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Europe Roundup: Oil prices hit fresh multi-year highs, US dollar underpinned by higher yields, Euro hits 4-1/2-month low, Sterling weakens post-BoE, European shares steady - Thursday, May 10th, 2018

Market Roundup

  • EUR/USD 0.24%, USD/JPY 0.01%, GBP/USD 0.16%, EUR/GBP 0.08%
     
  • DXY -0.15%, DAX 0.62%, FTSE -0.05%, Brent 0.41%, Gold 0.21%
     
  • Oil set for biggest weekly rise in a month as Iran sanctions loom
     
  • China won't change stance on trade talks with U.S. -China commerce ministry
     
  • BOJ governor signals debate on conditions for stimulus exit
     
  • China April producer inflation picks up for first time in 7 months
     
  • GB Mar Manufacturing Output YY, 2.9%, 2.9% f'cast, 2.5% prev
     
  • GB Mar Industrial Output YY, 2.9%, 3.1% f'cast, 2.1% prev (r)
     
  • GB Mar Construction O/P Vol YY, -4.9%, -5.7% f'cast, -1.8% prev (r)
     
  • GB Mar Goods Trade Balance GBP, -12.29 bln, -11.25 bln f'cast, -10.41 bln prev (r)
     
  • GB Mar Goods Trade Bal Non-EU, -3.64 bln, -2.35 bln prev (r)
     
  • GB May TR IPSOS PCSI, 52.69, 50.92 prev
     
  • DE May TR IPSOS PCSI, 56.66, 58.87 prev
     
  • FR May TR IPSOS PCSI, 43.93, 42.44 prev

Economic Data Ahead

  • (0830 ET/1230 GMT) U.S. Initial Jobless Claims, 218k f'cast, 211k prev
     
  • (0830 ET/1230 GMT) U.S. Continued Jobless Claims, 1.78 mln f'cast, 1.75 mln prev
     
  • (0830 ET/1230 GMT) U.S. Jobless Claims 4-Wk Avg, 221.50k prev
     
  • (0830 ET/1230 GMT) U.S. Apr Real Weekly Earnings MM, -0.1% f'cast, 0.4% prev 
     
  • (0830 ET/1230 GMT) U.S. Apr CPI MM, SA, 0.3% f'cast, -0.1% prev
     
  • (0830 ET/1230 GMT) U.S. Apr CPI YY, NSA, 2.5% f'cast, 2.4% prev
     
  • (0830 ET/1230 GMT) U.S. Apr Core CPI YY, NSA, 2.2% f'cast, 2.1% prev
     
  • (0830 ET/1230 GMT) U.S. Apr Core CPI MM, SA, 0.2% f'cast, 0.2% prev
     
  • (0830 ET/1230 GMT) U.S. Apr Core CPI YY, NSA, 2.2% f'cast, 2.1% prev
     
  • (0830 ET/1230 GMT) U.S. Apr CPI Index NSA, 250.68 f'cast, 249.55 prev
     
  • (0830 ET/1230 GMT) CA Mar New Housing Price Index, 0.0% f'cast, -0.2% prev

Key Events Ahead

  • (0700 ET/1100 GMT) BoE publishes summary and minutes of the MPC meeting and Inflation Report 
     
  • N/A RBNZ announces Official Cash Rate (OCR) and Monetary Policy Statement
     
  • N/A EBRD holds annual meeting - Amman

FX Beat

DXY: US dollar index has declined sharply after hitting high of 93.42 yesterday. Any convincing close below 92.50 will take the index till 91.95 (200 –day MA). Market eyes US CPI data which is to be released for further direction.

EUR/USD: EURUSD is showing a minor recovery after hitting new 2018 low of 1.8228 ahead of US CPI data. On the lower side, near term support stands at 1.1800 and any break below targets 1.17120 (38.2% fibo)/1.1600. The near term resistance is around 1.1900 and any break above will take the pair to next level till 1.1925/1.1970/1.200. The pair should close above 1.2020 for further upside. Markets focus on US CPI data for further direction.

GBP/USD: GBP weakens across the board after BOE monetary policy. GBP/USD has declined more than 100 pips as BoE holds rates as expected but forecasted inflation to edge lower in the near to medium term in its Inflation Report. 1.3620 will be acting major resistance and any convincing break above will take the pair slightly till 1.3640 (55- 4H EMA)/1.36659. Major trend reversal only above 1.4000. The near term support is around 1.3480 and any break below will drag the pair till 1.3450/1.3400.

USD/JPY: USD/JPY struggles to hold gains above 110 handle. The major edged higher from lows of 109.54 in Tokyo low to reach 110.01, before relapsing to 109.62 levels. Price action hovers around 50% Fibos and technical studies support further upside in the pair. Scope for test of 61.8% Fib at 110.87 on bullish momentum. That said, bearish divergence and 'Cyoher Pattern' on daily charts keeps scope for downside. 20-DMA is strong support at 108.68 levels. Break below to see further weakness.

