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Europe Roundup: Sterling eases as investors eye vote on early election, euro tumbles as EZ growth halves in Q2, markets await U.S. non-farm payroll report - Friday, September 6th, 2019

Market Roundup

  • UK PM Johnson says he will not contemplate resigning
  • UK carmakers urge Brexit delay rather than no-deal exit
  • Euro zone's slowing growth confirmed, hit by weak trade

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Labor Department releases nonfarm payrolls report for the month of August. The report is likely to show 158,000 jobs were added compared with an increase of 164,000 in July.
  • (0830 ET/1230 GMT) The U.S. Bureau of Labor Statistics will release labor force participation rate for the month of August. The rate stood at 63 percent in the previous month.
  • (0830 ET/1230 GMT) The U.S. Labor Department is expected to report that the unemployment rate remained steady at 3.7 percent in August.
  • (0830 ET/1230 GMT) The United States' average hourly earnings are likely to rise 0.3 percent in August.
  • (0830 ET/1230 GMT) Statistics Canada releases the employment report for August. The economy is likely to have added 15,000 jobs, compared to a decline of 24,200 jobs in July, while the participation rate stood at 65.6 percent in the same month.
  • (0830 ET/1230 GMT) Canada's unemployment rate is expected to remain steady at 5.7 percent in August.
  • (1000 ET/1400 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of August. The index posted a reading of 54.2 in the prior month.
  • (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events Ahead

  • (1230 ET/1630 GMT) Federal Reserve Chairman Jerome H. Powell gives a speech
  • (1230 ET/1630 GMT) The Swiss National Bank Chairman of the Governing Board Thomas J. Jordan's speech

FX Beat

DXY: The dollar index surged, rebounding from a 1-week low hit in the previous session as U.S data showing private employers’ payrolls rose and the growth of the services sector accelerated in August boosted investors’ appetite for riskier assets. However, expectations that the Federal Reserve would cut U.S. interest rates this month limited the upside. The greenback against a basket of currencies traded 0.1 percent up at 98.51, having touched a low of 98.09 on Thursday, its lowest since August 28.

EUR/USD: The euro declined as investors sentiment weakened after data showed Eurozone growth halved in the second quarter of this year as Germany’s economy shrank and trade slowed. Moreover, an unexpected fall in Germany's industrial output in July, adding to signs that manufacturers in the German economy are struggling. The European currency traded 0.1 percent down at 1.1025, having touched a high of 1.1084 on Thursday, its highest since August 29. Immediate resistance is located at 1.1090 (21-DMA), a break above targets 1.1116 (August 27 High). On the downside, support is seen at 1.0999 (5-DMA), a break below could drag it below 1.0963 (August 30 High).

USD/JPY: The dollar surged, extending gains for the third straight session after the U.S. reported strong economic data and political tension eased. Investors now await a U.S. non-farm payrolls report due later, which is expected to show 158,000 jobs were added and the unemployment rate remained unchanged at 3.7 percent in August. The major was trading 0.1 percent up at 106.98, having hit a high of 107.23 on Thursday, its highest since August 2. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. Nonfarm payrolls, unemployment report, and Fed Chair Powell's speech. Immediate resistance is located at 107.56 (August 2 High), a break above targets 108.00. On the downside, support is seen at 106.33 (5-DMA), a break below could take it lower at 105.73 (September 3 Low).

GBP/USD: Sterling plunged, hovering away from a 1-month peak hit in the previous session, as the British opposition parties will discuss how to respond to Boris Johnson’s bid to call a snap election after the prime minister said he would not delay the planned October 31 departure from the European Union. The major traded 0.2 percent down at 1.2300, having hit a high of 1.2353 on Thursday, it’s highest since July 29. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2383 (July 29 High), a break above could take it near 1.2456 (July 17 High). On the downside, support is seen at 1.2205 (10-DMA), a break below targets 1.2139 (August 30 Low). Against the euro, the pound was trading 0.2 percent down at 89.57 pence, having hit a high of 89.41 earlier, it’s highest since July 25.

USD/CHF: The Swiss franc declined, extending previous session losses, as robust economic data from the United States and positive signs on U.S.-China trade talks boosted appetite for riskier assets. The major trades 0.6 percent up at 0.9914, having touched a high of 0.9917 earlier, it’s highest since Sept. 3. On the higher side, near-term resistance is around 0.9949 (July 31 High) and any break above will take the pair to next level till 0.9975 (August 1 High). The near-term support is around 0.9775 (August 27 High), and any close below that level will drag it till 0.9737 (August 8 Low).

Equities Recap

European shares advanced, as risk sentiment improved after Beijing and Washington agreed to hold trade talks in early-October.

The pan-European STOXX 600 index rallied 0.2 percent at 386.54 points, while the FTSEurofirst 300 surged 0.2 percent to 1,521.22 points.

Britain's FTSE 100 trades 0.05 percent up at 7,272.53 points, while mid-cap FTSE 250 gained 0.05 to 19,655.21 points.

Germany's DAX rose 0.5 percent at 12,190.61 points; France's CAC 40 trades 0.1 percent higher at 5,597.17 points.

Commodities Recap

Crude oil prices declined as U.S.-China trade tensions continued to weigh on sentiment despite recent diplomatic progress. International benchmark Brent crude was trading 1.8 percent lower at $59.39 per barrel by 1115 GMT, having hit a high of $62.37 the day before, its highest since August 2. U.S. West Texas Intermediate was trading 1.8 percent up at $55.12 a barrel, after rising as high as $57.72 on Thursday, its highest since August 1.

Gold prices plunged by 1 percent, putting it on track for its second weekly fall, as robust economic data from the United States and the planned resumption of trade talks between Washington and Beijing boosted appetite for riskier assets. Spot gold was trading 0.9 percent lower at $1,505.97 per ounce by 1117 GMT, having touched a low of $1,502.67 earlier, its lowest since August 23. The metal fell over 2 percent on Thursday and was down 0.9 percent so far this week. U.S. gold futures slid 0.8 percent to $1,513.30.

Treasuries Recap

The Euro zone bond yields inched down ahead of a key ECB meeting and stronger U.S. data all tempering demand for fixed income. Germany’s 10-year bond yield dipped 2 basis points to -0.61 percent, having jumped 8.5 basis points on Thursday in its biggest one-day rise since June 2018. It is up 10 bps on the week and set for one its biggest weekly jumps of the year so far. Germany’s 30-year bond is within striking distance of positive yield territory.

The Japanese government bond yields rose in line with U.S. Treasuries. The benchmark 10-year JGB futures fell 0.12 points to 154.92. The 10-year cash JGB yield rose 3 basis points to minus 0.245 percent.

In the superlong zone, the 20-year JGB yield advanced 4.5 basis points to 0.100 percent, while the 30-year yield jumped 7 basis points to 0.200 percent and the 40-year bond yield surged 8 basis points to 0.225 percent.

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