Europe Roundup: Sterling gains on better-than-expected retail sales, euro eases ahead of ECB policy meeting outcome, European shares trade in red - Thursday, December 14th, 2017

Market Roundup

• United Kingdom Nov 2017 retail sales yy increase to 1.6 % (forecast 0.3 %) vs previous -0.3 %
   
• United Kingdom Nov 2017 retail sales ex-fuel yy increase to 1.5 % (forecast 0.4 %) vs previous -0.3 %
   
• United Kingdom Nov 2017 retail sales ex-fuel mm increase to 1.2 % (forecast 0.5 %) vs previous 0.4 % (revised from 0.1 %)
   
• United Kingdom Nov 2017 retail sales mm increase to 1.1 % (forecast 0.4 %) vs previous 0.5 % (revised from 0.3 %)
   
• Eurozone Dec 2017 Markit composite flash PMI increase to 58 (forecast 57.2) vs previous 57.5
   
• Eurozone Dec 2017 Markit service flash PMI increase to 56.5 (forecast 56) vs previous 56.2
   
• Eurozone Dec 2017 Markit manufacturing flash PMI increase to 60.6 (forecast 59.8) vs previous 60.1
   
• Germany Dec 2017 Markit manufacturing flash PMI increase to 63.3 (forecast 62) vs previous 62.5
   
• Germany Dec 2017 Markit service flash PMI increase to 55.8 (forecast 54.6) vs previous 54.3
   
• Germany Dec 2017 Markit composite flash PMI increase to 58.7 (forecast 57.2) vs previous 57.3
   
• France Dec 2017 Markit service flash PMI decrease to 59.4 (forecast 59.9) vs previous 60.4
   
• France Dec 2017 Markit manufacturing flash PMI increase to 59.3 (forecast 57.2) vs previous 57.7
   
• Indonesia Dec 2017 Lending Facility Rate stays flat at 5 % (forecast 5 %) vs previous 5 %
   
• Indonesia Dec 2017 Deposit Facility Rate stays flat at 3.5 % (forecast 3.5 %) vs previous 3.5 %
• Indonesia Dec 2017 7-day Reverse Repo stays flat at 4.25 % (forecast 4.25 %) vs previous 4.25 %
  ​

Economic Data Ahead

• (0800 ET/1200 GMT) Bank of England policymakers will meet to vote on interest rate decision. The BoE is expected to keep rates on hold at 0.5 percent this month, after raising for the first time in more than a decade in November.
   
• (0745 ET/1245 GMT) The European Central Bank will announce its interest rate decision and unveil economic forecasts. The ECB is likely to keep its policy stance unchanged and reaffirm its October decision to halve asset buys from next year.
   
• (0830 ET/1330 GMT) The U.S. Commerce Department is expected to report that retail sales rose 0.3 percent in November, after advancing 0.3 percent in October. While excluding autos, retail sales are likely to have gained 0.6 percent, after surging 0.1 percent in the previous month.
   
• (0830 ET/1330 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 3,000 to a seasonally adjusted 239,000 for the week ended Dec. 8, while continuing claims for the week ended Dec. 1 is expected to decline to 1.900 million from 1.908 million.
   
• (0830 ET/1330 GMT) The U.S. Labor Department publishes import and export prices index for the month of November. The import prices are likely to have gained 0.7 percent after rising 0.2 percent in October, while exports are expected to have edged up 0.2 percent after staying flat in the prior month.
   
• (0830 ET/1330 GMT) The Statistics Canada is likely to report that New Housing Price Index (NHPI) rose 0.2 percent in October after posting similar gains in September.
   
• (0945 ET/1445 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of December. The index posted a final reading of 53.9 in the previous month.
   
• (0945 ET/1445 GMT) Financial firm Markit Economics is likely to report that preliminary U.S. service PMI business activity index rose to 54.0 in December after printing a final reading of 53.9 in November.
   
• (0945 ET/1445 GMT) Financial firm Markit releases preliminary U.S. composite PMI for the month of December. The index posted a final reading of 54.8 in the previous month.
   
• (1000 ET/1500 GMT) The U.S. Commerce Department is expected to report that business inventories declined 0.1 percent in October, after staying flat in September.
   
• (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending December 8.
   
