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Europe Roundup: Sterling eases on UK political uncertainty, euro rebounds as German business morale improves, European shares rally - Monday, March 25th, 2019

Market Roundup

  • EUR/USD 0.05%, USD/JPY 0.28%, GBP/USD -0.26%, EUR/GBP 0.37%
     
  • DXY -0.1%, DAX 0.2%, FTSE -0.1%, Brent -0.16%, Gold 0.36%
     
  • 'Time's up, Theresa'? PM urged to set her own exit date to get Brexit deal
     
  • Former Fed chair Yellen says yield curve may signal need to cut rates, not a recession
     
  • Fed's Evans says have to be nervous about yield curve, but U.S. economy solid
     
  • ECB's monetary policy not reached its limit: ECB's Coeure
     
  • U.S. Fed's Harker still sees one rate hike 'at most' this year
     
  • Euro, bond yields, stocks rise after German Ifo rise
     
  • Germany Mar Ifo Business Climate New, 99.6, 98.5 f'cast, 98.5 prev, 98.7 r'vsd
     
  • Germany Mar Ifo Curr Conditions New, 103.8, 102.9 f'cast, 103.4 prev, 103.6 r'vsd
     
  • Germany Mar Ifo Expectations New, 95.6, 94.0 f'cast, 93.8 prev, 94.0 r'vsd
     
  • Mueller finds no Trump-Russia conspiracy but some questions left unresolved
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The Federal Reserve Bank of Chicago will release its Chicago Fed National Activity Index (CFNAI) for the month of February. The index stood at -0.43 in the prior month.
     
  • (1030 ET/1430 GMT) The Dallas Fed releases its Manufacturing Business Index for the month of March. The index posted a rise of 13.1 percent in the previous month.
     

Key Events Ahead

  • (1950 ET/2350 GMT) BoJ to release summary of opinions from board members at its March 14-15 policy meeting in Tokyo

FX Beat

DXY: The dollar index rallied after U.S. Special Counsel Robert Mueller concluded that nobody associated with President Donald Trump's campaign conspired with Russia during the 2016 presidential election, The greenback against a basket of currencies traded 0.1 percent up at 96.62, having touched a peak of 96.81 on Friday, its highest since Mar. 14. FxWirePro's Hourly Dollar Strength Index stood at 20.78 (Neutral) by 1100 GMT.

EUR/USD: The euro rebounded from an over 1-week low after data showed German business morale improved unexpectedly in March after six consecutive drops, indicating that the economy is likely to pick up in the coming months. The European currency traded 0.05 percent up at 1.1306, having touched a low of 1.1273 on Friday, its lowest since Mar. 12. FxWirePro's Hourly Euro Strength Index stood at -123.78 (Highly Bearish) by 1100 GMT. Immediate resistance is located at 1.1344 (Mar. 14 High), a break above targets 1.1408 (Mar. 1 High). On the downside, support is seen at 1.1273 (Mar. 22 Low), a break below could drag it till 1.1221 (Mar. 11 Low).

USD/JPY: The dollar bounced back from a 1-1/2 month trough after Chicago Federal Reserve Bank President Charles Evans stated that he was still confident about the U.S. economic growth outlook. However, the upside appears limited amid concerns about a potential U.S. recession and decelerating global growth. The major was trading 0.2 percent up at 110.13, having hit a low of 109.70, its lowest since Feb. 8. FxWirePro's Hourly Yen Strength Index stood at 145.39 (Neutral) by 1100 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the Chicago Fed national activity index, and Dallas Fed Manufacturing business index. Immediate resistance is located at 110.46 (Feb. 11 High), a break above targets 111.07 (Feb. 26 High). On the downside, support is seen at 109.63 (Dec. 31 Low), a break below could take it lower at 109.55 (Feb. 6 Low).

GBP/USD: Sterling slumped, as pressure grew on Prime Minister Theresa May to step down from office ahead of parliamentary votes on Brexit. The major traded 0.2 percent down at 1.3174, having hit a low of 1.3003 on Thursday; it’s lowest since Mar. 11. FxWirePro's Hourly Sterling Strength Index stood at -22.46 (Neutral) 1100 GMT. Immediate resistance is located at 1.3254 (Mar. 4 High), a break above could take it near 1.3311 (Mar. 19 High). On the downside, support is seen at 1.3146 (Mar. 20 Low), a break below targets 1.3068 (Mar. 7 Low). Against the euro, the pound was trading 0.4 percent down at 85.83 pence, having hit a low of 87.22 on Thursday, it’s lowest since Feb. 22.

