News

Europe Roundup: Sterling rallies above 1.4100 on better-than-expected UK labor report, greenback at 3-year lows on U.S. Treasury Secretary Mnuchin's remarks, European shares nudge up – Wednesday, January 24th, 2018

Market Roundup

  • United Kingdom Nov ILO unemployment rate stays flat at 4.3 % (forecast 4.3 %) vs previous 4.3 %
     
  • United Kingdom Dec claimant count unemployment change decrease to 8.6 k (forecast 5.4 k) vs previous 12.2 k (revised from 5.9 k)
     
  • United Kingdom Nov average week earnings 3m yy stays flat at 2.5 % (forecast 2.5 %) vs previous 2.5 %
     
  • United Kingdom Nov average earnings (ex-bonus) increase to 2.4 % (forecast 2.3 %) vs previous 2.3 %
     
  • Eurozone Jan Markit service flash PMI increase to 57.6 (forecast 56.4) vs previous 56.6
  • Eurozone Jan Markit manufacturing flash PMI decrease to 59.6 (forecast 60.3) vs previous 60.6
     
  • Eurozone Jan Markit composite flash PMI increase to 58.6 (forecast 57.9) vs previous 58.1
     
  • Germany Jan Markit composite flash PMI decrease to 58.8 (forecast 58.6) vs previous 58.9
     
  • Germany Jan Markit service flash PMI increase to 57 (forecast 55.6) vs previous 55.8
     
  • Germany Jan Markit manufacturing flash PMI decrease to 61.2 (forecast 63) vs previous 63.3
     
  • Davos-U.S. Treasury secretary Mnuchin says 'we are committed to economic growth of 3 percent or higher'
     
  • Davos-U.S. Treasury secretary Mnuchin says a weaker dollar is good for us

Economic Data Ahead

  • (0900 ET/1400 GMT) The Federal Housing Finance Agency releases its housing price index for the month of November. The index gained 0.5 percent in October.
     
  • (0945 ET/1445 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of January. The index is likely edged up to 55.0 after posted a final reading of 55.1 in the previous month.
     
  • (0945 ET/1445 GMT) Financial firm Markit Economics is likely to report that preliminary U.S. service PMI business activity index rose to 54.0 in January after printing a final reading of 53.7 in December.
     
  • (0945 ET/1445 GMT) Markit Economics will release preliminary U.S. composite PMI for the month of January. The index posted a final reading of 54.1 in the prior month.
     
  • (1000 ET/1500 GMT) National Association of Realtors is likely to report that U.S. existing home sales declined 2.2 percent to an annual rate of 5.70 million units in December, after surging 5.6 percent to a seasonally adjusted annual rate of 5.81 million units the month before.
     
  • (1100 ET/1600 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending January 19.
     
  • (1645 ET/2145 GMT) The Statistics New Zealand is likely to report that consumer price index rose at an annualized rate of 1.9 percent in the fourth quarter, while on a quarterly basis it increased 0.4 percent.
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending January 19.
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending January 19.
     

FX Beat

DXY: The dollar index tumbled to 3-year lows after U.S. Treasury Secretary Steven Mnuchin said he welcomed its weakness at the annual Davos summit of business and political leaders. The greenback against a basket of currencies traded 0.5 percent down at 89.69, having touched a low of 89.60 earlier, its lowest since December 2014. FxWirePro's Hourly Dollar Strength Index stood at -123.39 (Highly Bearish) by 1000 GMT.

EUR/USD: The euro rose to its highest level in 3-years after data showed Eurozone's Markit's composite flash Purchasing Managers' Index jumped to 58.6 this month, its highest since June 2006 and surpassing expectations for a dip to 57.9 from a final December reading of 58.1. The European currency traded 0.4 percent up at 1.2341, having touched a high of 1.2355 earlier, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at -97.50 (Slightly Bearish) by 1000 GMT. Immediate resistance is located at 1.2360, a break above targets 1.2400. On the downside, support is seen at 1.2263 (78.6% retracement of 1.1916 and 1.2355), a break below could drag it lower 1.2189 (61.8% retracement).

USD/JPY: The dollar slumped to a fresh 4-month low after U.S. Treasury Secretary S. Mnuchin stated that a weaker USD was favorable for trade. The major was trading 0.7 percent down at 109.51, having hit a low of 109.50 earlier, its lowest since Sept 12. FxWirePro's Hourly Yen Strength Index stood at 53.81 (Bullish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. housing price index, preliminary manufacturing and service PMI's and existing home sales figures for further momentum. Immediate resistance is located at 109.95 (78.6% retracement of 111.48 and 109.50), a break above targets 110.28 (61.8% retracement). On the downside, support is seen at 109.40 (Sept. 15 Low), a break below could take it lower 109.00.

