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Europe Roundup: Sterling eases on Brexit concerns, dollar index at 1-week peak amid holiday-thinned trading, European shares nudge up - Monday, September 3rd, 2018

Market Roundup

  • EUR/USD 0.05%, USD/JPY 0.01%, GBP/USD -0.69%, EUR/GBP 0.70%
     
  • DXY 0.05%, DAX -0.30%, FTSE 0.75%, Brent 0.58%, Gold 0.06%
     
  • Trade worries help dollar settle at 1-week highs
     
  • Trade war could force heavier hand from China on yuan, says BNP Paribas FX strategist
     
  • Turkey's central bank promises action after inflation surges to 18 pct
     
  • Lira falls as inflation spikes, rupiah hits 20-yr low
     
  • EZ Aug Markit Manufacturing Final PMI, 54.6, 54.6 forecast, 54.6 previous
     
  • Germany Aug Markit/BME Manufacturing PMI, 55.9, 56.1 forecast, 56.1 previous
     
  • Great Britain Aug Markit/CIPS Manufacturing PMI, 52.8, 53.8 forecast, 54.0 previous, 53.8 revised
     
  • France Aug Markit Manufacturing PMI, 53.5, 53.7 forecast, 53.7 previous
     
  • Italy Aug Markit/ADACI Manufacturing PMI, 50.1, 51.1 forecast, 51.5 previous
     
  • Sterling falls as Brexit headlines sap demand
     
  • BoE's Carney still plans to step down in 2019 - UK PM May's spokesman
     
  • PM May's Brexit plan only credible one, can get parliament's support – spokesman
     

Economic Data Ahead

  • No major data release scheduled

Key Events Ahead

  • (0900 ET/1300 GMT) German Chancellor Merkel, Finance Minister Scholz meet social partners – Berlin

FX Beat

DXY: The dollar index held firm near a 1-week peak as traders aggressively bought the dollar amid worries over the escalation of trade disputes between the U.S. and its counterparts; and a deepening sell-off across emerging market currencies. The greenback against a basket of currencies trades flat at 95.13, having touched a high of 95.22, its highest since August 27. FxWirePro's Hourly Dollar Strength Index stood at 8.32 (Neural) by 1000 GMT.

EUR/USD: The euro rebounded from an over 1-week low touched in the previous session, after data showed Eurozone Markit manufacturing PMI came in at 54.6 in August, in line with previous month's reading and forecasts. The European currency traded 0.1 percent up at 1.1614, having touched a low of 1.1584 on Friday, its lowest since Aug 24. FxWirePro's Hourly Euro Strength Index stood at 41.45 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1670 (5-DMA), a break above targets 1.1747 (July 31 High). On the downside, support is seen at 1.1584 (21-DMA), a break below could drag it till 1.1550.

USD/JPY: The dollar steadied amid concern about the global trade after U.S.-Canada trade negotiations reached an impasse. On Saturday, U.S. President Donald Trump stated there was no need to keep Canada in the North American Free Trade Agreement and warned Congress not to interfere with the trade talks. The major was trading flat at 111.09, having hit a low of 110.68 on Friday, its lowest since August 23. FxWirePro's Hourly Yen Strength Index stood at 22.58 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, amid a lack of economic data from the U.S. docket. Immediate resistance is located at 111.31 (August 23 High), a break above targets 111.82 (August 29 High). On the downside, support is seen at 110.70 (August 9 Low), a break below could take it lower 110.43 (August 15 Low).

GBP/USD: Sterling slumps below the 1.2900 handle after data showed UK Markit Manufacturing PMI declined to 52.8 in August from 53.8 in July. Moreover, the selling pressure intensified after European Union chief Brexit negotiator Michel Barnier's comments stoked worries over the progress of Brexit negotiations. The major traded 0.5 percent down at 1.2878, having hit a high of 1.3042 on Thursday; it’s highest since August 3. FxWirePro's Hourly Sterling Strength Index stood at 3.45 (Neutral) 1000 GMT. Immediate resistance is located at 1.3083 (July 19 High), a break above could take it near 1.3159 (July 24 High). On the downside, support is seen at 1.2856 (21-DMA), a break below targets 1.2799 (August 24 Low). Against the euro, the pound was trading 0.7 percent down at 90.18 pence, having hit a high of 89.38 on Friday, it’s highest since August 17.

