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Europe Roundup: Sterling gains following upbeat economic data, euro rises above 1.0400 on better-than-expected CPI, investors await FOMC meeting minutes - Wednesday, January 4th, 2017

Market Roundup

  • GBP/USD 0.23%, USD/JPY -0.31%, EUR/USD 0.36%
     
  • DXY -0.25%, DAX -0.41%, Brent 0%, Iron -1.54% Gold 0.75%
     
  • Trump said he will hold a news conference on Jan 11 in NY
     
  • PBOC sets yuan mid-point at 6.9526 against dollar highest since mid-May 08 vs 6.9498 Tuesday
     
  • Abe not thinking of calling a snap election
     
  • Euro zone Dec Markit Service Final PMI 53.7 vs 53.1 previous, 53.1 expected
     
  • Euro zone Dec Markit Composite Final PMI 54.4 vs 53.9 previous, 53.9 expected
     
  • Euro zone Dec Inflation, Flash YY 1.1% vs 0.6 previous, 1 expected
     
  • Euro zone Dec Inflation Ex Food & Energy Flash 0.9% vs 0.8 previous, 0.8 expected
     
  • German Dec Markit Services PMI 54.3 vs 53.8 previous, 53.8 expected
     
  • German Dec Markit Composite Final PMI 55.2 vs 54.8 previous, 54.8 expected
     
  • Britain’s EU envoy deplores “muddled thinking” in resignation letter
     
  • Foreign investor net gilt purchases rose to 13mth high of GBP 15.608bln in Nov
     
  • UK Chancellor Hammond meeting Gulf leaders this week
     
  • British retailer Next cuts profit forecast and warns of tough times
     
  • UK Nov BOE Consumer Credit 1.926bln GB vs 1.618 previous, 1.6 expected
     
  • UK Nov Mortgage Lending 3.157bln GB vs 3.278 previous, 3.5 expected
     
  • UK Nov Mortgage Approvals 67.505k vs 67.518 previous, 67.4 expected
     
  • UK Nov M4 Money Supply 0.4% vs 1.1 previous
     
  • UK Dec Markit/CIPS Cons PMI 54.2 vs 52.8 previous, 52.8 expected

Economic Data Ahead

  • (0815 ET/1315 GMT) Payrolls processor ADP releases U.S. employment report for the month of December. The report is expected to show that 173,000 jobs were added as compared with 216,000 jobs in November.
     
  • (0945 ET/1445 GMT) The NAPM-New York releases ISM-New York Index for the month of December. The index stood at 52.5 in the previous month.
     
  • (1330 ET/1830 GMT) Autodata Corp releases U.S. auto sales figures for December, which are likely to have dropped to an annualized rate of 17.70 million units from 17.87 million units in November.
     
  • (1630 ET/2130 GMT) API reports its weekly crude oil stock.
     
  • (1930 ET/2330 GMT) The Australian Industry Group (AiG) releases its Performance of Services Index for the month of November. The index stood at 51.1 in October.
     

Key Events Ahead

  • (0945 ET/1445 GMT) FedTrade operation 30-year Ginnie Mae, max $1.300bn
     
  • (1400 ET/1900 GMT) The Federal Open Market Committee issues minutes of its December13-14 policy meeting,

FX Beat

DXY: The dollar eased versus its major peers, weighed down by a pull-back in the U.S Treasury yields. The greenback against a basket of currencies traded 0.25 percent lower at 102.96, hovering away from 2017 high of 103.82 hit in the previous session. FxWirePro's Hourly Dollar Strength Index stood at 37.61 (Neutral) by 1100 GMT.

EUR/USD: The euro rose above the 1.0400 handle, recovering from a 14-yeat low after data showed business activity across the euro zone grew at the fastest pace for five-and-a-half years. Moreover, the major was also supported by better-than-expected Eurozone's flash CPI reading, which came in at an annual rate of 1.1 percent in December, surpassing consensus of 1.0 percent, while the core figures rose 0.9 percent versus November’s 0.8 percent. The European currency traded 0.3 percent higher at 1.0433, having hit an intra-day high of 1.0445. FxWirePro's Hourly Euro Strength Index stood at -64.27 (Bearish) by 1000 GMT. The pair should break above 1.0504 for further jump till 1.0560/1.0600. Minor trend reversal is only above 1.06700. On the lower side, any break below 1.0380 will drag it till 1.0340/1.0260/1.0150 (161.8% retracement of 1.0352 and 1.0653).

