highest since 2014.

Gold prices edged up after touching their highest since September in the previous session, as a flagging rally in equities sent investors towards safe-haven assets. Spot gold was up 0.2 percent at $1,318.80 an ounce by 1125 GMT, after rising as high as $1,327.24 an ounce on Wednesday, the most since Sept. 15. U.S. gold futures were down 0.1 percent at $1,319.10 an ounce.

Treasuries Recap

The U.S. Treasuries climbed ahead of the 30-year auction, scheduled to be held today at 18:00GMT. The yield on the benchmark 10-year Treasuries slid 1 basis point to 2.53 percent, the super-long 30-year bond yields also fell 1 basis point to 2.88 percent and the yield on the short-term 2-year traded 1/2 basis point higher at 1.96 percent.

The UK gilts jumped as investors flocked into safe-haven instruments, following growing possibilities of a 'no-deal' Brexit, although recently some optimism had spiked up as the negotiations moved to the second phase. The yield on the benchmark 10-year gilts, slumped 2-1/2 basis points to 1.26 percent, the super-long 30-year bond yields plunged 2 basis points to 1.80 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points lower at 0.53 percent.

The German bunds surged as investors have largely shrugged-off the eurozone’s industrial production for the month of November. The German 10-year bond yields, which move inversely to its price, slumped 2-1/2 basis points to 0.45 percent, the yield on 30-year note plunged 3 basis points to 1.29 percent and the yield on short-term 2-year traded 1/2 basis point lower at -0.62 percent.

The New Zealand government bonds ended the session on a softer note, tracking similar trend in the U.S. counterpart after Chinese officials recommended halting purchases of U.S. Treasuries, in a bid to control the excessive bond-buying by the country, noted as the world’s largest holder of foreign-exchange reserves. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, rallied 1-1/2 basis points to 2.89 percent, the yield on 20-year also rose 1-1/2 basis points to 3.36 percent and the yield on short-term 2-year ended flat at 2.00 percent.

The Japanese government bonds gained as the Bank of Japan maintained the amount of its bond buying in its open market operation. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell over 1 basis point to 0.073 percent, the yield on the long-term 30-year note dipped 1/2 basis point to 0.847 percent and the yield on short-term 2-year also slid 1/2 basis point to -0.128 percent.

The Australian government bonds slumped following board weakness in the U.S. Treasuries. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 6 basis points to 2.703 percent, the yield on the long-term 30-year note jumped 5-1/2 basis points to 3.404 percent and the yield on short-term 2-year climbed 2-1/2 basis points to 2.035 percent.


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