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Europe Roundup: Sterling eases on persisting no-deal Brexit fears, greenback plunges amid renewed Fed rate cut expectations, investors eye U.S. nonfarm payroll report - Friday, October 4th, 2019

Market Roundup

  • Germany says any Brexit deal must prevent hard Irish border
     
  • Oil set for big weekly loss on demand worries
     
  • Gold gains on economic fears
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Labor Department releases nonfarm payrolls report for the month of September. The report is likely to show 145,000 jobs were added compared with an increase of 130,000 in August.
     
  • (0830 ET/1230 GMT) The U.S. Bureau of Labor Statistics will release labor force participation rate for the month of September. The rate stood at 63.2 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 September.
     
  • (0830 ET/1230 GMT) The United States' average hourly earnings are likely to rise 0.3 percent in September after climbing 0.4 percent in the month before.
     
  • (0830 ET/1230 GMT) The United States releases trade balance figures for the month of September. The economy's trade deficit is expected to have expanded to $54.5 billion from 54.0 billion in August.
     
  • (1300 ET/1800 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events Ahead

  • (0430 ET/0830 GMT) Federal Reserve Bank of Boston President Eric Rosengren's speech
     
  • (1400 ET/1800 GMT) Federal Reserve Chairman Jerome H. Powell's speech
     
  • (1410 ET/1810 GMT) Federal Reserve's Board of Governors member Lael Brainard gives a speech
     
  • (1545 ET/1945 GMT) Federal Reserve Bank of Kansas City President Esther L. George's speech
     
  • (1600 ET/2000 GMT) Vice-chair for supervision of the Federal Reserve Board of Governors Randal Keith Quarles gives a speech
     

FX Beat

DXY: The dollar index tumbled as disappointing U.S. manufacturing data fanned fears of a sharp global economic slowdown and stoked bets of further interest rate cuts. The greenback against a basket of currencies traded 0.2 percent down at 98.75, having touched a low of 98.64 on Thursday, its highest since September 25.

EUR/USD: The euro rose, extending gains for the fourth straight session after German Foreign Minister Heiko Maas stated that the European Union is likely to take retaliatory measures in response to new U.S. tariffs on European goods. The European currency traded 0.1 percent up at 1.0979 having touched a low of 1.0897 on Tuesday, its lowest since May 2017. Immediate resistance is located at 1.0994 (50% retracement of 1.1109 and 1.0879), a break above targets 1.1021 (61.8% retracement). On the downside, support is seen at 1.0938 (5-DMA), a break below could drag it below 1.0904.

USD/JPY: The dollar plunged as weak manufacturing and services data this week raised concerns the U.S. economy was losing momentum. The major was trading 0.2 percent down at 106.73, having hit a low of 106.48 the day before, its lowest since September 24. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. non-farm payroll, unemployment rate, trade balance and Fed officials' speeches. Immediate resistance is located at 107.56 (5-DMA), a break above targets 108.25 (September 13 High). On the downside, support is seen at 106.32 (September 5 Low), a break below could take it near at 105.82 (September 4 Low).

GBP/USD: Sterling eased as investors remained sceptical that the European Union will agree to Prime Minister Boris Johnson's offer and that an agreement can be struck before the leave date, 31 October. The major traded 0.1 percent down at 1.2321, having hit a high of 1.2413 the day before, 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 1.2400, a break above could take it near 1.2456. On the downside, support is seen at 1.2299 (5-DMA), a break below targets 1.2233 (September 9 Low). Against the euro, the pound was trading 0.3 percent down at 89.14 pence, having hit a low of 89.36 on Tuesday, it’s lowest since Sept. 13.

USD/CHF: The Swiss franc rose, halting a 2-day losing streak, as weak U.S. service sector survey deepened concerns over economic growth and bolstered bets of further rate cuts by the Federal Reserve. The major trades 0.5 percent down at 0.9937, having touched a high of 1.0027 the day before, it’s highest since May 31. On the higher side, near-term resistance is around 1.0042 and any break above will take the pair to next level till 1.0084. 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 nudged higher as investors were hopeful of further monetary easing from the US Federal Reserve in the wake of poor economic data.

The pan-European STOXX 600 index slumped 0.1 percent at 377.18 points, while the FTSEurofirst 300 rose 0.1 percent to 1,485.21 points.

Britain's FTSE 100 trades 0.3 percent up at 7,096.90 points, while mid-cap FTSE 250 rose 0.05 to 19,353.90 points.

Germany's DAX fell 0.05 percent at 11,919.34 points; France's CAC 40 trades 0.1 percent higher at 5,445.38 points.

Commodities Recap

Crude oil prices steadied but were still on track for a second consecutive weekly loss after declining on fears that slower global economic growth would dent energy demand.  International benchmark Brent crude was trading 0.7 percent up at $57.97 per barrel by 1053 GMT, having hit a low of $57.13 the day before, its lowest since August 7. U.S. West Texas Intermediate was trading 0.3 percent higher at $52.43 a barrel, after falling as low as $50.97 on Thursday, its lowest since August 7.

Gold prices rallied, extending gains for a fourth straight session, after weak U.S. data deepened concerns over economic growth, while investors eye a jobs report that could signal further U.S. rate cuts. Spot gold was trading 0.3 perent up at $1,504.13 an ounce at 1056 GMT, having touched a high of $1,519.53 on Thursday, its highest since September 25. U.S. gold futures were flat at $1,514.60.

Treasuries Recap

The U.S. Treasuries remained divided during the afternoon session ahead of the country’s employment report for the month of September, scheduled to be released today by 12:30GMT. In addition, a host of speeches by members of the Federal Open Market Committee (FOMC), namely, Rosengren, Bostic, George, Clarida and Quarles, due to be delivered later through the day shall add further direction to the debt market. However, of utmost importance, will be the speech from FOMC Chair Jerome Powell, at 18:00GMT, for detailed insight into the debt market. The yield on the benchmark 10-year Treasury yield slipped 1 basis point to 1.526 percent, the super-long 30-year bond yield lost 1-1/2 basis point to 2.023 percent while the yield on the short-term 2-year edged nearly 1 basis point higher to 1.394 percent

The German bunds remained tad higher during European trading session after markets returned from a week-day holiday amid otherwise, silent hours that barely witnessed data of any major economic significance. However, markets will be closely eyeing the United States’ economic data, due for release later today, which will provide further direction to the debt prices. The German 10-year bond yield, which move inversely to its price, slipped 1 basis point to -0.594 percent, the yield on 30-year note also edged 1 basis point down to -0.117 percent while the yield on short-term 2-year remained flat at -0.760 percent.

The Japanese government bonds closed tad higher on the last trading day of the week tracking a similar movement in the United States Treasuries, governing concerns over global economic slowdown after weaker-than-expected report on the strength of the U.S. services sector. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, remained tad lower at -0.211 percent, the yield on the long-term 30-year hovered around 0.354 percent and the yield on short-term 2-year suffered 4 basis points to -0.329 percent.

The Australian 10-year government bond yield slumped to 1-month low during Asian session tracking a similar movement in the United States Treasuries amid surging safe-haven demand as global central banks’ are in a policy easing frenzy. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, dipped 3-1/2 basis points to 0.894 percent, the yield on the long-term 30-year bond fell over 3 basis points to 1.512 percent and the yield on short-term 2-year down about 2 basis points lower at 0.631 percent.   

By Lactus Fernandes
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