Europe Roundup: Sterling hits 1-year low against euro on "no-deal" Brexit fears, dollar index slumps on growing global trade war concerns, European shares advance - Tuesday, August 28th, 2018 

Market Roundup

• EUR/USD 0.22%, USD/JPY -0.05%, GBP/USD 0.11%, EUR/GBP 0.08%
   
• DXY -0.13%, DAX 0.22%, FTSE 0.38%, Brent 0.81%, Gold 0.23%
   
• Sterling slips to one-year low vs euro on no-deal Brexit angst
   
• Yuan extends bounce after PBOC raises mid-point most in 15 months
   
• Turkish lira weakens against dollar, minister warns on sanctions
   
• U.S., Mexico reach NAFTA deal, turn up pressure on Canada
   
• UK May says no-deal Brexit not "the end of the world"-Sky
   
• North Korea tells U.S. denuclearisation talks may fall apart - CNN
   
• Iran’s parliament blames Rouhani for economic troubles, refers him to judiciary
   
• EU Jul Money-M3 Annual Growth, 4.0%, 4.3% forecast, 4.4% previous
   
• Oil rises to seven-week highs on signs of tighter supply
   
• Gold steadies as U.S.-Mexico trade deal weighs on dollar, China ties in focus
   

Economic Data Ahead

• (0830 ET/1230 GMT) The U.S. Census Bureau is likely to report that preliminary wholesale inventories rose 0.1 percent in July after posting similar gains in June. 
   
• (0830 ET/1230 GMT) The United States releases goods trade balance data for the month of July. The economy recorded a trade deficit of $67.92 billion in the previous month. 
   
• (0900 ET/1300 GMT) The S&P/Case-Shiller is expected to report that U.S. home price index of 20 metropolitan areas rose at an annualized rate of 6.5 percent in June, after posting similar gains in the previous month. 
   
• (1000 ET/1400 GMT) Federal Reserve Bank of Richmond will publish it Manufacturing Index for August. The index posted a rise of 20 in the prior month. 
   
• (1000 ET/1400 GMT) The U.S. Conference Board is expected to report that its consumer confidence index eased to 126.8 in August from a reading of 127.4 in July. 
   
• (1630 ET/2030 GMT) API reports its weekly crude oil stock. 
   

Key Events Ahead

• No significant events scheduled

FX Beat

DXY: The dollar index declined to a near 4-week low after the U.S. Commerce Department said that it had made a preliminary determination that imports of certain steel wheels from China were subsidized and it would impose duties on the product. The greenback against a basket of currencies trades 0.1 percent down at 94.65, having touched a low of 94.60, its lowest since August 1. FxWirePro's Hourly Dollar Strength Index stood at -44.66 (Neutral) by 1000 GMT.

EUR/USD: The euro surged to a 4-week peak after Italy's Deputy Prime Minister Luigi Di Maio stated that the country's public deficit could exceed the European Union's ceiling of 3 percent of the gross domestic product. Additionally, data showing the Eurozone's lending growth to non-financial corporations expanded by 4.1 percent in July, while household lending growth was steady at 3.0 boosted the ongoing momentum.  The European currency traded 0.2 percent up at 1.1698, having touched a high of 1.1707 earlier, its highest since July 31. FxWirePro's Hourly Euro Strength Index stood at 90.55 (Slightly Bullish) by 1000 GMT. Immediate resistance is located at 1.1747 (July 31 High), a break above targets 1.1790 (July 9 High). On the downside, support is seen at 1.1600 (5-DMA), a break below could drag it till 1.1538 (21-DMA).

USD/JPY: The dollar turned positive against the Japanese yen, as investor risk sentiment revived after the United States and Mexico agreed to overhaul the North American Free Trade Agreement (NAFTA). The major was trading 0.05percent up at 111.11, having hit a high of 111.48 on Friday, its highest since August 6. FxWirePro's Hourly Yen Strength Index stood at -124.82 (Highly Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. prelim wholesale inventories, good trade balance and Richmond Fed Manufacturing Index. Immediate resistance is located at 111.52 (August 6 High), a break above targets 111.73 (August 2 High). On the downside, support is seen at 110.77 (10-DMA), a break below could take it lower 110.31 (August 17 Low).

