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Europe Roundup: DXY hits 16-month high; Brexit uncertainty dents pound, euro; gold hits one-month lows; WTI off multi-month lows - Monday, November 12th, 2018

Market Roundup

  • EUR/USD -0.66%, USD/JPY 0.1%, GBP/USD -0.95%, EUR/GBP 0.24%
     
  • DXY 0.52%, DAX -0.52%, FTSE 0.36%, Brent 1.33%, Gold -0.2%
     
  • UK PM May stares into Brexit abyss as domestic opposition mounts
     
  • BoE's Broadbent says Brexit deal still most likely outcome - CNBC
     
  • Everyone must prepare for possibility of hard Brexit-Germany
     
  • China calls for open world economy but work remains on landmark trade pact
     
  • China c.bank extends currency swap with UK for 3 years
     
  • Euro zone growth slowdown is a return to normal - ECB
     
  • Saudi's Falih says analysis shows need for 1 mln bpd cut in oil output
     
  • EU working at all levels to avoid escalating trade tensions with U.S. - Juncker
     
  • Italy industry output falls by less than expected in Sept, after Aug jump
     
  • Italy's budget tussle raises debt concerns: ECB's de Guindos

Economic Data Ahead

  • No major data expected

Key Events Ahead

  • (0900 ET/1400 GMT) German Finance Minister Olaf Scholz speaks to the foreign press association in Berlin
     
  • (1030 ET/1530 GMT) ECB bank supervisors Danièle Nouy and Sabine Lautenschläger speak to students in a Youth Dialogue in Frankfurt
     
  • (1430 ET/1930 GMT) Fed San Francisco President Mary Daly speaks on the economic outlook before the Regional Economic Development for Eastern Idaho in Idaho Falls

FX Beat

DXY: U.S. dollar strengthened across the board amid expectations that the U.S. Federal Reserve is on track to tighten borrowing costs. Dollar index rises to over 16-month peak at 97.58.

EUR/USD: The single currency under pressure. EUR/USD hits 17-month low on broad-based US dollar buying. Monetary policy divergence between the Fed and ECB , Italian budget deficit problem and widening of spread between Italy 10 year and German bund to keep downside pressure. Near term trend line support is around 1.12400 and any break below targets 1.1200/1.1150 level. The major trend reversal only above 1.15000 and any violation above targets 1.16200. 

GBP/USD: The British pound tumbles across the board dented by Brexit uncertainty. Cable showed a gap down open and is extending weakness as we write. Price was down 1.03%, at 1.2838 at 1030 GMT. The pair has broken major support 1.2920 and  trend is weak as long as resistance 1.3300 holds. The minor resistance is around 1.2965 and any violation above targets 1.3000/1.3050/1.3100. The minor reversal only above 1.3175 level. On the lower side, near term support is around 1.2800 and any break below to see dip till 1.2750/1.26900. 

USD/JPY: USD/JPY hits 6-week highs at 114.23 before paring some gains to trade at 113.92 at the time of writing. U.S. dollar strengthened across the board amid expectations that the U.S. Federal Reserve is on track to tighten borrowing costs. The pair maintains its positive tone but we also see some overbought pressures on momentum indicators. Price action is struggling at 114 handle and a decisive break above is required for upside continuation. 20-DMA is strong support at 112.88, while immediate resistance lies at 114.55 (Oct 4 high).

EUR/CHF: EUR/CHF trades 0.27 percent lower on the day as Euro dented across the board. The pair has slipped below major moving averages and dipped into daily cloud. Momentum studies are bearish and RSI is below 50 levels. We see scope for further weakness. Italy budget deadline looms Tuesday and Italy-German yield spread looks set to rise in a EUR-negative manner as Italy is unlikely to revise lower its expansive budget deficit target. The pair was rejected at stiff resistance at 110-EMA, breaks strong trendline support at 1.1390, eyes 1.1342 (cloud base and Oct 26 low).