USD/CHF: The Swiss franc eased, extending previous session losses, as the greenback surged on news that U.S. Special Counsel Robert Mueller had found no evidence of collusion between Russia and President Donald Trump's election campaign team. The major trades 0.1 percent up at 0.9939, having touched a low of 0.9894 on Wednesday; it’s lowest since Jan. 16. FxWirePro's Hourly Swiss Franc Strength Index stood at 133.17 (Highly Bullish) by 1100 GMT. On the higher side, near-term resistance is around 0.9986 (Jan. 22 High) and any break above will take the pair to next level till 1.0024 (Feb. 22 High). The near-term support is around 0.9895 (Jan.17 Low), and any close below that level will drag it till 0.9852 (Jan. 4 Low).

Equities Recap

European shares slumped on concerns over sluggish global growth, while the euro surged as an unexpected rise in German business sentiment eased fears of a recession in the economy.

The pan-European STOXX 600 index plunged 0.4 percent at 374.65 points, while the FTSEurofirst 300 index eased 0.3 percent to 1,474.20 points.

Britain's FTSE 100 trades 0.3 percent down at 7,183.61 points, while mid-cap FTSE 250 fell 0.6 to 18,884.45 points.

Germany's DAX declined 0.1 percent at 11,350.23 points; France's CAC 40 trades 0.2 percent lower at 5,262.18 points.

Commodities Recap

Crude oil prices declined, as concerns of a sharp economic slowdown offset support from tighter supply due to OPEC's production cuts and U.S. sanctions on Iran and Venezuela. International benchmark Brent crude was trading 0.1 percent up at $66.85 per barrel by 1113 GMT, having hit a high of $68.67 on Thursday, its highest since Nov. 13. U.S. West Texas Intermediate was trading 0.2 percent higher at $58.94 a barrel, after rising as high as $60.37 on Thursday, its highest since the Nov. 12.

Gold prices surged as investors' appetite for riskier assets faded on concerns about a potential U.S. recession and decelerating global growth. Spot gold gained 0.3 percent to $1,316.27 per ounce by 1116 GMT, having touched a high of $1,320.26 on Thursday, its highest since Feb 28. U.S. gold futures also added 0.3 percent to $1,316.50 an ounce.

Treasuries Recap

The U.S. Treasuries climbed during afternoon session, amid a muted trading session that is scheduled to witness data of little economic significance. However, the latest Chicago Fed national activity and Dallas Fed manufacturing indices can be watched out for. The yield on the benchmark 10-year Treasury yield rose 1-1/2 basis points to 2.469 percent, the super-long 30-year bond yields climbed nearly 2 basis points to 2.906 percent and the yield on the short-term 2-year traded tad higher at 2.337 percent.

The United Kingdom’s gilts continued to surge during the afternoon session, as investors still remain confused over the actual state of Brexit negotiations after leaders of the European Union had finally agreed to an extension of the Article 50 deadline to avoid a no-deal Brexit. The yield on the benchmark 10-year gilts, jumped 3-1/2 basis points to 1.046 percent, the super-long 30-year bond yields surged 3 basis points to 1.518 percent and the yield on the short-term 2-year also climbed 3-1/2 basis points to 0.687 percent.

The German bunds slid during European session after the country’s Ifo business climate index cheered market investors ahead of the short-term 2-year auction, scheduled to be held on March 26 by 10:40GMT, which shall provide further direction to the debt market. The German 10-year bond yields, which move inversely to its price, jumped nearly 2-1/2 basis points to -0.002 percent, the yield on 30-year note also surged 2-1/2 basis points to 0.618 percent and the yield on short-term 2-year traded tad higher at -0.559 percent

The Japanese government bonds closed higher tracking a partial inversion of the United States’ Treasury yield curve after the 3-month rate overtook the benchmark 10-year peer as investors remained concerned over a global economic downturn in the near-term. The yield on the benchmark 10-year JGB note, which moves inversely to its price, plunged nearly 9 basis points to -0.084 percent, the yield on the long-term 30-year suffered nearly 2-1/2 basis points to 0.507 percent and the yield on short-term 2-year slumped 18 basis points to -0.181 percent.

The Australian government bond yields plunged during Asian trading session as investors fretted about the risks of a global economic slowdown amid a partly inversion of the United States Treasury yield, seen at the end of last trading week. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 6-1/2 basis points to 1.781 percent, the yield on the long-term 30-year bond also slumped 6-1/2 basis points to 2.424 percent and the yield on short-term 2-year traded nearly 5 basis points lower at 1.452 percent.

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