GBP/USD: Sterling surged, extending gains for the third straight session, as the greenback eased on the economic uncertainty caused by U.S. President Donald Trump's repeated threats to ditch the 1994 accord. However, the British pound slumped to a 1-year low against the euro after the French Prime Minister Edouard Philippe asked his ministers to plan contingency measures in case of a no-deal Brexit. 
The major traded 0.05 percent up at 1.2898, having hit a high of 1.2936 on Wednesday; it’s highest since August 8. FxWirePro's Hourly Sterling Strength Index stood at -71.66 (Slightly Bearish) 1000 GMT.  Immediate resistance is located at 1.2936 (August 22 High), a break above could take it near 1.3006 (August 6 High). On the downside, support is seen at 1.2802 (10-DMA), a break below targets 1.2729 (August 20 Low). Against the euro, the pound was trading 0.1 percent down at 90.70 pence, having hit a low of 90.75 earlier, it’s lowest since September 2017.

USD/CHF: The Swiss franc rose to a 4-month peak as the greenback touched multi-week lows amid concerns over developing U.S.-China trade war. The major trades 0.3 percent down at 0.9768, having touched a low of 0.9761, it’s lowest since August 23. FxWirePro's Hourly Swiss Franc Strength Index stood at 131.28 (Highly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 0.9814 (23.6% retracement of 0.9982 and0.9716) and any break above will take the pair to next level till 0.9846 (38.2% retracement). The near-term support is around 0.9740 and any close below that level will drag it till 0.9705.

Equities Recap

European shares advanced, boosted by gains in auto sector stocks, while investor risk sentiment revived after the United States and Mexico reached a trade agreement. 

The pan-European STOXX 600 index advanced 0.1 percent at 385.89 points, while the FTSEurofirst 300 index surged 0.05 percent to 1,509.22 points.

Britain's FTSE 100 trades 0.4 percent up at 7,603.64 points, while mid-cap FTSE 250 gained 0.8 percent to 20,847.63 points.

Germany's DAX rose 0.2 percent at 12,558.59 points; France's CAC 40 trades 0.3 percent higher at 5,492.07 points.

Commodities Recap

Crude oil price rallied to multi-week peaks, boosted by evidence of still-modest increases in output from OPEC and improving Chinese refining demand. International benchmark Brent crude was trading 0.6 percent up at $76.71 per barrel by 1028 GMT, having hit a high of $76.85 earlier, its highest since July 11. U.S. West Texas Intermediate was trading 0.3 percent higher at $69.07 a barrel, after rising as high as $69.29 on Friday, its highest since August 8.

Gold prices surged as the greenback consolidated near a 1-month low amid concerns over developing U.S.-China trade row. Spot gold edged up 0.2 percent higher to $1,213.77 by 1032 GMT, having hit a high of $1214.19, its highest since August 13. U.S. gold futures were up 0.2 percent at $1,218.40 an ounce.

Treasuries Recap 

The U.S. Treasuries remained tad lower ahead of the country’s 5-year auction, scheduled to be held today by 17:00GMT. The yield on the benchmark 10-year Treasuries rose nearly 1/2 basis point to 2.85 percent, the super-long 30-year bond yields gained close to 1 basis point to 3.004 percent and the yield on the short-term 2-year traded flat at 2.653 percent.

The German bunds gained during European session as investors wait to watch the country’s 5-year auction and August employment report, scheduled to be released on August 29 and 30 respectively for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, fell nearly 1 basis point to 0.369 percent, the yield on 30-year note also slipped close to 1 basis point to 1.039 percent while the yield on short-term 2-year hovered around -0.595 percent.

The New Zealand 10-year bond yield closed at a 3-week high as investors’ risk sentiments improved, following a trade deal between the United States and Mexico. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped nearly 3 basis points to 2.633 percent, the yield on the long-term 20-year note slid nearly 1 basis point to 2.950 percent and the yield on short-term 2-year too closed 1 basis point down at 1.715 percent.

The Australian bond yields jumped during the Asian session, tracking a similar movement in U.S. Treasuries after United States President Donald Trump announced that they have struck a trade deal with Mexico. This led to a rise in investors’ confidence and thus a shift away from safe-haven assets. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped nearly 2-1/2 basis points to 2.575 percent, the yield on the long-term 30-year bond surged 2 basis points to 3.102 percent and the yield on short-term 2-year rose nearly 1 basis point to 2.022 percent.