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Europe Roundup: Sterling eases on lingering Brexit concerns, dollar index at over 2-week trough as trade war worries escalate, European shares trade in red – Wednesday, March 7th, 2018

Market Roundup

  • Eurozone Q4 GDP revised YY stays flat at 2.7 % (forecast 2.7 %) vs previous 2.7 %
     
  • Eurozone Q4 GDP revised QQ stays flat at 0.6 % (forecast 0.6 %) vs previous 0.6 %
     
  • United Kingdom Feb Halifax house price 3m/yy decrease to 1.8 % (forecast 1.6 %) vs previous 2.2 %
     
  • United Kingdom Feb Halifax house prices mm increase to 0.4 % (forecast 0.3 %) vs previous -0.6 %
     
  • China Feb FX reserves (monthly) decrease to 3.134 trl us (forecast 3.16 trl us) vs previous 3.161 trl us
     
  • BOJ Deputy Gov nominee Amamiya: Higher US rates reflect solid US economy, which is a good thing for Japan, global economy
     
  • BOJ Deputy Gov Nominee Amamiya: Must look at merits, demerits in judging if deepening negative rates feasible
     
  • BOJ Deputy Gov Nominee Amamiya: Reorganisation of financial institutions one option given difficult environment they face
     
  • BOJ Deputy Gov Nominee Amamiya: Technically possible to deepen negative rates
     
  • Lagarde says Trump has some reasons to consider trade sanctions as some countries do not respect the rules
     
  • IMF's Lagarde says the macroeconomic impact of US trade tariffs would be serious if other nations do the same

Economic Data Ahead

  • (0815 ET/1315 GMT) Payrolls processor ADP releases U.S. employment report for the month of February. The report is expected to show that 195,000 jobs were added as compared with 235,000 jobs in January.
     
  • (0830 ET/1330 GMT) The United States releases trade balance figures for the month of January. The economy's trade deficit is expected to have widened to $55.1 billion from 53.1 billion in December.
     
  • (0830 ET/1330 GMT) The U.S. Labor Department will release labor costs report for the fourth-quarter. The indicator is expected to nudge up 2.1 percent after posting a gain of 2.0 percent in the previous quarter.  
     
  • (0830 ET/1330 GMT) The U.S. Labor Department is likely to report that non-farm productivity edged lower 0.1 percent in the fourth-quarter, after recording a similar decline in the previous quarter.
     
  • (0830 ET/1330 GMT) The Statistics Canada is expected to report that labor productivity rate of Canadian businesses increased by 0.3 percent for the fourth quarter, after declining 0.6 percent in the third quarter.
     
  • (0830 ET/1330 GMT) The Statistics Canada is likely to report that international trade deficit narrowed to C$2.50 billion in January from C$3.19 billion in December.
     
  • (1000 ET/1500 GMT) Bank of Canada will meet to announce its benchmark interest rate, where it is expected to hold interest rates at 1.25 percent.
     
  • (1100 ET/1600 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending March 2.
     
  • (1400 ET/1900 GMT) The Fed issues its Beige Book, a summary of anecdotes on the health of the economy.
     
  • (1500 ET/2000 GMT) The U.S. Federal Reserve is likely to report that consumer credit declined to $17.0 billion in January from $18.45 billion the month before.

Key Events Ahead

  • (0730 ET/1230 GMT) Federal Reserve Bank of New York President William Dudley participates in a neighborhood recovery tour in San Juan, Puerto Rico.
     
  • (0800 ET/1300 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic speaks on the economic outlook in a fireside chat to the Broward Workshop, in Fort Lauderdale, Florida.
     
  • (0820 ET/1320 GMT) Federal Reserve Bank of New York President William Dudley participates in a discussion and presentation at an event hosted by the Puerto Rico Chamber of Commerce.
     
  • (1900 ET/0000 GMT) Federal Reserve Board Governor Lael Brainard speaks on “Economic and Monetary Policy Outlook” before the Money Marketeers of New York University Forum, in New York.
     

FX Beat

DXY: The dollar index tumbled to a 2-week low as investors grew cautious about the outlook of the U.S. currency after a top economic advisor to the Trump administration resigned stoking fears of a trade war. The greenback against a basket of currencies traded flat at 89.44, having touched a low of 89.41 earlier, its lowest since Feb. 20. FxWirePro's Hourly Dollar Strength Index stood at -89.17 (Slightly Bearish) by 1000 GMT.

EUR/USD: The euro rallied to an over 2-week peak ahead of a policy meeting on Thursday, where policymakers are expected to provide more detail on when the European Central Bank will wind up it's massive stimulus scheme. The European currency traded 0.2 percent up at 1.2425, having touched a low of 1.2155 on Thursday, its lowest since Jan. 12. FxWirePro's Hourly Euro Strength Index stood at 130.99 (Highly Bullish) by 1000 GMT. Immediate resistance is located at 1.2465 (Feb 14. High), a break above targets 1.2553 (Feb 16 High). On the downside, support is seen at 1.2326 (21-DMA), a break below could drag it lower 1.2297 (10-DMA).