AUD/USD: Antipodeans eased as concerns about global growth resurfaced, weighing on risk-sensitive assets. AUD/USD extends decline for the 3rd straight session. Upside has been rejected at 110-EMA, recovery attempts lack traction, we see scope for further weakness. The pair finds strong support at 1H 200-SMA at 0.7208, break below will see accentuation of weakness. 5-DMA is immediate resistance at 0.7245. Any bearish invalidation only above 110-EMA.

Equities Recap

European markets largely muted on Monday's trade. The pan-European STOXX 600 index was down 0.23 percent at 364.68 points, while the FTSEurofirst 300 index was down 0.17 percent at 1,439.10 points.

Britain's FTSE 100 was up 0.20 percent at 7,119.51 points, while mid-cap FTSE 250 was down 0.72 percent at 18,968.41 points.

Germany's DAX was down 0.75 percent at 11,442.57 points; France's CAC 40 was down 0.22 percent at 5,095.38 points.

Commodities Recap

US Oil off multi-month lows after Saudi Arabia announced a supply cut in December and other producers also considered reductions heading into 2019. U.S. WTI crude futures rose 1.6 percent to $61.15 per barrel. Front-month Brent crude futures were at $71.59 per barrel at 0749 GMT, up 2 percent from their last close.

Gold hit one-month lows on strong dollar. Spot gold was trading 0.3 percent lower at $1,205.86 per ounce at 0746 GMT. 

Among other precious metals, silver was up 0.1 percent at $14.17 per ounce, palladium fell 0.2 percent to $1,113.92 per ounce, while platinum was down 0.1 percent at $848.50 an ounce.

Treasuries Recap

U.S.: The U.S. Treasuries remained tad higher Monday amid a muted trading session that witnessed data of little economic significance ahead of a host of FOMC members’ speeches throughout this week. The yield on the benchmark 10-year Treasuries slipped nearly 1/2 basis point to 3.186 percent, the super-long 30-year bond yields too remained tad lower at 3.388 percent and the yield on the short-term 2-year also traded 1/2 basis point lower at 2.928 percent.

UK:  The UK gilts surged Monday as investors wait to watch the country’s employment report for the month of September, scheduled to be released on November 13 by 09:30GMT. Also, October’s consumer price inflation (CPI) report, due on the following day on November 14 by 09:30GMT will add further direction to the debt market. The yield on the benchmark 10-year gilts, slumped nearly 4-1/2 basis points to 1.449 percent, the super-long 30-year bond yields suffered 3 basis points to 1.894 percent and the yield on the short-term 2-year too traded 3 basis points lower at 0.747 percent.

EUR: The German bunds jumped during European session Monday ahead of the country’s consumer price inflation (CPI) for the month of October, scheduled to be released on November 13 by 07:00GMT. Also, ZEW economic sentiment index for November, due on the same day by 10:00GMT will add further direction to the debt market. The German 10-year bond yields, which move inversely to its price, slumped 2 basis points to 0.391 percent, the yield on 30-year note fell 1-1/2 basis points to 1.037 percent and the yield on short-term 2-year traded tad lower at -0.635 percent.

JGBs: The Japanese government bonds remained mixed on the first trading day of the week Monday, as investors wait to watch the country’s 30-year auction and the gross domestic product (GDP) for the third quarter of this year, both scheduled to be unveiled on November 13 by 03:35GMT and 23:50GMT respectively. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 12 basis points to 0.119 percent, the yield on the long-term 30-year note hovered around 0.886 percent and the yield on short-term 3-year slumped 13-1/2 basis points to -0.135 percent

AUD: Australian government bonds gained across the curve during Asian session Monday as investors moved to safe-haven buying due to global equities sell-off on China’s economic growth worries and worry of further escalation of Sino-U.S. trade war. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell 3 basis points to 2.744 percent, the yield on the long-term 30-year bond also dipped 3 basis points to 3.250 percent and the yield on short-term 2-year down 1-1/2 basis points to 2.086 percent.

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