• (1400 ET/1900 GMT) Mexico's central bank meets to decide its interest rate and is expected to raise interest rates by 25 basis points to 7.25 percent.
   
• (1630 ET/2130 GMT) New Zealand will release its Business PMI index for the month of November. The index stood at 57.2 in the previous month. 
   
• (1850 ET/2350 GMT) Bank of Japan releases its Tankan large manufacturing Index for the fourth-quarter. The index is expected to rise to 24 after it stood at 22 in the previous quarter.
   
• (1850 ET/2350 GMT)  Bank of Japan's Tankan Non-Manufacturing Index is expected to remain unchanged at 23 in the fourth-quarter.
   

Key Events Ahead

• (0830 ET/1330 GMT) European Central Bank President releases the monetary policy statement and gives a press conference.
   
• (1225 ET/1725 GMT) Bank of Canada Governor Stephen Poloz will give a speech.

FX Beat

DXY: The dollar index bounced back from a 1-week low hit earlier in the session amid a pickup in the U.S. Treasury bond yields. The greenback against a basket of currencies traded flat at 93.48, having touched a low of 93.33 earlier, its lowest since Dec. 6. FxWirePro's Hourly Dollar Strength Index stood at -93.46 (Slightly Bearish) by 1000 GMT.

EUR/USD: The euro turned lower after rising to a 1-week high earlier in the session, as investors cautiously awaited the European Central Bank policy meeting, where the central bank is seen likely to keep interest rates steady and reaffirm its existing monetary policy stance. The European currency traded 0.1 percent down at 1.1818, having touched a high of 1.1843 earlier, its highest since Dec. 6. FxWirePro's Hourly Euro Strength Index stood at -39.38 (Neutral) by 1000 GMT. The pair is facing strong resistance at 1.18548 (61.8% fibo) and any break above will take it to next level till 1.1900/19612 (Nov 27th, 2017 high). On the lower side, major support is around 1.1700 and any break below will drag the pair to next level till 1.1660/1.1600.

USD/JPY: The dollar rebounded after falling to a 5-day low in the previous session following the recovery in the U.S. 10-year treasury yield from the post-Fed low of 2.34 percent to 2.37 percent. The major was trading 0.2 percent up at 112.75, having hit a low of 112.46 on Wednesday, its lowest since Dec. 7. FxWirePro's Hourly Yen Strength Index stood at 45.95 (Neutral) by 1000 GMT. On the lower side, any close below 111 confirms minor weakness, a decline till 110/108.15 likely.  Any convincing close above 114 will take the pair to next level till 114.73/115.

GBP/USD: Sterling rallied to a 6-day high after data showed British retail sales grew much faster than expected in November as shoppers took advantage of Black Friday bargains. The economy's retail sales rose 1.1 percent on the month, up from growth of 0.5 percent in October and surpassing forecasts of a 0.4 percent rise. Sterling traded up at 1.3430, having hit a high of 1.3465 earlier, it’s highest since Dec. 8. FxWirePro's Hourly Sterling Strength Index stood at 100.93 (Highly Bullish) by 1000 GMT. On the lower side, near-term support is around 1.3300 and any break below will drag the pair to next level till 1.3225/1.3175. The near-term resistance is around 1.3550 and any break above will take it to next level till 1.3600/1.3680. Against the euro, the pound was trading 0.1 percent up at 88.07 pence, having hit a high of 86.89 pence on Friday, it’s highest since Jun. 9.

USD/CHF: The Swiss franc retreated from a 9-day high after the Swiss National Bank kept the target range for its benchmark three-month interest rate at minus 1.25 percent to minus 0.25 percent and maintained its ultra-loose monetary policy stance to combat the highly valued currency. The major trades 0.4 percent up at 0.9891, having touched a low of 0.9839 earlier, it’s lowest since Dec. 5. FxWirePro's Hourly Swiss Franc Strength Index stood at -97.00 (Slightly Bearish) by 1000 GMT. On the higher side, near-term resistance is around 0.98850 (233- H MA) and any break above will take the pair to next level till 0.9945/0.9977 (Dec 8th, 2017 high). The near-term support is around 0.9850 (15 H MA) and any violation below that level will drag it to next level till 0.9800/0.9770/0.9735.