USD/CHF: USDCHF hits fresh 6 month high 1.00563 and formed almost double top around that level. The pair has shown a more than 800 pips from the low of 0.91876 made on Feb 2018. The pair is facing support near 1.000 and any close below will drag the pair till 0.9945 (10- day MA)/0.9900 in the short term. The bearish continuation can be seen only below 0.9800 (20 –day MA). On the higher side, near term major resistance is around 1.0060 and any break above will take the pair till 1.010/1.0150.

EUR/JPY: EUR/JPY is holding above 200W SMA which is strong support at 129.19. The pair has extended gains for 2 straight sessions. Upside now finds stiff resistance at cloud base at 130.53. Break above cloud base could see further upside. Scope then for test of 20-DMA at 131.72. On the downside we see further weakness only on decisive break below 200W SMA at 129.19. 

Equities Recap

European shares steadied on Thursday. The pan-European STOXX 600 index was down 0.24 percent at 391.50 points, while the FTSEurofirst 300 index slipped 0.19 percent to 1,596.35 points.

Britain's FTSE 100 trades 0.02 percent up at 7,664.60 points, while mid-cap FTSE 250 down 0.06 percent to 20,695.36 points.

Germany's DAX was up 0.29 percent at 20,695.36 points; France's CAC 40 was down 0.13% at 5,527.68 points.

Commodities Recap

Brent crude hits new multi-month highs as markets adjust to looming sanctions on Iran. Brent crude futures hit their strongest since November 2014, at $77.89 per barrel. U.S. West Texas Intermediate (WTI) crude futures also marked a November-2014 high, at $71.84 a barrel.

Gold was lragely muted amid firm dollar. Spot gold was at $1,311.82 per ounce by 0714 GMT. U.S. gold futures for June delivery were 0.1 percent lower at $1,312 per ounce.

Silver was 0.1 percent higher at $16.49 an ounce. Platinum rose 0.1 percent to $910.74 an ounce while palladium remained unchanged at $974.75.

Treasuries Recap

U.S.: The U.S. Treasuries gained Thursday ahead of the country’s consumer price index (PPI) for the month of April, scheduled to be released today by 12:30GMT. Also, the 30-year Note auction and the initial jobless claims, due today by 17:00GMT and 12:30GMT respectively will add further direction to the bond market. The yield on the benchmark 10-year Treasuries slumped nearly 2 basis points to 2.97 percent, the super-long 30-year bond yields slid slightly to 3.15 percent and the yield on the short-term 2-year traded nearly 1 basis point lower at 2.52 percent.

UK: The UK gilts remained narrowly mixed during European session Thursday after the country’s manufacturing production for the month of March slightly bettered than market expectations, while the trade balance data failed to cheer investors. The yield on the benchmark 10-year gilts, slid 1/2 basis point to 1.45 percent, the super-long 30-year bond yields hovered around 1.86 percent and the yield on the short-term 2-year also traded 1-1/2 basis points higher at 0.82 percent.

NZD: New Zealand bonds jumped at the time of closing Thursday after the Reserve Bank of New Zealand (RBNZ) decided to remain unchanged on its benchmark interest rate at its monetary policy meeting, held early today, while maintaining a tone of dovishness in its policy statement that followed. Also, the central bank took to downgrading its forecasts for the country’s gross domestic product (GDP) and inflation for the upcoming period, which crowded investors into buying safe-haven bonds, thus weigh on yields. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, slumped 3-1/2 basis points to 2.78 percent, the yield on the long-term 20-year note plunged 6 basis points to 3.29 percent and the yield on short-term 2-year closed 5-1/2 basis points lower at 1.87 percent.

JGBs: The Japanese government bonds remained flat on the lower side of the curve during late Asian session Thursday, even as the Bank of Japan’s (BoJ) policy board members remained slightly dovish, noting the need to maintain powerful monetary policy easing, besides, acknowledging that there still remains time to reach the 2 percent inflation goal. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, remained flat at 0.05 percent, the yield on the long-term 30-year note traded tad higher at 0.73 percent and the yield on short-term 2-year too remained steady at -0.12 percent.

AUD: Australian government bonds edged slightly higher on Thursday tracking weaker-than-expected Chinese consumer inflation data. Now, markets await next week’s employment report which might set a tone for the Reserve Bank of Australia in its next month’s monetary policy meeting. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, dipped 1 basis point to 2.780 percent, the yield on the long-term 30-year Note fell 1 basis point to 3.276 percent and the yield on short-term 2-year down nearly 1-1/2 basis points to 2.019 percent.

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