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Europe Roundup: Sterling gains despite downbeat construction PMI, greenback at 1-week peak on U.S.-China trade deal hopes, European shares surge - Monday, March 4th, 2019

Market Roundup

  • Eurozone Jan 2019 producer prices yy stays flat at 3 % (forecast 2.9 %) vs previous 3 %
     
  • Eurozone Jan 2019 producer prices mm increase to 0.4 % (forecast 0.3 %) vs previous -0.8 %
     
  • Eurozone Mar 2019 Sentix index increase to -2.2 diff.idx (forecast -3.1 diff.idx) vs previous -3.7 diff.idx
     
  • United Kingdom Feb 2019 Markit/CIPS construction PMI decrease to 49.5 diff.idx (forecast 50.3 diff.idx) vs previous 50.6 diff.idx
     

Economic Data Ahead

  • (0945 ET/1445 GMT) The NAPM-New York releases ISM-New York Index for the month of February. The index stood at 63.4 in the previous month.
     
  • (1000 ET/1500 GMT) The Commerce Department is likely to report that U.S. construction spending increased 0.2 percent in December after rising 0.8 percent in the previous month.
     

Key Events Ahead

  • No significant events scheduled

FX Beat

DXY: The dollar index rallied to a 1-week peak, as the United States and China appear close to a deal that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods. The greenback against a basket of currencies traded 0.2 percent up at 96.61, having touched a low of 95.82 on Thursday, its lowest since February 5. FxWirePro's Hourly Dollar Strength Index stood at 82.28 (Slightly Bullish) by 1000 GMT.

EUR/USD: The euro slumped to a 1-week, as the greenback rallied on reports that the United States and China are close to a deal to end a tariff row that has slowed global economic growth. The European currency traded 0.2 percent down at 1.1340, having touched a high of 1.1419 on Thursday, its highest since Feb. 5. FxWirePro's Hourly Euro Strength Index stood at -23.80 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1417 (Jan. 25 High), a break above targets 1.1443 (Jan. 28 High). On the downside, support is seen at 1.1316 (Feb. 22 Low), a break below could drag it till 1.1289 (Feb. 18 Low).

USD/JPY: The dollar rose, drifting towards 2-1/2 month peak touched in the prior session, on reports that the United States and China might reach a formal agreement at a summit around March 27. The major was trading 0.05 percent up at 111.93, having hit a high of 112.07, its highest since December 20.  FxWirePro's Hourly Yen Strength Index stood at -55.00 (Bullish) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. construction spending and New York business conditions index. Immediate resistance is located at 112.20, a break above targets 112.60 (Dec. 20 High). On the downside, support is seen at 111.18 (5-DMA), a break below could take it lower at 110.66 (Feb.28 Low).

GBP/USD: Sterling surged after media reports over the weekend indicated Britain was softening its demands of the European Union in renegotiating parts of the Brexit withdrawal deal. However, the upside was limited after data showed Britain's construction activity fell for the first time in almost a year last month, as Brexit uncertainty and a slow housing market delayed new building projects. The major traded 0.2 percent up at 1.3230, having hit a high of 1.3350 on Wednesday; it’s highest since July 9. FxWirePro's Hourly Sterling Strength Index stood at 81.06 (Slightly Bullish) 1000 GMT. Immediate resistance is located at 1.3300, a break above could take it near 1.3362 (July 9 High). On the downside, support is seen at 1.3136 (Jan 28 Low), a break below targets 1.3093 (Feb. 26 Low). Against the euro, the pound was trading 0.4 percent down at 85.68 pence, having hit a high of 85.28 on Wednesday, it’s highest since May 2017

USD/CHF: The Swiss franc eased, hovering way from a near 4-week peak touched last week, as growing optimism the United States and China will reach a trade agreement sent investors away from safe-haven assets. The major trades 0.2 percent up at 1.0008, having touched a low of 0.9926 on Thursday; it’s lowest since February 1. FxWirePro's Hourly Swiss Franc Strength Index stood at 50.55 (Bullish) by 1000 GMT. On the higher side, near-term resistance is around 1.0024 (February 22 High) and any break above will take the pair to next level till 1.0054 (February 18 High). The near-term support is around 0.9921 (January 25 Low), and any close below that level will drag it till 0.9889 (December 7 Low).

