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Europe Roundup: Sterling hits 1-1/2 year high above 1.4000, dollar weakens against yen following BoJ policy outcome, European shares rally - Tuesday, January 23rd, 2018

Market Roundup

  • United Kingdom Jan CBI trends - orders decrease to 14 (forecast 12 ) vs previous 17
     
  • Germany Jan ZEW current conditions increase to 95.2 (forecast 89.8 ) vs previous 89.3
     
  • Germany Jan ZEW economic sentiment increase to 20.4 (forecast 17.8 ) vs previous 17.4
     
  • United Kingdom dec PSNB, mm GBP decrease to 0.979 bln gb (forecast 4.4 bln gb) vs previous 6.645 bln gb (revised from 8.118 bln gb)
     
  • United Kingdom dec PSNCR, mm GBP increase to 25.13 bln gb vs previous 13.152 bln gb (revised from 12.933 bln gb)
     
  • United Kingdom dec PSNB ex banks GBP decrease to 2.591 bln gb (forecast 5 bln gb) vs previous 8.257 bln gb (revised from 8.694 bln gb)

Economic Data Ahead

  • (1000 ET/1500 GMT) Federal Reserve Bank of Richmond will publish it Manufacturing Index for January. The index posted a rise of 20 in the prior month.

  • (1000 ET/1500 GMT) The European Commission releases Eurozone's preliminary Consumer Confidence reading for the month of January. The index posted a final reading of 0.5 in the prior month.
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance reports merchandise trade balance for the month of December. The economy's trade surplus is expected to expand to 530.0 billion yen from 113.4 billion yen in November.
     

Key Events Ahead

  • N/A The annual meeting of the World Economic Forum under the banner "Creating a Shared Future in a Fractured World" at Davos.
     
  • N/A U.S., Mexican and Canadian officials meet in Montreal for a week in the sixth and last round of talks to modernize the 1994 North American Free Trade Agreement (NAFTA).
     
  • (1000 ET/1500 GMT) Senate Banking Committee holds a hearing on the nomination of Marvin Goodfriend to be a member of the Federal Reserve Board of Governors in Washington.
     
  • (1830 ET/2330 GMT) Federal Reserve Bank of Chicago President Charles Evans gives introductory remarks before the Chicago Council on the Global Affairs conference, "The Future of Monetary Policy: Embracing the Unconventional."
     

FX Beat

DXY: The dollar index steadied near 3-year lows, as some investors speculated that its recent decline may come to an end amid growing concern over the U.S. stance on global trade. The greenback against a basket of currencies traded 0.1 percent up at 90.45, having touched a low of 90.11 on Thursday, its lowest since January 2015. FxWirePro's Hourly Dollar Strength Index stood at 14.11 (Neutral) by 1000 GMT.

EUR/USD: The euro eased after the latest ZEW study showed that the ECB is forced to buy more debt from countries such as France, Spain, and Italy due to a shortage of bonds from less-indebted nations like Germany and the Baltic States.  The European currency traded 0.1 percent down at 1.2246, having touched a high of 1.2322 on Wednesday, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at -49.53 (neutral) by 1000 GMT. Immediate resistance is located at 1.2300, a break above targets 1.2370. On the downside, support is seen at 1.2120 (50.0% retracement of 1.1916 and 1.2322), a break below could drag it lower 1.2072 (38.2% retracement).

USD/JPY: The dollar slumped against the Japanese yen after Bank of Japan Governor Haruhiko Kuroda reiterated his commitment to monetary easing. The major was trading 0.3 percent down at 110.65, having hit a low of 110.19 on Wednesday, its lowest since Sept 15. FxWirePro's Hourly Yen Strength Index stood at 89.31 (Slightly Bullish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the Richmond Fed manufacturing index for further momentum. Immediate resistance is located at 111.41 (38.2% retracement of 110.19 and 113.38), a break above targets 111.78 (50.0% retracement). On the downside, support is seen at 110.32 (Jan. 15 Low), a break below could take it lower 110.00.

GBP/USD: Sterling slightly eased after rising to a 1-1/2 month high above the 1.4000 handle, despite upbeat UK public finances data and positive comments delivered by Britain's Finance Minister Hammond. The major traded 0.2 percent down at 1.3952, having hit a high of 1.4003 earlier, it’s highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 63.86 (Bullish) by 1000 GMT. Immediate resistance is located at 1.4020, a break above could take it near 1.4050. On the downside, support is seen at 1.3869 (5-DMA), a break below targets 1.3795 (61.8% retracement of 1.3458 and 1.4003). Against the euro, the pound was trading 0.1 percent down at 87.77 pence, having hit a high of 87.61 pence earlier, it’s highest since Dec. 15.

