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Europe Roundup: Sterling consolidates below 1.3800 amid Brexit developments, dollar index rebounds as U.S. Treasuries resume rise, European shares trade in red - Wednesday, January 17th, 2018

Market Roundup

  • Eurozone Dec inflation ex-tobacco idx increase to 102.57 vs previous 102.2
     
  • Eurozone Dec inflation exenerfoodalctob yy stays flat at 0.9 % vs previous 0.9 %
     
  • Eurozone Dec inflation, ex-tobacco yy Decrease to 1.3 % vs previous 1.5 %
     
  • Eurozone Dec inflation exenerfoodalctob mm increase to 0.5 % vs previous -0.1 %
     
  • Eurozone Dec inflation ex food & energy mm increase to 0.4 % (forecast 0.4 %) vs previous -0.1 %
     
  • Eurozone Dec inflation final mm increase to 0.4 % (forecast 0.4 %) vs previous 0.1 %
     
  • Eurozone Dec inflation ex food & energy yy stays flat at 1.1 % (forecast 0.9 %) vs previous 1.1 %
     
  • Eurozone Dec inflation, final yy stays flat at 1.4 % (forecast 1.4 %) vs previous 1.4 %
     
  • Eurozone Dec inflation ex-tobacco mm increase to 0.4 % vs previous 0.1 %
     
  • ECB's Nowotny says strengthening euro "not helpful"    
     
  • Bank of England says will consider following up adequacy of lenders' credit risk monitoring in late 2018
     
  • Bank of England says have seen some evidence UK lenders tightened consumer credit underwriting standards in 2017

Economic Data Ahead

  • (0915 ET/1415 GMT) The Federal Reserve is likely to report that industrial production rose 0.4 percent in December after increasing 0.2 in the prior month.
     
  • (0915 ET/1415 GMT) The Federal Reserve Board is expected to report that capacity utilization slightly rose to 77.3 percent in December from 77.1 percent in November.
     
  • (1000 ET/1500 GMT) The National Association of Home Builders (NAHB) is expected to report that U.S. Housing Market Index eased to 72 in January after rising to 74 in December.
     
  • (1000 ET/1500 GMT) Bank of Canada will meet to announce its benchmark interest rate, where it is expected to raise rates to 1.25 percent.
     
  • (1400 ET/1900 GMT) The Fed issues its Beige Book, a summary of anecdotes on the health of the economy.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending January 12.
  • (1850 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending January 12.

Key Events Ahead

  • N/A Argentina Treasury Minister Nicolas Dujovne will announce the government's budget deficit for the fourth quarter and the year of 2017.
     
  • (1000 ET/1500 GMT) The U.S. Senate Banking Committee holds a vote on the nominations of Jerome Powell to be chairman of the Federal Reserve, and the reappointment of Randal Quarles as a Federal Reserve Board governor.
     
  • (1115 ET/1615 GMT) Bank of Canada's Stephen Poloz and Carolyn Wilkins hold a press conference to discuss the monetary policy in Ottawa.
     
  • (1500 ET/2000 GMT) Federal Reserve Bank of Chicago’ Charles Evans, Federal Reserve Bank of Dallas’ Robert Kaplan participate in a discussion on current economic conditions and monetary policy before the American Council of Life Insurers Executive Roundtable in Palm Beach, Florida.
     
  • (1630 ET/2130 GMT) Federal Reserve Bank of Cleveland President Loretta Mester gives a lecture on monetary policy communications at Rutgers University.
     

FX Beat

DXY: The dollar index rebounded after tumbling to a 3-year low in the prior session as the yield on the benchmark 10-year Treasuries rose nearly 1-1/2 basis points. The greenback against a basket of currencies traded 0.2 percent up at 90.62, having touched a low of 90.11 on Tuesday, its lowest since January 2015. FxWirePro's Hourly Dollar Strength Index stood at -143.89 (Highly Bearish) by 1000 GMT.

EUR/USD: The euro declined after rallying to a fresh three-year high above the 1.2300 handle in early trades following comments from ECB Nowotny, highlighting some growing concerns over the currency rapid strengthening. The European currency traded 0.2 percent down at 1.2243, having touched a high of 1.2322 earlier, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at 64.07 (Bullish) by 1000 GMT. Immediate resistance is located at 1.2340, a break above targets 1.2370. On the downside, support is seen at 1.2169 (61.8% retracement of 1.1916 and 1.2269), a break below could drag it lower 1.2121 (50.0% retracement).

USD/JPY: The dollar bounced back after declining to a 4-month low earlier in the session as analysts believe the markets are overpricing the possibility of near-term BoJ tightening and the BoJ is more likely to reiterate its ultra-easy stance. The major was trading 0.3 percent up at 110.77, having hit a low of 110.19 earlier, its lowest since Sept 15. FxWirePro's Hourly Yen Strength Index stood at -29.15 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. industrial production report, NAHB housing market index and Fed officials speeches. Immediate resistance is located at 110.95 (23.6% retracement of 110.19 and 113.38), a break above targets 111.41 (38.2% retracement). On the downside, support is seen at 110.19 (Session Low), a break below could take it near 110.00.