GBP/USD: Sterling rallied above the 1.4100 handle to its highest since post-Brexit-vote after the UK labor report showed that the number of people in work rose by 102,000 in the three months to November, the biggest increase since the period to July and taking total employment to a record 32.2 million. The major traded 0.7 percent up at 1.4101, having hit a high of 1.4118 earlier, it’s highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 103.00 (Highly Bullish) by 1000 GMT. Immediate resistance is located at 1.4140, a break above could take it near 1.4170. On the downside, support is seen at 1.3910 (5-DMA), a break below targets 1.3865 (61.8% retracement of 1.3458 and 1.4118). Against the euro, the pound was trading 0.4 percent up at 87.49 pence, having hit a high of 87.48 pence, it’s highest since Dec. 8.

USD/CHF: The Swiss franc advanced to a 4-month peak as the greenback slumped to a 3-year low after U.S. Democrats withdrew the offer to fund Trump's border wall.  The major trades 0.7 percent down at 0.9512, having touched a low of 0.9503 earlier, it’s lowest since Sept. 11.  FxWirePro's Hourly Swiss Franc Strength Index stood at 49.00 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9540 (78.6% retracement of 0.9666 and 0.9503) and any break above will take the pair to next level till 0.9587 (50% retracement). The near-term support is around 0.9500 and any close below that level will drag it to next level till 0.9470.

Equities Recap

European shares nudged up, despite a decline in utility stocks, while the greenback slumped to 3-year lows on fear of protectionism and U.S. Treasury Secretary Steven Mnuchin's remarks at the annual Davos summit.

The pan-European STOXX 600 index gained 0.01 percent to 402.87 points, while the FTSEurofirst 300 index edged up 0.1 percent to 1,584.30 points.

Britain's FTSE 100 trades 0.3 percent lower at 7,711.28 points, while mid-cap FTSE 250 gained 0.1 percent to 20,684.36 points.

Germany's DAX rose 0.01 percent at 13,560.08 points; France's CAC 40 trades 0.05 percent down at 5,531.89 points.

Commodities Recap

Crude oil prices declined, weighed down by data showing an increase in U.S. crude oil and gasoline inventories. International benchmark Brent crude was trading 0.1 percent down at $69.81 per barrel by 1039 GMT, having hit a low of $68.26 on Friday, its lowest since Jan. 9. U.S. West Texas Intermediate was trading 0.2 percent up at $64.56 a barrel, after easing as low as $62.87 on Friday, its lowest since Jan. 9.

Gold prices rallied to its highest in a 4-monthss, as the U.S. dollar slumped to a fresh three-year low, while worries about potential trade wars led investors risk-aversion trade. Spot gold was up 0.7 percent at $1,350.07 per ounce at 1042 GMT, having touched its strongest level since Sept. 8 at $1,350.38 earlier. U.S. gold futures for February delivery rose 0.4 percent to $1,342.30 per ounce.

Treasuries Recap

The U.S. Treasuries traded nearly flat amid a silent trading session that witnessed data of little economic significance. The yield on the benchmark 10-year Treasuries rose 1 basis point to 2.63 percent, the super-long 30-year bond yields also edged 1 basis point higher to 2.91 percent and the yield on the short-term 2-year traded flat at 2.06 percent.

The UK gilts plunged after the country’s employment report for the month of November, delivered along market expectations, with unemployment remaining unchanged. The yield on the benchmark 10-year gilts, jumped nearly 3 basis points to 1.38 percent, the super-long 30-year bond yields surged 2-1/2 basis points to 1.87 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.58 percent.

The German bunds slid as investors have largely shrugged-off the lower-than-expected manufacturing PMI for the month of January. The German 10-year bond yields, which move inversely to its price, rose nearly 1 basis point to 0.56 percent, the yield on 30-year note hovered around 1.30 percent and the yield on short-term 2-year too climbed nearly 1 basis point to -0.58 percent.

The New Zealand government bonds jumped at the time of closing as investors clustered safe-haven assets on ongoing global tensions. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 4-1/2 basis points to 2.95 percent, the yield on 20-year plunged 4 basis points to 3.43 percent and the yield on short-term 2-year ended 1 basis point lower at 2.04 percent.

The Japanese government bonds gained as Bank of Japan announced it was keeping its monetary policy setting unchanged, shooting market theories of an early reduction in QE. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1/2 basis point to 0.073 percent, the yield on the long-term 30-year note traded nearly flat at 0.826 percent and the yield on short-term 2-year remained steady at -0.134 percent.

The Australian government bonds regained some ground in line with the U.S. Treasuries, where strong demand at an auction of two-year paper supported sentiment. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 3 basis points to 2.794 percent, the yield on the long-term 30-year note slid 3-1/2 basis points to 3.425 percent and the yield on short-term 2-year down 2 basis points to 2.078 percent.


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