USD/JPY: The dollar eased against the Japanese yen, as a retreat in Treasury yields weakened the bid tone around the greenback. However, prevalent risk-on sentiment, renewed optimism in the U.S. economy and Trump’s policy kept the downside limited in the major. The pair trades 0.1 percent down at 117.59, having touched a peak of 118.60 the previous session, its highest since Dec. 15. FxWirePro's Hourly Yen Strength Index stood at -90.11 (Slightly Bearish) by 1000 GMT. The major resistance is around 119 and break above targets 120. On the lower side, minor support is around 117.32 (daily Tenken-Sen) and any break below targets 116/115.14 (daily Kijun-Sen).

GBP/USD: Sterling gained, reversing almost all of its previous session losses, after data showed purchasing managers' index for the construction sector rose to 54.2 in December, beating forecasts of 53.0. The major was also strengthened by another report which indicated that British consumer borrowing picked up pace to grow at its fastest rate in more than 11 years in November, while the mortgage market retained upbeat momentum. Sterling trades 0.3 percent up at 1.2270, pulling further away from a 2-month low of 1.2199 hit in the previous session. FxWirePro's Hourly Sterling Strength Index stood at 35.67 (Neutral) by 1000 GMT. The pair is facing strong resistance at 1.2380 and any close above will take it till 1.2510/1.2550 (61.8% retracement of 1.27747 and 1.22005). On the lower side, short term support stands at 1.2200 and any break below will drag it down till 1.2150/1.2080 level. Against the euro, the pound trades 0.2 percent down at 85.15 pence, drifting away from a 2-week high of 84.50 touched the prior day.

USD/CHF: The Swiss franc gained, halting its 2-day losing streak, as the greenback declined following a fall in the Treasury yields. The dollar trades 0.1 percent down at 1.0261, having hit a high of 1.0335 the day before, its highest since Dec. 15. FxWirePro's Hourly Swiss Franc Strength Index stood at -41.26 (Neutral) by 1000 GMT. Any break below 1.000 will drag the pair down till 0.9909/0.9820 (200- day MA). On the higher side, break above 1.0335 will take it to next level till 1.04180 (161.8% retracement of 1.03435 and 1.02179) in the short term. The minor resistance is around 1.0250.

AUD/USD: The Australian dollar rallied to a 2-week high, amid slight U.S. dollar retracement in the wake of a decline in the U.S. treasury yields. Moreover, risk-on market sentiment and higher commodity prices also strengthened the bid tone around the major. The Aussie trades 0.7 percent up at 0.7270, having touched a high of 0.7279, it’s highest since Dec. 21. FxWirePro's Hourly Aussie Strength Index stood at 53.37 (Bullish) by 1100 GMT. On the higher side, any break above 0.7246 (23.6% retracement of 0.75233 and 0.71599) will take the pair to next level till 0.7300 (38.2% retracement of 0.75230 and 0.71599)/0.7316 (21- day MA). The major support is around 0.7150 and break below will drag it till 0.70690/0.7000.

NZD/USD: The New Zealand dollar gained as the greenback eased across the board following a pull-back in the U.S. Treasury yields. However, the upside remained capped, as divergent monetary policy outlook between the Fed and RBNZ weighed on the Kiwi bulls sentiments. The major trades 0.5 percent up at 0.6953, hovering away from a low of 0.6889 hit earlier in the day. FxWirePro's Hourly Kiwi Strength Index was at 61.84 (Bullish) by 1100 GMT. Immediate resistance is located at 0.6990 (Dec 19 High), a break above could take it over 0.7000. On the downside, support is seen at 0.6884, a break below could drag it till 0.6850.

Equities Recap

European shares eased from a one-year high as UK fashion retailer Next shares fell as much as 14 percent after a profit warning and caution on future trade.