AUD/USD: The Australian dollar advanced to an over 1-month peak on the back of stronger-than-expected Aussie jobs data and upbeat Chinese retail sales, industrial production and Foreign Direct Investment figures. The major trades 0.3 percent up at 0.7656, having hit a high of 0.7674 earlier; it’s highest since Nov. 10. FxWirePro's Hourly Aussie Strength Index stood at 78.46 (Highly Bullish) by 1000 GMT. On the lower side, the near term support is around 0.7500 and any convincing break below will drag the pair till 0.7435/0.7380. The near-term support is around 0.7575. The near-term resistance is around 0.7681 (233- day MA) and any break above targets 0.7730/0.7780.

Equities Recap

European stocks slumped, weighed down by weakness in bank stocks, while greenback bounced back from a 1-week low amid a rebound in the U.S. Treasury bond yields.

The pan-European STOXX 600 index eased 0.2 percent to 389.95 points, while the FTSEurofirst 300 index slumped 0.2 percent to 1,536.03 points.

Britain's FTSE 100 trades 0.2 percent lower at 7,482.61 points, while mid-cap FTSE 250 fell 0.3 percent to 19,997.20 points.

Germany's DAX eased 0.3 percent at 13,085.18 points; France's CAC 40 trades 0.2 percent down at 5,386.74 points.

Commodities Recap

Crude oil prices steadied, after easing from recent peaks in the previous sessions, as U.S. crude oil stockpiles fell by 5.1 million barrels in the week to Dec. 8, its fourth consecutive week of decline. International benchmark Brent crude was trading flat at $62.64 per barrel by 0942 GMT, having hit a high of $65.80 on Tuesday, its highest since Jul. 2015. U.S. West Texas Intermediate was trading 0.1 percent lower at $56.61 a barrel, after rising as high as $58.53 on Tuesday, its highest since Dec. 1.

Gold prices held gains after rising to a 1-week high earlier in the session, as the dollar weakened after the U.S. Federal Reserve raised benchmark rates for the third time this year as widely expected, but maintained its outlook of three rate increases in 2018 on low inflation concerns.  Spot gold was trading flat at $1,255.07 an ounce at 0946 GMT, after touching its highest since Dec. 7 at $1,258.93. U.S. gold futures were up 0.9 percent at $1,259.20.

Treasuries Recap

The U.S. Treasuries slumped after the Federal Reserve kept its interest rates outlook unchanged in its last monetary policy meeting of this year concluded yesterday. The yield on the benchmark 10-year Treasuries jumped 3 basis points to 2.37 percent, the super-long 30-year bond yields climbed nearly 1-1/2 basis points to 2.74 percent and the yield on the short-term 2-year traded 3 basis points higher at 1.81 percent.

The UK gilts lost ground after the country’s retail sales for the month of November cheered market expectations. The yield on the benchmark 10-year gilts, rose nearly 1 basis point to 1.22 percent, the super-long 30-year bond yields hovered around 1.78 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points higher at 0.49 percent.

The German bunds traded tad lower after the country’s manufacturing PMI for the month of December topped market consensus, adding to distraction in demand in the debt market. The German 10-year bond yields, which move inversely to its price, remained nearly flat at 0.32 percent, the yield on 30-year note traded tad higher at 1.15 percent and the yield on short-term 2-year remained steady at -0.73 percent.

The New Zealand government bonds jumped sharply at the time of closing after the country’s coalition government revised down its economic and fiscal forecasts in its half-yearly update. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 6 basis points to 2.78 percent, the yield on 20-year note plunged 7-1/2 basis points to 3.32 percent while the yield on short-term 2-year ended 1 basis point lower at 1.95 percent.

The Japanese government bonds traded nearly flat as investors remain remained sidelined in any major deal ahead of the upcoming Christmas holidays. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1/2 basis point to 0.045 percent, the yield on long-term 40-year declined nearly 1/2 basis point to 0.967 percent and the yield on short-term 3-year declined 1 basis point to -0.141 percent.

The Australian government bonds slumped following the weakness in the U.S. Treasuries after the Federal Reserve raised interest rates on Wednesday but left its rate outlook for the coming years unchanged even as policymakers projected a short-term jump in US economic growth from the Trump administration's proposed tax cuts. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 2 basis points to 2.563 percent, the yield on the long-term 30-year note climbed 2 basis points to 3.306 percent and the yield on short-term 2-year surged 5 basis points to 1.910 percent.