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Europe Roundup: Sterling firm above 1.3500, euro hits 1-week high on better-than-expected economic data, European shares off highs - Tuesday, September 19th, 2017

Market Roundup

  • EUR/USD 0.34%, USD/JPY 0.04%, GBP/USD 0.07%, EUR/GBP 0.27%
     
  • DXY -0.23%, DAX -0.1%, FTSE 0.33%, Brent 0.52%, Gold 0.15%
     
  • EUR/CHF rises to its highest since Jan 2015 at 1.1565
     
  • Germany Sep ZEW Economic Sentiment 17 vs 10, 12.5 forecast
     
  • Germany Sep ZEW Current Conditions 87.9 vs 86.7, 86.6 forecast
  • EZ Jul Current Account NSA 32.5B vs 28.1B, 29.8B revised
     
  • EZ Jul Current Account SA 25.1B vs 21.1B, 22.8B revised
     
  • France trims deficit outlook on firm growth
     
  • Oil steady on tighter Middle East supplies, as rising U.S. output weighs
     
  • Gold steady; markets brace for Fed meeting

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Commerce Department is likely to report that current account deficit narrowed to $115.1 billion in the second quarter from $116.8 billion in the previous quarter.
     
  • (0830 ET/1230 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to an annualized rate of 1.175 million units in August from 1.155 million units in July.
     
  • (0830 ET/1230 GMT) The U.S. building permits are likely to have decreased to a 1.220 million-unit pace in August from a 1.223 million-unit pace in July.
     
  • (0830 ET/1230 GMT) The U.S. Labor Department publishes import and export prices index for the month of August. The import prices are likely to have gained 0.4 percent after rising 0.1 percent in July, while exports are expected to have edged up 0.2 percent after increasing 0.4 percent in the prior month
     
  • (0830 ET/1230 GMT) Statistics Canada releases manufacturing shipments data for the month of July. Manufacturing sales are likely to have declined 1.6 percent after falling 1.8 percent in June.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.
     
  •  (1845 ET/2245 GMT) The Statistics New Zealand releases current account data for the second quarter. The economy is likely to post a deficit of $0.875 billion after recording a surplus of $0.244 billion in the previous quarter.
     
  • (1950 ET/2350 GMT) Japan's Ministry of Finance reports merchandise trade balance for the month of August. The economy's trade surplus is expected to have narrowed to 93.9 billion yen from 418.8 billion yen in July.

Key Events Ahead

  • (1300 ET/1700 GMT) The Federal Reserve's Federal Open Market Committee commences its two-day meeting on interest rates in Washington.
     
  • (1430 ET/1830 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.625 bn)
     
  • (1500 ET/1900 GMT) French President Emmanuel Macron speaks at a news conference on the sidelines of the United Nations General Assembly in New York.
     
  • N/A U.S. President Donald Trump will hold a series of meetings with world leaders on the sidelines of the U.N. General Assembly meeting in New York.
     

FX Beat

DXY: The dollar gained versus the Japanese yen and Swiss franc as easing geopolitical tensions boosted investors' appetite for riskier assets. The greenback against a basket of currencies traded 0.2 percent down at 91.87, having touched a high of 92.66 last week, its highest since Sept. 5. FxWirePro's Hourly Dollar Strength Index stood at -43.46 (Neutral) by 1000 GMT.

EUR/USD: The euro rose to a 1-week high after data showed German economic sentiment improved more than expected in September after falling for three consecutive months. Additionally, the major was also supported by a separate report showing the Eurozone's current account surplus widening in July. The European currency traded 0.4 percent up at 1.1993, having touched a high of 1.2006 earlier, its highest since Sept. 11. FxWirePro's Hourly Euro Strength Index stood at 75.86 (Slightly Bullish) by 1000 GMT. On the lower side, near-term intraday support is around 1.1850 (trend line joining 1.13400 and 1.13705) and any break below will drag the pair down till 1.18230 (Aug 31st, 2017 low)/1.1800. The major resistance is around 1.2100 and any break above confirms bullish continuation, a jump till 1.2200.

USD/JPY: The dollar advanced to an 8-week high as investors awaited a two-day Federal Reserve policy meeting that commences later in the day for clues on its plans to move towards unwinding its $4.2-trillion portfolio of Treasuries and mortgage-backed securities. The major was trading 0.1 percent up at 111.67, having hit a high of 111.88 earlier in the session, its highest since Jul. 26. FxWirePro's Hourly Yen Strength Index stood at -173.37 (Highly Bearish) by 1000 GMT. On the lower side, any break below 108 confirms minor weakness, a decline till 106 likely. Any break above 111.76 (233 day MA) confirms minor bullishness, a jump till 112/112.19 likely.

GBP/USD: Sterling steadied above the 1.3500 handle, after declining nearly 1 percent in the previous session following Bank of England governor Mark Carney comments. On Monday, the BoE policymaker stated that the interest rates hikes in coming months would be limited and gradual. Sterling traded 0.1 percent up at 1.3508, having hit a high of 1.3618 in the prior session, its highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 164.06 (Highly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 1.36320 and any break above will take the pair till 1.3700/1.3750. The near-term support is around 1.34500 and any break below will drag the pair down till 1.3400/1.33180. Against the euro, the pound was trading 0.3 percent down at 88.79 pence, having hit a high of 87.74 pence last week, it’s highest since Jul. 17.