Equities Recap

European shares gained as optimism over a deal to end the U.S.-China trade war boosted investor risk sentiment.

The pan-European STOXX 600 index advanced 0.3 percent at 375.45 points, while the FTSEurofirst 300 index rallied 0.4 percent to 1,475.09 points.

Britain's FTSE 100 trades 0.4 percent up at 7,133.39 points, while mid-cap FTSE 250 surged 0.1 to 19,420.13 points.

Germany's DAX rose 0.05 percent at 11,604.83 points; France's CAC 40 trades 0.5 percent higher at 5,293.05 points

Commodities Recap

Crude oil prices rallied by more than 1 percent, boosted by output cuts by producer cartel OPEC and reports that the United States and China are close to a deal to end a tariff row. International benchmark Brent crude was trading 1.05 percent up at $65.86 per barrel by 1014 GMT, having hit a low of $64.29 on Tuesday, its lowest since February 14. U.S. West Texas Intermediate was trading 1.1 percent higher at $56.32 a barrel, after falling as low as $55.00 on Tuesday, its lowest since the February 15.

Gold prices slumped to an over 1-month low, as prospects of a trade deal between China and the United States dented the safe-havens demand. Spot gold eased 0.4 percent at $1,287.64 per ounce by 1018 GMT, having touched a low of $1,286.16 earlier, its lowest since January 25. U.S. gold futures were down 0.3 percent at $1,295.40.

Treasuries Recap

The U.S. Treasuries remained tad higher during the late European session amid a silent trading session that witnessed data of little economic significance. the main data focus this week will be Friday’s employment report for February, in which developments in the unemployment rate and wage growth will remain of particular interest. The yield on the benchmark 10-year Treasury yield slipped nearly 1 basis point to 2.748 percent, the super-long 30-year bond yields also edged nearly 1 basis point lower at 3.115 percent and the yield on the short-term 2-year traded tad lower at 2.555 percent.

The United Kingdom’s gilts suffered during the afternoon session, even as the country’s construction PMI for the month of February came in lower than market expectations and investors will now keep a close eye on the Bank of England (BoE) Governor Mark Carney’s speech, scheduled to be held on March 5 by 15:35GMT. The yield on the benchmark 10-year gilts, fell 2 basis points to 1.315 percent, the super-long 30-year bond yields also slipped nearly 2 basis points to 1.819 percent and the yield on the short-term 2-year too edged 2 basis points down to 0.818 percent.

The German bunds remained nearly flat during European session amid a muted trading session that witnessed data of little economic significance ahead of Eurozone’s retail sales for the month of January, scheduled to be released on March 5 by 10:00GMT. The German 10-year bond yields, which move inversely to its price, remained flat at 0.516 percent, the yield on 30-year note hovered around 0.816 percent and the yield on short-term 2-year rose 1 basis point to -0.516 percent.

The Japanese government bonds remained mixed towards the close of Asian session on the first trading day of the week as investors await the country’s 10-year and 30-year auctions, scheduled to be held on March 5 and 7 at 03:35GMT respectively. The yield on the benchmark 10-year JGB note, which moves inversely to its price, remained flat at -0.001 percent, the yield on the long-term 30-year fell 2 basis points to 0.641 percent and the yield on short-term 2-year remained tad lower at -0.141 percent.

The Australian government bonds plunged during Asian trading session tracking a similar movement in the United States’ counterpart as investors still remain hopeful over a trade agreement between the latter and China before March 27.  The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 4-1/5 basis points to 2.192 percent, the yield on the long-term 30-year bond also surged 4-1/2 basis points to trade at 2.757 percent and the yield on short-term 2-year climbed nearly 2-1/2 basis points to 1.759 percent.

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