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Europe Roundup: Sterling hits 1-1/2 year high despite downbeat retail sales, dollar index weighed down by U.S. government shutdown concerns, European shares rally - Friday, January 19th, 2018

Market Roundup

  • EUR/USD 0.25%, USD/JPY -0.4%, GBP/USD 0.01%, EUR/GBP 0.18%
     
  • DXY -0.17%, DAX 0.94%, FTSE 0.27%, Brent -0.58%, Gold 0.55%
     
  • Clock running out for U.S. Congress to avert government shutdown
     
  • Great Britain Retail Sales YY Dec, 1.4%, 3.0% forecast, 1.6% previous
     
  • Great Britain Retail Sales Ex-Fuel YY Dec, 1.3%, 3.0% forecast, 1.5% previous
     
  • Germany Producer Prices YYDec, 2.3% 2.3% forecast, 2.5% previous
     
  • EU Current Account NSA, EUR Nov, 37.8B, 35.9B previous
     
  • EU Current Account SA, EUR Nov, 32.5B, 35.9B previous
     
  • Japan govt upgrades economic view for first time in 7 months
     
  • Bitcoin use under scrutiny in Indonesian island of Bali
     
  • China's Q4 GDP growth backed by continued strength in services, agriculture
     
  • China's money rates inch up amid taxes, expectations of tight policy
     
  • Oil prices fall as U.S. output rise outweighs crude stock falls
     
  • Gold up on weaker dollar, but heads for first weekly loss in 6 weeks

Economic Data Ahead

  • (0830 ET/1330 GMT) Statistics Canada releases manufacturing shipments data for the month of November. Manufacturing sales are likely to have increased 2.0 percent after declining 0.4 percent in October.
     
  • (0830 ET/1330 GMT) The Statistics Canada will report foreign portfolio investment in domestic stocks for the month of November.
     
  • (0830 ET/1330 GMT) The Statistics Canada will release investment in foreign securities figures for the month of November.
     
  • (1000 ET/1500 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index rose to 97.0 in January, after posting a final reading of 95.9 in December.
     
  • (1300 ET/1800 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events Ahead

  • (0845 ET/1345 GMT) Boston Fed boss Raphael Bostic participates in an informal discussion, "Thoughts on the Economy" before a National Regional public affairs forum, in Nashville, Tennessee.
     
  • (1145 ET/1645 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $885 mn)
     
  • (1300 ET/1800 GMT) Federal Reserve Vice Chair for Supervision Randal Quarles speaks on "Bank Regulation" before the American Bar Association Banking Law Committee Annual Meeting, in Washington.
     
  • (1330 ET/1830 GMT) San Francisco Fed President John Williams will give his comments about the outlook for the economy and policy before the central bank's January policy-setting meeting at the Bay Area Council Economic Institute's 11th Annual Forecast Conference: "Visualizing the Future of the Bay."
     

FX Beat

DXY: The dollar index slumped on the view that other central banks will join the Federal Reserve in looking to hike ultra-low interest rates. The greenback against a basket of currencies traded 0.1 percent down at 90.45, having touched a low of 90.11 the day before, its lowest since January 2015. FxWirePro's Hourly Dollar Strength Index stood at -43.55 (Neutral) by 1000 GMT.

EUR/USD: The euro extended previous session gains, as the greenback eased amid concerns about a potential U.S. government shutdown. The European currency traded 0.3 percent up at 1.2270, having touched a high of 1.2322 on Wednesday, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at 64.54 (Bullish) 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 declined on fears that the bill to fund government still needed an approval by the Senate, in order to avoid U.S. government shutdown. The major was trading 0.3 percent down at 110.68, having hit a low of 110.19 on Wednesday, its lowest since Sept 15. FxWirePro's Hourly Yen Strength Index stood at -79.11 (Slightly Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. Michigan consumer sentiment index and Fed's Quarles speech for further momentum. Immediate resistance is located at 111.78 (50.0% retracement of 110.19 and 113.38), a break above targets 112.16 (61.8% retracement). On the downside, support is seen at 110.19 (Jan. 17 Low), a break below could take it lower 110.00.

GBP/USD: Sterling rallied to its highest levels since Britain's vote to leave the European Union in 2016, despite data showed British retail sales declined by much more than expected in December. The economy's retail sales volumes dropped 1.5 percent from November, well below for a monthly dip of 0.6 percent and more than reversing a 1.0 percent rise in November. Sterling traded flat at 1.3894, having hit a high of 1.3941 on Wednesday, it’s highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 81.60 (Slightly Bullish) by 1000 GMT. Immediate resistance is located at 1.3950, a break above could take it near 1.4000. On the downside, support is seen at 1.3806 (5-DMA), a break below targets 1.3757 (61.8% retracement of 1.3458 and 1.3941). Against the euro, the pound was trading 0.3 percent down at 88.34 pence, having hit a high of 88.01 pence the day before, it’s highest since Dec. 19

USD/CHF: The Swiss franc advanced to a fresh 4-month high as the greenback against a basket of currencies consolidated near its lowest since January 2015. The major trades flat at 0.9585, having touched a low of 0.9535 earlier, it’s lowest since Sept. 11. FxWirePro's Hourly Swiss Franc Strength Index stood at 49.00 (Neutral) by 1000 GMT.  On the higher side, near-term resistance is around 0.9604 (61.8% retracement of 0.9845 and 0.9535) and any break above will take the pair to next level till 0.9702 (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.