USD/CHF: The Swiss franc eased as the greenback against a basket of currencies gained after the U.S. House of Representatives passed a short-term measure on Monday to lift a three-day government shutdown. The major trades flat at 0.9618, having touched a low of 0.9535 on Friday, it’s lowest since Sept. 11. On the higher side, near-term resistance is around 0.9659 (61.8% retracement of 0.9845 and 0.9535) and any break above will take the pair to next level till 0.9676 (10-DMA). The near-term support is around 0.9530 and any close below that level will drag it to next level till 0.9470.

Equities Recap

European shares surged to record highs, while the greenback steadied near a 3-year low against a basket of currencies after U.S. senators struck a deal to end a 3-day government shutdown.

The pan-European STOXX 600 index gained 0.3 percent to 403.24 points, while the FTSEurofirst 300 index edged up 0.3 percent to 1,585.69 points.

Britain's FTSE 100 trades 0.3 percent higher at 7,739.23 points, while mid-cap FTSE 250 gained 0.1 percent to 20,684.36 points.

Germany's DAX rose 0.9 percent at 13,579.42 points; France's CAC 40 trades 0.1 percent up at 5,549.05 points.

Commodities Recap

Crude oil prices steadied, supported by healthy economic growth and ongoing supply cuts by a group of exporters including OPEC and Russia. International benchmark Brent crude was trading flat at $69.28 per barrel by 1041 GMT, having hit a low of $68.26 on Friday, its lowest since Jan. 9. U.S. West Texas Intermediate was trading 0.1 percent down at $63.84 a barrel, after easing as low as $62.87 on Friday, its lowest since Jan. 9.

Gold prices rose as the dollar hovered around three-year lows following a U.S. government shutdown came to a halt. Spot gold gained 0.2 percent up at $1,336.53 an ounce by 1044 GMT, having touched its weakest level since Jan. 12 at $1,324.15 on Thursday. U.S. gold futures for February delivery climbed 0.3 percent to $1,335.70 per ounce.

Treasuries Recap

The U.S. Treasuries sharply climbed on persisting worries over the government shutdown despite a vote by the Congress on Monday to end a three-day US government shutdown, approving the latest short-term funding bill as Democrats accepted promises from Republicans for a broad debate later on the future of young illegal immigrants. The yield on the benchmark 10-year Treasuries slumped 3 basis points to 2.63 percent, the super-long 30-year bond yields also plunged nearly 3 basis points to 2.90 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points lower at 2.06 percent.

The UK gilts jumped after the country "agreed in principle" to a Norway-style Brexit transition period, which means that Britain will welcome all the rules of the European Union without any control to modify them. The yield on the benchmark 10-year gilts, slipped 1 basis point to 1.35 percent, the super-long 30-year bond yields also fell nearly 1 basis point to 1.85 percent and the yield on the short-term 2-year traded 1 basis point lower at 0.56 percent.

The German bunds gained as investors have largely shrugged off the country’s ZEW economic sentiment which rose more than expected in January, while the current conditions index hit a record high, bolstering optimism over the strength of the motor of the euro zone economy, industry data showed. The German 10-year bond yields, which move inversely to its price, fell 1 basis point to 0.55 percent, the yield on 30-year note also slipped 1 basis point to 1.29 percent and the yield on short-term 2-year hovered around -0.59 percent.

The New Zealand government bonds remained flat as investors remained sidelined in any major trading activity amid a muted session that witnessed data of least economic significance. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 2.99 percent, the yield on 20-year hovered around 3.46 percent and the yield on short-term 2-year too ended nearly flat at 2.05 percent.

The Japanese government bonds traded tad higher, after the Bank of Japan (BoJ) remained steady in its first monetary policy decision of this year, although striking a cautious tone over the economy’s ability to reach the 2 percent inflation goal. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 0.07 percent, the yield on the long-term 30-year note edged nearly 1 basis point lower at 0.82 percent and the yield on short-term 2-year traded nearly flat at -0.13 percent.

The Australian bonds jumped as investors poured into safe-haven assets after United States President Donald Trump ignited fears of a global trade war, offsetting upgrades to the world growth outlook and a deal to re-open the U.S. government. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 2-1/2 basis points to 2.82 percent, the yield on the long-term 30-year note also plunged 2-1/2 basis points to 3.46 percent and the yield on short-term 2-year traded nearly 2-1/2 basis points to 2.09 percent.

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105 %

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104.9 %

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107 %

January 31 00:00 UTC 166176166176m

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