USD/CHF: The Swiss franc edged down, extending previous session losses, as easing geopolitical tensions supported improving investors' appetite for riskier assets. The major trades 0.2 percent up at 0.9627, having touched a high of 0.9705 last week, it’s highest since Aug. 16. FxWirePro's Hourly Swiss Franc Strength Index stood at -152.15 (Highly Bullish) by 1000 GMT. The short-term trend is still bullish as long as support 0.9535 holds and any break below will drag the pair down till 0.9525/0.9480/0.9420. The near-term resistance is around 0.9700 and any convincing break above will take it to next level till 0.97730/0.9808.

AUD/USD: The Australian dollar retreated from a 2-week low after the RBA's latest policy meeting minutes highlighted the need to balance the risk of high household debt and low CPI.  The Aussie trades 0.5 percent up 0.7997, having hit a low of 0.7940 on Monday, it’s lowest since Sept. 5. FxWirePro's Hourly Aussie Strength Index stood at 68.37 (Bullish) by 1000 GMT. On the lower side, near-term support is around 0.7938 (34- day EMA) and any close below will drag the pair till 0.7880 (55 day EMA). The near-term resistance is around 0.8125 and any break above targets 0.8200/0.8235.

Equities Recap

European shares eased from recent peaks, while the dollar rallied against the yen as traders awaited clues from a Federal Reserve meeting on the pace of monetary policy tightening in the United States.

The pan-European STOXX 600 index fell 0.1 percent to 381.65 points, while the FTSEurofirst 300 index eased 0.05 percent to 1,499.01 points.

Britain's FTSE 100 trades 0.4 percent up at 7,278.46 points, while mid-cap FTSE 250 gained 0.4 percent to 19,506.55 points.

Germany's DAX declined 0.1 percent at 12,546.55 points; France's CAC 40 trades 0.1 percent higher at 5,234.00 points.

Commodities Recap

Crude oil prices rose as OPEC producers Saudi Arabia and Iraq pointed to a reduction in supplies in order to tighten the market and balance prices.  International benchmark Brent crude was trading 0.6 percent up at $55.75 per barrel by 1001 GMT, having hit a high of $55.96 on Thursday, its strongest since Apr. 13. U.S. West Texas Intermediate was trading 1.1 percent up at $50.30 a barrel, after rising as high as $50.47 last week, its highest since May. 25.

Gold prices held firm above a two-week low, as the greenback eased, while investors cautiously awaited this week's Federal Reserve meeting, which is expected to provide more clues on the pace of U.S. monetary tightening.

Spot gold was trading 0.1 percent up at $1,308.41 per ounce by 1006 GMT, after falling to a low of $1,304.55 in the previous session, its lowest level since Aug 31. U.S. gold futures for December delivery were flat at$1,310.50 an ounce.

Treasuries Recap

The U.S. Treasuries remained tad higher as investors wait to watch the country’s President Donald Trump deliver a speech today by 14:30GMT, besides, the Federal Open Market Committee (FOMC) policy decision, scheduled to be unveiled on September 20 by 18:00GMT. The yield on the benchmark 10-year Treasury slipped nearly 1 basis point to 2.22 percent, the super-long 30-year bond yields down 1 basis point at 2.79 percent while the yield on short-term 2-year note traded nearly flat at 1.39 percent.

The UK gilts jumped after reading the Bank of England (BoE) Governor Mark Carney’s speech, where he reiterated that some BoE tightening may be need in coming months, emphasizing again that rate hikes are expected to be gradual and limited. Carney also warned that Brexit will reduce the supply capacity and trade openness the U.K. economy. The yield on the benchmark 10-year gilts, fell nearly 1-1/2 basis points to 1.29 percent, the super-long 30-year bond yields slumped 2 basis points to 1.88 percent and the yield on the short-term 2-year traded nearly 2-1/2 basis points lower at 0.40 percent.

The German government bunds strengthened after investors have largely shrugged-off the surge in the country’s economic sentiment indicator, released by ZEW. The German 10-year bond yields, which moves inversely to its price, slipped 1 basis point to 0.45 percent, the yield on 30-year note fell 1-1/2 basis points to 1.23 percent and the yield on short-term 2-year traded nearly 1 basis point lower at -0.68 percent.

The Japanese government bonds traded tad higher as investors wait to watch the Bank of Japan’s monetary policy decision for the month of September, scheduled to be unveiled on September 21. The yield on the benchmark 10-year Treasury note slipped 1 basis point to 0.03 percent, the yield on long-term 30-year also fell nearly 1 basis point to 0.84 percent and the yield on short-term 2-year traded flat at -0.14 percent.

The New Zealand bonds ended Tuesday session on a weaker note as investors wait to watch the country’s second-quarter gross domestic product (GDP), scheduled to be released on September 20 by 22:45GMT, besides, the GlobalDairyTrade price auction, due on September 19 for further direction in the bond market. At the time of closing, the yield on the benchmark 10-year Treasury note slipped 1 basis point to 3.01 percent, the yield on 7-year note also fell 1 basis point to 2.86 percent while the yield on short-term 2-year ended 1/2 basis point higher at 2.12 percent.

The Australian bonds eased losses after the Reserve Bank of Australia (RBA) maintained a balanced view of the economy in the September monetary policy meeting minutes, released early today. The yield on the benchmark 10-year Treasury note rose 1 basis point to 2.82 percent, the yield on 15-year note climbed nearly 1 basis point to 3.11 percent and the yield on short-term 2-year also traded 1 basis point higher at 2.00 percent

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