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Europe Roundup: Sterling hits 2-1/2 month high after PM May's announcement, euro steadies as French election loom, European shares touch 2-week trough - Tuesday, April 18th, 2017

Market Roundup

  • EUR/USD -0.1%, USD/JPY -0.2%, GBP/USD -0.1%, EUR/GBP +0.2%
     
  • DXY -0.1%, DAX -0.7%, FTSE -1.2%, Copper +0.7%, Gold +0.15%
     
  • British PM May calls for early election on June 8
     
  • Sterling recovers after BBC reports UK PM May wants early election June 8
     
  • Copper slips on geopolitical tensions, aluminium sees China boost
     
  • SNB domestic deposits rise to 480.63bln w/e Apr 14vs previous 476.198
     
  • Japan, US did not discuss currencies in economic talks - government official
     
  • Japan ratings affirmed at 'A+/A-1' outlook remains stable
     
  • Trump promised Turkey's Erdogan close cooperation on Syria, Iraq, PKK - Turkish sources
     
  • Japan's Aso: Japan, U.S. agree to combat unfair trade practices
     
  • Swiss see no fallout from U.S. currency manipulation list inclusion

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Department of Commerce is expected to report that housing starts decreased to 1.25 million units in March from a reading of 1.29 million units in February.
     
  • (0830 ET/1230 GMT) The U.S. building permits are likely to have increased to a 1.25 million-unit pace in March from a 1.22 million-unit pace in the previous month.
     
  • (0830 ET/1230 GMT) The Statistics Canada will report foreign portfolio investment in domestic stocks for the month of February.
     
  • (0830 ET/1230 GMT) The Statistics Canada will release investment in foreign securities figures for the month of February.
     
  • (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production rose 0.5 percent in March after staying unchanged in the prior month.
     
  • (0915 ET/1315 GMT) The Federal Reserve Board is expected to report that capacity utilization rose to 76.2 percent in March from 75.4 percent in February.
     
  • (0915 ET/1315 GMT) The United States' manufacturing output is likely to slow down to 0.1 percent in March from 0.5 percent in the previous month.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (0900 ET/1300 GMT) Federal Reserve Bank of Kansas City President Esther George is scheduled to speak before the Levy Economics Institute of Bard College as the 26th Annual Minsky conference in Annandale-on-Hudson, New York.
     
  • (1230 ET/1630 GMT) Bank of Canada Senior Deputy Governor Carolyn Wilkins is scheduled to give a speech on automation, productivity and monetary policy, before the Toronto Region Board of Trade.
     
  • (1245 ET/1645 GMT)  FedTrade operation 15-yr Fannie Mae/Freddie Mac (max $600 mn)
     
  • (1430 ET/1830 GMT) Canada Finance Minister Bill Morneau is scheduled to meet with Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory to discuss the overheated Toronto housing market and possible measures to rein in prices.
     

FX Beat

DXY: The dollar weakened against the Japanese yen, as rising geopolitical uncertainties weighed on market sentiment. The greenback against a basket of currencies traded 0.25 percent lower at 100.04, having hit a low of 100.00 the day before, its lowest since Mar. 30. FxWirePro's Hourly Dollar Strength Index stood at -62.59 (Bearish) by 1000 GMT.

EUR/USD: The euro advanced, extending gains for two consecutive sessions, boosted by increased odds of Macron’s win in the French election. However, renewed risk-off sentiment limited the upside in the major. The European currency traded 0.2 percent up at 1.0664, hovering towards a high of 1.0677 touched last week, its highest since Apr. 6. FxWirePro's Hourly Euro Strength Index stood at 102.02 (Highly Bullish) by 1000 GMT. On the lower side, major support is around 1.0600 and any break below will drag the pair till 1.05694 (Apr 10 low)/ 1.0525. The near term resistance is around 1.0700 and any break above will take it till 1.0740/1.0800.

USD/JPY: The dollar eased below the 109.00 handle amid prevalent risk-off sentiment in wake of rising tensions between the U.S. and North Korea. Moreover, British Prime Minister Theresa May call for an early parliamentary election on June 8 further boosted the Japanese Yen's safe-haven appeal. The major traded down at 108.87, having touched a low of 108.13 the day before, its lowest since Nov. 15. FxWirePro's Hourly Yen Strength Index stood at 44.11 (Neutral) by 1000 GMT. On the higher side, any break above 109.58 (7- day MA) and break above will take the pair till 109.85 (daily Tenken-Sen)/110.64 (21- day EMA). The near term support is around 108 and any break below will drag it till 106.32.

GBP/USD: Sterling rose to a 2-1/2 month high against the dollar and to a near 2-month high versus the euro after British Prime Minister Theresa May announced an early general election for June 8. The major trades 0.9 percent higher at 1.2674, having touched a high of 1.2674 earlier, its highest since Feb. 2. FxWirePro's Hourly Sterling Strength Index stood at -1.13 (Neutral) by 1000 GMT. Any break above the major resistance will take the pair till 1.27060 (Feb 2 high).  On the lower side, near term support is around 1.2500 (100- day EMA) and any break below will drag it down till 1.2480 (100- day EMA)/ 1.2455 (21- day EMA)/1.2400/1.23650 (Apr 7th low). Against the euro, the pound traded 0.6 percent up at 84.16 pence, having hit an early high of 84.15 pence.