GBP/USD: Sterling trimmed gains after rising to a 1-1/2 year above the 1.3800 handle as investors awaited the latest developments in negotiations over Britain's departure from the European Union. The major traded flat at 1.3790, having hit a high of 1.3836 earlier, it’s highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 141.17 (Highly Bullish) by 1000 GMT. Immediate resistance is located at 1.3840, a break above could take it near 1.3890. On the downside, support is seen at 1.3757 (78.6% retracement of 1.3458 and 1.3836), a break below targets 1.3693 (61.8% retracement). Against the euro, the pound was trading 0.2 percent up at 88.73 pence, having hit a low of 89.29 pence on Friday, it’s lowest since Nov. 28.

USD/CHF: The Swiss franc eased after rising to a 4-month peak earlier in the session, as the greenback rebounded against a basket of currencies from its lowest since January 2015. The major trades 0.3 percent up at 0.9625, having touched a low of 0.9572 earlier, it’s lowest since Sept. 15. FxWirePro's Hourly Swiss Franc Strength Index stood at -29.24 (Neutral) by 1000 GMT.  On the higher side, near-term resistance is around 0.9677 (61.8% retracement of 0.9845 and 0.9572) and any break above will take the pair to next level till 0.9728 (10-DMA). The near-term support is around 0.9570 and any close below that level will drag it to next level till 0.9530.

AUD/USD: The Australian dollar rallied to a fresh near 4-month high earlier after data showed domestic home loans rose 2.1 percent in November, beating expectations of -0.2 percent and previous reading of -0.6 percent. The Aussie trades 0.3 percent up at 0.7980, having hit a high of 0.7999; it’s highest since Sept. 21. FxWirePro's Hourly Aussie Strength Index stood at 77.50 (Slightly Bullish) by 1000 GMT. Immediate support is seen at 0.7926 (61.8% retracement of 0.7807 and 0.7999), a break below targets 0.7904 (50.0% retracement). On the upside, resistance is located at 0.8000, a break above could take it near 0.8040.

Equities Recap

European shares tumbled in early trade, weighed down by heavy losses in financial and healthcare sectors, while the greenback gained against a basket of currencies as the yield on the U.S. Treasuries resumed rise. 

The pan-European STOXX 600 index slumped 0.2 percent to 397.66 points, while the FTSEurofirst 300 index edged down 0.1 percent to 1,563.67 points.

Britain's FTSE 100 trades 0.3 percent lower at 7,735.98 points, while mid-cap FTSE 250 eased 0.4 percent to 20,791.32 points.

Germany's DAX fell 0.2 percent at 13,228.02 points; France's CAC 40 trades 0.2 percent down at 5,502.39 points.

Commodities Recap

Crude oil prices eased as analysts warned of a downward correction, however, tightening supply and strong global demand supported prices. International benchmark Brent crude was trading 0.7 percent down at $68.83 per barrel by 0905 GMT, having hit a high of $70.33 on Monday, its highest since Dec. 2014. U.S. West Texas Intermediate was trading 0.6 percent down at $63.51 a barrel, after rising as high as $64.86 on Monday, its highest since Dec. 2014.

Gold prices declined, reversing early session gains as the U.S. dollar recovered from a three-year low against a basket of currencies. Spot gold was 0.2 percent down at $1,335.69 an ounce by 0910 GMT, after touching its strongest since Sept. 11 at $1,344.47 on Monday. U.S. gold futures were down 0.1 percent at $1,335.40 an ounce.

Treasuries Recap

The U.S. Treasuries suffered as investors look forward to a host of speeches from the FOMC members Evans, Kaplan and Mester’s speech, scheduled to be held today by 20:00GMT, 20:15GMT and 21:30GMT respectively. The yield on the benchmark 10-year Treasuries rose nearly 1-1/2 basis points to 2.55 percent, the super-long 30-year bond yields hovered around 2.83 percent and the yield on the short-term 2-year traded 2 basis points higher at 2.03 percent.

The UK gilts climbed as investors wait to watch the country’s 5-year auction, scheduled to be held on January 18 by 10:45GMT. The yield on the benchmark 10-year gilts, slipped 1 basis point to 1.29 percent, the super-long 30-year bond yields also slid 1 basis point to 1.80 percent while the yield on the short-term 2-year rose nearly 1 basis point to 0.58 percent.

The German bunds plummeted after Eurozone’s consumer price inflation index (CPI) for the month of December met market expectations. The German 10-year bond yields, which move inversely to its price, fell 1/2 basis point to 0.55 percent, the yield on 30-year note slid 1 basis point to 1.28 percent and the yield on short-term 2-year hovered around -0.57 percent.

The New Zealand government bonds jumped at the time of closing, tracking a solid jump in dairy product prices at Fonterra's GlobalDairyTrade auction amid concerns about a decline in the country’s supply following dry weather conditions. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 2 basis points to 2.89 percent, the yield on 20-year also plunged 2 basis points to 3.36 percent and the yield on short-term 2-year ended 1 basis point lower at 2.00 percent.

The Japanese government bonds traded narrowly mixed after the Bank of Japan kept its bond purchases unchanged in its open market operation held today. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 0.082 percent, the yield on the long-term 30-year note dipped nearly 1/2 basis point to 0.832 percent and the yield on short-term 2-year rose 1/2 basis point to -0.130 percent.

The Australian government bonds slumped as investors preferred riskier assets following a rise in Westpac’s consumer sentiment for January. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 2.761 percent, the yield on the long-term 30-year note climbed 1/2 basis point to 3.446 percent and the yield on short-term 2-year up 1-1/2 basis points to 2.089 percent.

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