AUD/USD: The Australian dollar climbed to a fresh 4-month peak, boosted by yesterday's jobs report which led the market to bring forward the likely timing of a rate hike from the Reserve Bank of Australia. The Aussie trades 0.2 percent up at 0.8010, having hit a high of 0.8038 earlier, it’s highest since Sept. 20. FxWirePro's Hourly Aussie Strength Index stood at 11.21 (Neutral) by 1000 GMT. Immediate support is seen at 0.7990 (78.6% retracement of 0.7807 and 0.8038), a break below targets 0.7915 (61.8% retracement). On the upside, resistance is located at 0.8050, a break above could take it near 0.8100.

Equities Recap

European shares advanced as gains among miners helped offset a pullback in energy firms, while sterling rallied to its highest levels since June 2016, despite downbeat British retail sales data.

The pan-European STOXX 600 index gained 0.4 percent to 400.40 points, while the FTSEurofirst 300 index edged up 0.4 percent to 1,574.27 points.

Britain's FTSE 100 trades 0.2 percent higher at 7,716.29 points, while mid-cap FTSE 250 eased 0.1 percent to 20,646.18 points.

Germany's DAX rose 0.9 percent at 13,397.76 points; France's CAC 40 trades 0.4 percent up at 5,517.90 points.

Commodities Recap

Crude oil prices declined and were on course for the biggest weekly falls since October, as a rebound in U.S. production outweighed ongoing declines in crude inventories. International benchmark Brent crude was trading 0.4 percent down at $68.84 per barrel by 1037 GMT, having hit a low of $68.28 earlier, its lowest since Jan. 9. U.S. West Texas Intermediate was trading 0.2 percent down at $63.58 a barrel, after easing as low as $62.87, its lowest since Jan. 9.

Gold prices rose, extending previous session gains, supported by a weaker dollar amid worries about a possible U.S. government shutdown. Spot gold was up 0.7 percent at $1,335.65 an ounce by 1039 GMT, having touched its weakest level since Jan. 12 at $1,324.15 on Thursday. The safe-haven metal has declined 0.5 percent so far this week, its worst week since early December. U.S. gold futures were up 0.4 percent at $1,332.

Treasuries Recap

The U.S. Treasuries slipped on a plausible change in the Federal Reserve’s Vice Chairman amid worries of a government shutdown on the back of the country’s tax reform agenda. The yield on the benchmark 10-year Treasuries jumped 2 basis points to 2.63 percent, the super-long 30-year bond yields surged 2-1/2 basis points to 2.91 percent and the yield on the short-term 2-year traded nearly flat at 2.04 percent.

The UK gilts traded mixed after the country’s December retail sales, came in at worse than market expectations, at -1.5 percent m/m, vs consensus estimates of -0.6% m/m, from 1.0% m/m in November, revised lower from 1.1%. The yield on the benchmark 10-year gilts, hovered around 1.34 percent, the super-long 30-year bond yields climbed nearly 1 basis point to 1.84 percent while the yield on the short-term 2-year traded 2 basis points lower at 0.56 percent.

The The German bunds plunged as all eyes remain on Sunday’s special party congress of delegates from Germany’s Social Democrat Party (SPD), who will vote on whether to approve the start of formal negotiations with Chancellor Merkel’s Christian Democrat Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU) to establish a new Grand Coalition (GroKo). The German 10-year bond yields, which move inversely to its price, rose 1-1/2 basis points to 0.58 percent, the yield on 30-year note also surged nearly 1-1/2 basis points to 1.32 percent and the yield on short-term 2-year traded flat at -0.58 percent.

The New Zealand government bonds plunged at the time of closing, tracking a fall in U.S. Treasuries as well, on news of a plausible re-shuffling in the United States’ Federal Reserve. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 5 basis points to 2.99 percent, the yield on 20-year surged 5-1/2 basis points to 3.46 percent and the yield on short-term 2-year ended 1-1/2 basis points higher at 2.05 percent.

The Japanese government bonds remained flat in muted trading session as investors are curiously eyeing the Bank of Japan’s (BoJ) monetary policy decision, scheduled to be held early next week for further detailed insight into the debt market. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 0.08 percent, the yield on the long-term 30-year note edged nearly 1/2 basis point lower at 0.84 percent and the yield on short-term 2-year traded nearly flat at -0.13 percent.

The Australian 10-year government bond yields hit a near 4-month high on the last trading day of the week, tracking similar sound sin the U.S. counterpart, following a possibility of a re-shuffling in the United States Federal Reserve. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, flaunted 6-1/2 basis points at 2.85 percent (highest since October 2017), the yield on the long-term 30-year note jumped a little over 8 basis points to 3.50 percent and the yield on short-term 2-year climbed 4-1/2 basis points to 2.12 percent.

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