USD/CHF: The Swiss franc rose, reversing most of its previous session losses, as investors sought safe-haven assets amid risk off market sentiment. The major traded 0.2 percent down at 1.0017, hovering towards a low of 1.0007 hit on Thursday, its weakest since Mar. 31. FxWirePro's Hourly Swiss Franc Strength Index stood at -9.46 (Neutral) by 1000 GMT. Any break above will take the pair till 1.03435. Overall trend reversal is only above 1.03435. The minor resistance is around 1.0600/1.01200. The near term support is around 1.000 and any break below will drag it till 0.9940 (200- day MA)/0.98600/0.9800.

AUD/USD: The Australian dollar tumbled after rising for four consecutive sessions, as minutes of the RBA's April meeting reinforced views that interest rates would stay low for longer. The Aussie trades 0.5 percent lower at 0.7549, retreating from a peak of 0.7610 touched in the previous session, it’s highest since Apr. 4. FxWirePro's Hourly Aussie Strength Index stood at -77.61 (Slightly Bearish) by 1000 GMT. On the lower side, any break below 0.7450 confirms minor weakness, a decline till 0.7380/0.7325 likely. The major resistance is around 0.7600 and a break above will take it till 07680/0.7745.

Equities Recap

European shares declined to two-week lows, weighed down by commodity-linked stocks, while the greenback slumped amid prevalent risk-off mood in wake of increasing tensions between the U.S. and North Korea.

The pan-European STOXX 600 index plunged 0.9 percent to 377.06 points, while the FTSEurofirst 300 index tumbled 0.9 percent to 1,482.42 points.

Britain's FTSE 100 trades 1.4 percent down at 7,225.77 points, while mid-cap FTSE 250 slumped 0.8 percent to 19,363.68 points.

Germany's DAX declined 0.69 percent at 12,025.27 points; France's CAC 40 trades 1.40 percent lower at 4,999.89 points.

Tokyo's Nikkei rose 0.35 percent to 18,418.59 points, Australia's S&P/ASX 200 index fell 1.01 percent to 5,830.60 points. South Korea's KOSPI rose 0.13 percent to 2,148.46 points.

Shanghai composite index eased 0.8 percent to 3,196.71 points, while CSI300 index plunged 0.5 percent to 3,462.74 points. Hong Kong’s Hang Seng shed 1.4 percent to 23,924.54 points.

Commodities Recap

Crude oil prices declined to an over 1-week low on news that U.S. shale oil output was likely to record the biggest monthly rise in more than two years, fuelling concerns that rising U.S. production is weakening OPEC-led efforts to reduce oversupply. International benchmark Brent crude was trading 0.9 percent down at $54.96 per barrel by 0936 GMT, having hit a low of $54.95 earlier in the day, its weakest since Apr. 7. U.S. West Texas Intermediate fell 0.8 percent to $52.28 a barrel, after declining as low as $52.26 earlier, its lowest since Apr. 7.

Gold prices steadied, after falling from a five-month high in the previous session, as geopolitical tensions over North Korea boosted the metal's safe-haven appeal. Spot gold rose 0.2 percent to $1,286.74 per ounce by 0941 GMT, after rising as high as $1,295.38 in the prior session, its highest since Nov. 9. U.S. gold futures were down 0.5 percent at $1,285.90.

Treasuries Recap

The U.S. Treasuries traded higher ahead of the country’s March industrial production data, besides, the FOMC member Esther L. George’s speech, scheduled to be held later in the day. The yield on the benchmark 10-year Treasury slumped nearly 3-1/2 basis points to 2.22 percent, the super-long 30-year bond yields plunged nearly 4 basis points to 2.88 percent and the yield on short-term 2-year note traded nearly 1-1/2 basis points lower at 1.18 percent.

The UK gilts jumped after the country’s Prime Minister Theresa May delivered her speech in Westminster today, calling for an early election on June 8, saying the government had the right plan for negotiating the terms of Britain's exit from the European Union and she needed political unity in London. The yield on the benchmark 10-year gilts, plunged 2-1/2 basis points to 1.02 percent, the super-long 30-year bond yields also slumped nearly 2-1/2 basis points to 1.63 percent while the yield on the short-term 2-year traded 1 basis point lower at 0.10 percent.

The German 10-year bund yields hit its lowest since December 30 last year as investors poured into safe-haven assets ahead of the Eurozone’s final reading of the consumer price inflation (CPI) for the month of March, scheduled to be released on April 19. The yield on the benchmark 10-year bonds slumped nearly 2 basis points to 0.17 percent, the long-term 30-year bond yields plunged 1-1/2 basis points to 0.91 percent and the yield on short-term 2-year bond also traded nearly 1-1/2 basis points lower at -0.86 percent.

The Japanese government bonds slumped as investors wait to watch the country’s trade balance data for the month of March, scheduled to be released on April 20. The benchmark 10-year bond yield, rose nearly 1 basis point to 0.01 percent, the long-term 30-year bond yields jumped nearly 3 basis points to 0.77 percent and the yield on the short-term 2-year note stood steady at -0.21 percent

The New Zealand bonds gained tracking firmness in the U.S. counterpart and as investors are curiously eyeing the country’s consumer price inflation (CPI) for the first quarter of this year, scheduled to be released on April 20 for further direction in the debt market. The yield on the benchmark 10-year bond, slumped 1 basis point to 2.99 percent, the yield on 7-year note also slipped nearly 1 basis point to 2.68 percent and the yield on the short-term 2-year note too traded 1 basis point lower at 2.14 percent.

The Australian government bonds plunged after a long Easter holiday, following mixed signals from the Reserve Bank of Australia’s (RBA) April monetary policy meeting minutes. The yield on the benchmark 10-year Treasury note, jumped 3 basis points to 2.50 percent, the yield on the 15-year note climbed 2-1/2 basis points to 2.89 percent and the yield on short-term 2-year traded little above 1 basis point at 1.63 percent.

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