USD/CHF: The Swiss franc eased after rising to a 4-month peak in the previous session on the back of unstable emerging market currencies and worries over the further escalation of the U.S-China trade war. The major trades 0.1 percent up at 0.9698, having touched a low of 0.9652 on Friday, it’s lowest since April 18. FxWirePro's Hourly Swiss Franc Strength Index stood at 94.45 (Slightly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 0.9735 (38.2% retracement of 0.9866 and0.9652) and any break above will take the pair to next level till 0.9760 (50.0% retracement). The near-term support is around 0.9635 and any close below that level will drag it till 0.9600.

Equities Recap

European shares slightly edged up, however, worries about U.S. trade policy and concern over emerging markets limited the upside.

The pan-European STOXX 600 index gained 0.1 percent at 382.66 points, while the FTSEurofirst 300 index advanced 0.05 percent to 1,495.05 points.

Britain's FTSE 100 trades 0.7 percent up at 7,485.73 points, while mid-cap FTSE 250 rose 0.05 percent to 20,697.03 points.

Germany's DAX fell 0.1 percent at 12,348.60 points; France's CAC 40 trades 0.1 percent higher at 5,412.16 points.

Commodities Recap

Crude oil prices surged, supported by concerns that falling Iranian output will tighten markets once U.S. sanctions start from November, however, higher supply from OPEC and the United States limited gains. International benchmark Brent crude was trading 0.5 percent up at $78.05 per barrel by 1046 GMT, having hit a high of $78.20 on Friday, its highest since July 11. U.S. West Texas Intermediate was trading 0.05 percent higher at $69.91 a barrel, after rising as high as $70.47 on Thursday, its highest since August 8.

Gold price rose amid worries over intensifying Sino-U.S. trade tensions, especially after an impasse in trade talks between the United States and Canada. Spot gold was 0.1 percent up at $1,201.27 an ounce at 1050 GMT, having touched a low of $1,195.60, its lowest since August 24. U.S. gold futures fell 0.2 percent to $1,204.90 an ounce.

Treasuries Recap

The German bunds remained tad lower despite a fall in the country’s manufacturing PMI for the month of August, also missing market estimates. However, euro zone's manufacturing PMI for the similar period met expectations, unchanged from previous as well. The German 10-year bond yields, which move inversely to its price, hovered around 0.331 percent, the yield on 30-year note tad higher at 1.007 percent and the yield on short-term 2-year traded nearly 1 basis point up at -0.615 percent.

The New Zealand bonds closed tad lower amid a muted trading session that witnessed data of little economic significance ahead of the GlobalDairyTrade (GDT) price auction, scheduled to be held on September 4 for added direction in the debt market. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, rose 1/2 basis point to 2.545 percent, the yield on the long-term 20-year note remained tad higher at 2.870 percent and the yield on short-term 2-year too closed nearly 1/2 basis point up at 1.658 percent.

The Japanese government bonds suffered during late Asian session even as investors’ risk sentiments dented following the return of trade war worries over NAFTA negotiations during the weekend. The yield on the benchmark 10-year JGB note, which moves inversely to its price, jumped nearly 1-1/2 basis points to 0.116 percent, the yield on the long-term 30-year note also surged close to 1-1/2 basis points to 0.857 percent and the yield on short-term 2-year traded 1/2 basis point higher at -0.107 percent.

The Australian bonds gained on the first trading day as investors moved into safe-haven buying on worries of over further escalation of the U.S-China trade conflicts. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell 2-1/2 basis points to 2.504 percent, the yield on the long-term 30-year bond also dipped 3 basis points to 3.022 percent and the yield on short-term 1-year slumped 1 basis point to 1.956 percent.

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