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Europe Roundup: Sterling gains as BoE stands pat, dollar index rebounds on U.S.-China trade hopes, markets await ECB policy meeting outcome – Thursday, September 13th, 2018

Market Roundup

  • EUR/USD -0.07%, USD/JPY 0.22%, GBP/USD 0.08%, EUR/GBP -0.16%
     
  • DXY 0.11%, DAX 0.45%, FTSE -0.37%, Brent -0.75%, Gold -0.08%
     
  • ECB to stay on course to curb stimulus as economy ticks over
     
  • Bank of England to keep rates steady after August rise
     
  • China welcomes U.S. invite for trade talks, Asian markets relieved
     
  • Japan bank lobby gives lukewarm welcome to BOJ's July move
     
  • Turkish lira weakens as investors await central bank rates decision
     
  • Great Britain Sep BOE Bank Rate, 0.75% forecast, 0.75% previous
     
  • Great Britain Aug RICS Housing Survey, 2, 2 forecast, 4 previous
     
  • Germany Aug CPI Final (mm), 0.1%, 0.1% forecast, 0.1% previous
     
  • Germany Aug CPI Final (yy), 2.0%, 2.0% forecast, 2.0% previous
     
  • France Aug CPI (EU Norm) Final (mm), 0.5%, 0.6% forecast, -0.1% previous
     
  • France Aug CPI (EU Norm) Final (yy), 2.6%, 2.6% forecast, 2.6% previous

Economic Data Ahead

  • (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 7,000 to a seasonally adjusted 210,000 for the week ended Sept. 7, while continuing claims for the week ended Aug. 31 are expected to rise to 1.710 million from a previous reading of 1.707 million.
     
  • (0830 ET/1230 GMT) The U.S. consumer price index likely increased 0.3 percent in August after rising 0.2 percent in July, while in the 12 months through August, the CPI is expected to have risen 2.8 percent.  Excluding food and energy, the core CPI probably rose 0.2 percent, matching the gain in the previous month.
     
  • (0830 ET/1230 GMT) The Statistics Canada releases its New Housing Price Index (NHPI) for the month of July. The index rose 0.1 percent in June.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending September 7.
     
  • (1400 ET/1800 GMT) The U.S. reports its monthly budget statement for the month of August. The government is likely to show a budget deficit of $156.5 billion after posting a deficit of $77.0 billion in the previous month.

Key Events Ahead

  • (0830 ET/1230 GMT) European Central Bank President releases the monetary policy statement and gives a press conference.
     
  • (1300 ET/1700 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic speaks on the economic outlook and monetary policy before the Mississippi Council of Economic Education, in Jackson.
     
  • (1900 ET/2300 GMT) Fed President Robert Kaplan participates in a moderated question-and-answer session before the Dallas Business Club, in Dallas, Texas.

FX Beat

DXY: The dollar index rebounded from an over 1-week low after senior U.S. officials sent an invitation to their Chinese counterparts to hold another bilateral trade meeting, stirring speculation further tariffs might be averted.  The greenback against a basket of currencies trades 0.1 percent up at 94.90, having touched a low of 94.73 on Wednesday, its lowest since August 31. FxWirePro's Hourly Dollar Strength Index stood at -79.70 (Slightly Bearish) by 1000 GMT.

EUR/USD: The euro declined, halting a 3-day winning streak as investors traded hesitantly before European Central Bank policy meeting outcome. The ECB is all certain to keep policy unchanged, but could make slight changes to its guidance to stay on course to end bond purchases this year and hike interest rates next autumn. The European currency traded 0.1 percent down at 1.1620, having touched a low of 1.1526 on Monday, its lowest since Aug 21. FxWirePro's Hourly Euro Strength Index stood at 31.71 (Neutral) by 1000 GMT.  Immediate resistance is located at 1.1658 (September 6 High), a break above targets 1.1710 (August 29 High). On the downside, support is seen at 1.1578 (21-DMA), a break below could drag it till 1.1542 (September 5 Low).

USD/JPY: The dollar surged against the Japanese yen as overnight headlines that Washington was seeking a new round of trade talks with Beijing boosted risk appetite. The major was trading 0.2 percent up at 111.49, having hit a high of 111.65 on Wednesday, its highest since September 5. FxWirePro's Hourly Yen Strength Index stood at -67.01 (Slightly Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. unemployment benefit claims, consumer price index, monthly budget statement, and speeches from FOMC members. Immediate resistance is located at 111.75 (September 5 High), a break above targets 112.15 (August 1 High). On the downside, support is seen at 111.01 (21-DMA), a break below could take it lower 110.68 (August 31 Low).