MSCI's benchmark global index rose for a second day to trade 0.3 percent higher, while MSCI's broadest index of Asia-Pacific shares outside Japan climbed for a seventh straight day, gaining 0.3 percent.

The pan-European STOXX 600 index decreased 0.1 percent at 365.18 points, while the FTSEurofirst 300 index shed 0.05 percent at 1,443.77 points.

Britain's FTSE 100 trades 0.04 percent down at 7,174.51 points, while mid-cap FTSE 250 tumbled 0.20 percent at 18,106.83 points.

Germany's DAX edged down 0.2 percent at 11,553.97 points; France's CAC 40 trades 0.01 percent lower at 4,898.61 points.

Tokyo's Nikkei rallied 2.51 percent to 19,594.16 points, Australia's S&P/ASX 200 index fell 0.02 percent to 5,731.90 points and South Korea's KOSPI added 0.08 percent at 2,045.64 points.

Shanghai composite index gained 0.7 percent at 3,158.79 points, while CSI300 index rose 0.8 percent to 3,368.31 points. Hong Kong’s Hang Seng shed 0.1 percent at 22,134.47 points.

Commodities Recap

Crude oil prices rose, after touching a more than 1 year high on Tuesday, as top exporter Saudi Arabia likely to raise prices for its crude as part of planned supply cuts. International benchmark Brent crude was trading 0.5 percent higher at $55.88 per barrel by 0916 GMT, after rising as high as $58.35 in the previous session, its highest since July 2015. U.S. West Texas Intermediate crude rose 0.7 percent at $52.80 a barrel, having hit a high of $55.21 the prior day, its highest since July 2015.

Gold prices edged up, hitting near 4-week high as physical demand from major consumers China and India counterbalanced the impact of a stronger U.S. dollar. Spot gold was up 0.7 percent at $1,165.9 an ounce by 0925 GMT, having hit a high of $1,167.66, its highest since Dec. 9. U.S. gold futures climbed 0.1 percent to $1,163.20 per ounce.

Treasuries Recap

The U.S. Treasuries were narrowly mixed ahead of the Federal Reserve’s December monetary policy meeting minutes. The yield on the benchmark 10-year Treasury note hovered around 2.45 percent, the super-long 30-year bond yield fell nearly 1 basis point to 3.04 percent and the yield on short-term 2-year note bounced 1/2 basis point to 1.23 percent.

The UK gilts traded narrowly mixed despite upbeat December construction PMI, which accounts for around 5.9 percent of the country’s gross domestic product (GDP). The yield on the benchmark 10-year gilts fell 1/2 basis point to 1.32 percent, the super-long 40-year bond yield climbed 1/2 basis point to 1.80 percent and the yield on short-term 2-year bounced 1-1/2 basis points to 0.14 percent.

The German bunds traded range bound as investors remain sidelined in any big deal despite upbeat economic data. The yield on the benchmark 10-year bond hovered around 0.26 percent mark, the long-term 30-year bond yields dipped nearly 1 basis point to 1.01 percent and the yield on short-term 2-year bond remained steady at -0.78 percent.

The Japanese government bonds slumped following the current rout in the global debt market. Also, better-than-expected manufacturing PMI drove-out investors from safe-haven buying. The benchmark 10-year bond yield rose 1-1/2 basis points to 0.06 percent, the long-term 30-year bond yields climbed nearly 2 basis points to 0.73 percent and the yield on short-term 3-year note bounced 1/2 basis point to -0.14 percent.

The New Zealand government bonds traded higher as dairy prices posted their largest fall over ten months at the first dairy auction of 2017. In intraday trading, the yield on the benchmark 10-year bond fell 3 basis points to 3.31 percent, the yield on 7-year note also dipped 3 basis points to 2.92 percent and the yield on short-term 2-year note slid 3 basis points to 2.23 percent.

The Australian government bonds slumped as investors moved away from safe-haven buying amid weakness in the U.S. Treasuries. Also, sell-off in bonds was driven by a recovery in energy prices. The yield on the benchmark 10-year Treasury note rose 5 basis points to 2.80 percent, the yield on 15-year note climbed 4-1/2 basis points to 3.26 percent and the yield on short-term 2-year bounced 3 basis points to 1.93 percent.

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