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Europe Roundup: Sterling consolidates as no-deal Brexit concerns persist, euro eases as German industrial orders decline more than expected, investors eye Fed Chair Powell's speech - Monday, October 7th, 2019

Market Roundup

  • Weak eurozone bank profits could take fresh hit: ECB
     
  • UK house prices rise at the slowest pace since 2013 - Halifax
     
  • German recession looms as industrial orders drop more than expected
     

Economic Data Ahead

  • (1500 ET/1900 GMT) The U.S. Federal Reserve is likely to report that consumer credit declined to $15.50 billion in August from $23.29 billion the month before.

Key Events Ahead

  • (1300 ET/1700 GMT) Federal Reserve Chairman Jerome H. Powell's speech

FX Beat

DXY: The dollar index held firm near 1-week low hit last week, as investors took a wait-and-see approach ahead of U.S.-China talks this week. The greenback against a basket of currencies traded flat at 98.80, having touched a low of 98.64 on Thursday, its highest since September 25.

EUR/USD: The euro declined after data showed German industrial orders fell more than expected in August on weaker domestic demand, adding to signs that a manufacturing slump is dragging the German economy into recession. The European currency traded down at 1.0978, having touched a high of 1.0999 on Thursday, its highest since September 25. Immediate resistance is located at 1.1021 (61.8% retracement of 1.1109 and 1.0879), a break above targets 1.1060 (78.6% retracement). On the downside, support is seen at 1.0945 (5-DMA), a break below could drag it below 1.0904.

USD/JPY: The dollar consolidated within narrow ranges as investors turned cautious ahead of crucial U.S.-China trade talks and Brexit negotiations. The major was trading flat at 106.86, having hit a low of 106.48 on Thursday, its lowest since September 24. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. consumer credit change and Fed Chair Powell's speech. Immediate resistance is located at 107.36 (5-DMA), a break above targets 107.58 (September 10 High). On the downside, support is seen at 106.32 (September 5 Low), a break below could take it near at 106.02 (August 16 Low).

GBP/USD: Sterling traded within thin ranges as investors looked at developments around the crucial talks between London and Brussels this week on the Brexit withdrawal deal, with a looming make-or-break Brexit summit on October 17 and 18, and Britain’s European Union departure set for Oct. 31. The major traded flat at 1.2330, having hit a high of 1.2413 on Thursday, it’s highest since September 25. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2376 (21-DMA), a break above could take it near 1.2400. On the downside, support is seen at 1.2270 (September 27 Low), a break below targets 1.2233 (September 9 Low). Against the euro, the pound was trading 0.2 percent down at 89.11 pence, having hit a low of 89.36 on Thursday, it’s lowest since Sept. 13.

USD/CHF: The Swiss franc edged higher, extending previous session gains, as nervousness over U.S.-China trade talks persisted and weaker European economic data underscored concerns about a looming recession in the German economy. The major trades 0.1 percent down at 0.9944, having touched a high of 1.0027 on Thursday, it’s highest since May 31. On the higher side, near-term resistance is around 0.9987 and any break above will take the pair to next level till 1.0027. The near-term support is around 0.9915, and any close below that level will drag it till0.9890 (September 23 Low).

Equities Recap

European shares rallied, boosted by gains in the healthcare sector, while euro eased amid growing concerns of a recession in the German economy.

The pan-European STOXX 600 index surged 0.3 percent at 381.37 points, while the FTSEurofirst 300 rallied 0.4 percent to 1,500.72 points.

Britain's FTSE 100 trades 0.3 percent up at 7,177.87 points, while mid-cap FTSE 250 declined 0.2 to 19,436.04 points.

Germany's DAX rose 0.4 percent at 12,054.71 points; France's CAC 40 trades 0.3 percent higher at 5,501.97 points.

Commodities Recap

Crude oil prices surged, buoyed by hopes of progress in U.S.-China trade talks and supported by challenges to supply facing major exporters. International benchmark Brent crude was trading 0.3 percent up at $58.63 per barrel by 1046 GMT, having hit a low of $57.13 on Thursday, its lowest since August 7. U.S. West Texas Intermediate was trading 0.4 percent higher at $52.84 a barrel, after falling as low as $52.27 on Thursday, its lowest since August 7.

Gold prices declined, extending previous session losses as the dollar firmed after a report said China was likely reluctant to agree to a broad trade deal with Washington. Spot gold was down 0.2 percent at $1,500.93 per ounce by 1048 GMT, having touched a high of $1,519.53 on Thursday, its highest since September 25. U.S. gold futures slipped 0.3 percent to $1,507.80 per ounce.

Treasuries Recap

The U.S. Treasuries slumped during the afternoon session ahead of a speech by Federal Open Market Committee (FOMC) Chair Jerome Powell, scheduled to be delivered at 17:00GMT, besides, a speech from another member, Neel Kashkari, also due later today. The yield on the benchmark 10-year Treasury yield rose nearly 1-1/2 basis point to 1.527 percent, the super-long 30-year bond yield edged 1 basis point up to 2.025 percent while the yield on the short-term 2-year remained flat at 1.402 percent.

The United Kingdom’s gilts remained narrowly mixed during European trading hours amid a muted trading session that hardly witnessed any data of major economic significance ahead of the country’s monthly GDP and manufacturing production for the month of August, scheduled to be released by end of this week. The yield on the benchmark 10-year gilts, slipped 1/2 basis point to 0.440 percent, the 30-year yield hovered around 0.942 percent while the yield on the short-term 2-year lost nearly 1 basis point to 0.343 percent

The German bunds gained during European trading session following disappointment in the country’s industry orders for the month of August, while industrial production is still eyed for the similar period, due for release tomorrow for further direction in the debt market. The German 10-year bond yield, which move inversely to its price, slipped 1-1/2 basis points to -0.600 percent, the yield on 30-year note also edged 1-1/2 basis point down to -0.119 percent and the yield on short-term 2-year remained nearly 1 basis point down at -0.763 percent.

The Australian government bonds opened on a higher note on the first trading day of the week, tracking a similar movement in the United States Treasuries following global economic concerns, after employment data in the U.S. disappointed market sentiments. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2 basis points to 0.878 percent, the yield on the long-term 30-year bond suffered 2-1/2 basis points to 1.491 percent and the yield on short-term 2-year too traded 2 basis points lower at 0.617 percent.   

By Lactus Fernandes
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