GBP/USD: Sterling rose, hovering towards a multi-week peak touched in the previous session after the Bank of England kept interest rates on hold and highlighted greater financial market concerns about Brexit. The major traded 0.05 percent up at 1.3051, having hit a high of 1.3087 on Tuesday; it’s highest since August 2. FxWirePro's Hourly Sterling Strength Index stood at 106.80 (Highly Bullish) 1000 GMT. Immediate resistance is located at 1.3087 (September 11 High), a break above could take it near 1.3144 (August 1 High). On the downside, support is seen at 1.2952 (10-DMA), a break below targets 1.2891 (21-DMA). Against the euro, the pound was trading 0.05 percent down at 89.13 pence, having hit a high of 88.76 on Tuesday, it’s highest since August 2.

USD/CHF: The Swiss franc gained, extending gains for the third straight session as persisting concerns of trade tensions between the United States and China dented investor sentiment. The major trades 0.1 percent down at 0.9691, having touched a high of 0.9758 on Tuesday, it’s highest since September 4. FxWirePro's Hourly Swiss Franc Strength Index stood at -17.61 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9755 (50.0% retracement of 0.9865 and 0.9641) and any break above will take the pair to next level till 0.9781 (61.8% retracement). The near-term support is around 0.9652 (August 31 Low) and any close below that level will drag it till 0.9612

Equities Recap

European shares rallied, as autos and mining stocks gained on news of new talks between the U.S. and China, while investors traded cautiously ahead of European Central Bank policy decision. 

The pan-European STOXX 600 index advanced 0.1 percent at 377.33 points, while the FTSEurofirst 300 index surged 0.2 percent to 1,475.45 points.

Britain's FTSE 100 trades 0.4 percent down at 7,287.99 points, while mid-cap FTSE 250 gained 0.4 percent to 20,292.57 points.

Germany's DAX rose 0.4 percent at 12,084.01 points; France's CAC 40 trades 0.2 percent higher at 5,342.29 points.

Commodities Recap

Crude oil prices declined from 4-month highs as investors focused on the risk that emerging market crises and trade disputes could dent demand. International benchmark Brent crude was trading 0.7 percent down at $79.13 per barrel by 1026 GMT, having hit a high of $80.09 on Wednesday, its highest since May 22. U.S. West Texas Intermediate was trading 1.2 percent down at $69.42 a barrel, after rising as high as $71.24 on Wednesday, its highest since September 4.

Gold prices eased after rising to a more than 1-week high in the previous session, amid hopes for a new round of U.S.-China trade talks. Spot gold fell to $1,205.52 an ounce at 1032 GMT, having hit a high of $1208.38 on Wednesday, its highest since Aug. 31.

Treasuries Recap

The U.S. Treasuries suffered ahead of the country’s consumer price index (CPI) for the month of August and a host of speeches by FOMC members, scheduled for later in the day. The yield on the benchmark 10-year Treasuries rose 1-1/2 basis points to 2.979 percent, the super-long 30-year bond yields also surged nearly 1-1/2 basis points to 3.118 percent and the yield on the short-term 2-year traded 2 basis points higher at 2.769 percent.

The United Kingdom’s gilts fell during European session after the Bank of England (BoE) remained on hold in its monetary policy decision, with all nine members of the policy committee voting in favour of no-change. The yield on the benchmark 10-year gilts, jumped nearly 1-1/2 basis points to 1.496 percent, the super-long 30-year bond yields remained tad 1/2 basis point higher at 1.846 percent and the yield on the short-term 2-year traded nearly 3 basis points higher at 0.812 percent.

The Japanese government bond prices sagged slightly on hopes of trade talk revival between the U.S. and China. The yield on the benchmark 10-year JGB note, which moves inversely to its price, rose about 1/2 basis point to 0.112 percent, the yield on the long-term 30-year note also climbed 1/2 basis point to 0.842 percent and the yield on short-term 2-year traded nearly flat at -0.108 percent.

The Australian bonds suffered during Asian trading hours after the country’s August employment report cheered market participants, besides, a resume of trade talks between the United States and China, which further added to losses in safe-haven instruments. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped nearly 2 basis points to 2.609 percent, the yield on the long-term 30-year bond climbed 1-1/2 basis points to 3.109 percent but the yield on short-term 2-year traded 3 basis points higher at 2.044 percent.


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