USD/JPY: The dollar declined against the Japanese yen after a key advocate for free trade in the U.S. government resigned, triggering concerns Washington will go ahead with import tariffs and risk a trade war. The major was trading 0.5 percent down at 105.63, having hit a low of 105.25 on Friday, its lowest since Nov. 2016. FxWirePro's Hourly Yen Strength Index stood at 31.06 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. trade balance, nonfarm productivity report, consumer credit, and Fed officials' speeches. Immediate resistance is located at 106.65 (10-DMA), a break above targets 107.26 (21-DMA). On the downside, support is seen at 105.35 (Mar. 5 Low), a break below could take it lower 104.90.

GBP/USD: Sterling slumped below the 1.3900 handle, as investors worried about Britain's ability to secure a favourable transition deal with the European Union. The major traded 0.1 percent down at 1.3873, having hit a low of 1.3712 on Thursday, it’s lowest since Jan 12. FxWirePro's Hourly Sterling Strength Index stood at -3.73 (Neutral) by 0500 GMT. Immediate resistance is located at 1.3929 (Previous Session High), a break above could take it near 1.3996 (Feb 27 Low). On the downside, support is seen at 1.3814 (5-DMA), a break below targets 1.3766 (Mar. 5 Low). Against the euro, the pound was trading 0.3 percent down at 89.56 pence, having hit a low of 89.67 pence earlier, it’s lowest since Nov. 28, 2017.

USD/CHF: The Swiss franc rose, reversing most of its previous session gains as trade war concern sent investors seeking safe-haven assets. The major trades 0.3 percent down at 0.9376, having touched a low of 0.9338 on Friday, it’s lowest since Feb. 26. FxWirePro's Hourly Swiss Franc Strength Index stood at -0.67 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9424 and any break above will take the pair to next level till 0.9490. The near-term support is around 0.9345 (Mar.  5 Low) and any close below that level will drag it till 0.9309.

Equities Recap

European shares tumbled as the resignation of Donald Trump's economic adviser Gary Cohn renewed fears of a potential trade war.

The pan-European STOXX 600 index slumped 0.4 percent to 370.02 points, while the FTSEurofirst 300 index plunged 0.3 percent to 1,448.89 points.

Britain's FTSE 100 trades 0.05 percent higher at 7,147.49 points, while mid-cap FTSE 250 rallied 0.1 percent to 19,708.93 points.

Germany's DAX declined 0.4 percent at 12,068.92 points; France's CAC 40 trades 0.5 percent down at 5,144.54 points.

Commodities Recap

Crude oil prices declined, weighed down by soaring U.S. crude oil production and rising inventories. International benchmark Brent crude was trading 0.1 percent down at $64.93 per barrel by 0949 GMT, having hit a low of $63.21 on Thursday, its lowest since Feb. 15. U.S. West Texas Intermediate was trading 0.8 percent down at $61.85 a barrel, after rising as low as $60.17 on Friday, its weakest since Feb. 15.

Gold prices slumped after hitting a 1-week high earlier as the equities declined after U.S. President Donald Trump said he would push ahead with severe tariffs on imports, rekindling fears of a potential trade war. Spot gold was down 0.1 percent at $1,332.96 per ounce as of 0953 GMT, after touching $1,340.35, its highest since Feb. 26, earlier in the session. U.S. gold futures for April delivery fell 0.07 percent to $1,334.20 per ounce.

Treasuries Recap

The U.S. Treasuries climbed ahead of the country’s ADP non-farm employment change for the month of February and FOMC member Dudley’s speech, scheduled for today at 13:15GMT and 13:20GMT respectively. The yield on the benchmark 10-year Treasuries slumped 2 basis points to 2.85 percent, the super-long 30-year bond yields slid nearly 1/2 basis point to 3.13 percent and the yield on the short-term 2-year fell nearly 1 basis point to 2.23 percent.

The German bunds gained after eurozone’s gross domestic product (GDP) for the fourth quarter of 2017 met market expectations, unchanged from that in the previous quarter.

The German 10-year bond yields, which move inversely to its price, slipped nearly 1 basis point to 0.66 percent, the yield on the 30-year note fell 1 basis point to 1.31 percent and the yield on short-term 2-year traded flat at -0.53 percent.

The New Zealand government bonds closed flat after dairy prices slipped further in the latest GlobalDairyTrade (GDT) price auction, held overnight as an influx of supply from the country curbed buying. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 3.04 percent, the yield on 20-year flattened at 3.56 percent and the yield on short-term 2-year closed 1 basis point higher at 1.97 percent.

The Japanese government bonds traded tad lower as investors wait to see a slight upward push in the country’s fourth-quarter gross domestic product (GDP), scheduled to be released later today. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 0.05 percent, the yield on the long-term 30-year note flattened at 0.75 percent and the yield on short-term 2-year traded 1/2 basis point higher at -0.15 percent.

The Australian bonds gained following weaker-than-expected Q4 GDP data, which is weakest in last three quarters. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 2 basis points to 2.815 percent, the yield on the long-term 30-year note dipped 2 basis points to 3.199 percent and the yield on short-term 2-year down 2 basis points to 1.965 percent.


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