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Europe Roundup: Sterling near 2-week peak on BoE rate hike speculation, dollar index weakens on U.S. deficit worries, European shares rebound - Thursday, February 15th, 2018

Market Roundup

  • Eurozone Dec Eurostat trade nsa, eur decrease to 25.4 bln eu vs previous 26.3 bln eu
     
  • Italy Dec global trade balance decrease to 5.253 bln eu vs previous 5.688 bln eu (revised from 4.83 bln eu)
     
  • Italy Dec trade balance eu decrease to -0.974 bln eu vs previous -0.1 bln eu (revised from 0.236 bln eu)
     
  • Spain Jan CPI yy decrease to 0.6 % (forecast 0.5 %) vs previous 1.1 %
     
  • Spain Jan HICP mm increase to -1.5 % (forecast -1.5 %)
     
  • Spain Jan HICP yy stays flat at 0.7 % (forecast 0.7 %) vs previous 0.7 %
     
  • Spain Jan CPI mm increase to -1.1 % (forecast -1.1 %)
     
  • France Q4 ILO unemployment rate decrease to 8.9 % vs previous 9.6 % (revised from 9.7 %)

Economic Data Ahead

  • (0830 ET/1330 GMT) The Federal Reserve Bank of New York is expected to report that manufacturing activity in New York State eased to 17.5 in February from 17.7 in January.
     
  • (0830 ET/1330 GMT) The U.S. producer price index is likely to have increased 0.4 percent in January, while in the 12 months through the same period, it is expected to have advanced 2.5 percent. PPI excluding food and energy probably edged up 0.2 percent after falling 0.1 percent in December.
     
  • (0830 ET/1330 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 9,000 to a seasonally adjusted 230,000 for the week ended Feb. 9, while continuing claims for the week ended Feb. 2 is expected to rise to 1.925 million from previous 1.923 million.
     
  • (0830 ET/1330 GMT) Philadelphia Federal Reserve manufacturing survey is likely to show that business activity decreased to 21.1 in February from 22.2 in January.
     
  • (0830 ET/1330 GMT) The Statistics Canada releases employment report for January. The economy posted a drop of 7,100 jobs in the month of December.
     
  • (0915 ET/1415 GMT) The Federal Reserve is likely to report that industrial production rose 0.2 percent in January, after increasing 0.9 in the prior month.
     
  • (0915 ET/1415 GMT) The Federal Reserve Board is expected to report that capacity utilization edged up to 78.0 percent in January from 77.9 percent in December.
     
  • (1000 ET/1500 GMT) The National Association of Home Builders (NAHB) is expected to report that U.S. Housing Market Index remained unchanged at 72 in February.
     
  • (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending February 9.
     
  • (1630 ET/2130 GMT) New Zealand will release its Business PMI index for the month of January. The index stood at 51.2 in the previous month. 
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending February 9.
     
  • (1850 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending February 9.
     

Key Events Ahead

  • (1330 ET/1830 GMT) Bank of Canada Deputy Governor Lawrence Schembri will give a speech in Winnipeg.
     
  • (1730 ET/2230 GMT) Reserve Bank of Australia Governor Philip Lowe's Speech.
  • FX Beat

DXY: The dollar index slumped to an over 2-week low on worries about the U.S. government's finances after a White House-led spending splurge and recent corporate tax cuts. The greenback against a basket of currencies traded 0.3 percent down at 88.77, having touched a low of 88.59, its lowest since Feb. 2. FxWirePro's Hourly Dollar Strength Index stood at -76.74 (Slightly Bearish) by 1000 GMT.

EUR/USD: The euro rallied to an over 2-week high as the greenback tumbled to recent low after the U.S. national debt topped $20 trillion, while the 2019 fiscal deficit is projected at near $1 trillion. The European currency traded 0.3 percent up at 1.2486, having touched a high of 1.2510 earlier, its highest since Jan. 2. FxWirePro's Hourly Euro Strength Index stood at 35.94 (Neutral) by 1000 GMT. Immediate resistance is located at 1.2523, a break above targets 1.2555. On the downside, support is seen at 1.2356 (10-DMA), a break below could drag it lower 1.2245 (Feb 7 Low).

USD/JPY: The dollar slumped to a 15-month low against the Japanese yen as worries over twin deficits in the United States mounted amid a government spending splurge and large corporate tax cuts. The major was trading 0.5 percent down at 106.46, having hit a low of 106.17 earlier, its lowest since Nov. 2016. FxWirePro's Hourly Yen Strength Index stood at 73.03 (Bullish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. producer price index, unemployment benefit claims and industrial production report for further momentum. Immediate resistance is located at 107.12 (78.6% retracement of 110.48 and 106.17), a break above targets 107.83 (61.8% retracement). On the downside, support is seen at 106.10, a break below could take it lower 105.80.

GBP/USD: Sterling advanced to 10-day high on the back of a broadly weakened dollar and on growing expectations that the Bank of England will raise rates faster than previously thought. The major traded 0.5 percent up at 1.4062, having hit a high of 1.4077 earlier, it’s highest since Feb 2. FxWirePro's Hourly Sterling Strength Index stood at 65.74 (Bullish) by 0500 GMT. Immediate resistance is located at 1.4095, a break above could take it near 1.4150 (Feb 5 High). On the downside, support is seen at 1.3892 (5-DMA), a break below targets 1.3764 (Feb 9 Low). Against the euro, the pound was trading 0.2 percent up at 88.75 pence, having hit a low of 89.19 pence the day before, it’s lowest since Jan. 12.

USD/CHF: The Swiss franc slumped to a 2-1/2 year low, as the greenback was weighed down by bearish pressure. The major trades 0.4 percent down at 0.9252, having touched a low of 0.9229 earlier, it’s lowest since Jun 2015. FxWirePro's Hourly Swiss Franc Strength Index stood at -86.51 (Slightly Bearish) by 1000 GMT. On the higher side, near-term resistance is around 0.9357 (5-DMA) and any break above will take the pair to next level till 0.9417 (21-DMA). The near-term support is around 0.9220 and any close below that level will drag it lower 0.9200.

Equities Recap

European shares recovered as investors turned their focus back on company earnings, while the greenback slumped to an over 2-week low on U.S. deficit worries.

The pan-European STOXX 600 index rallied 0.9 percent to 378.11 points, while the FTSEurofirst 300 index surged 0.9 percent to 1,482.32 points.

Britain's FTSE 100 trades 0.7 percent higher at 7,264.44 points, while mid-cap FTSE 250 gained 0.9 percent to 19,638.37 points.

Germany's DAX rose 0.8 percent at 12,455.76 points; France's CAC 40 trades 1.6 percent up at 5,246.11 points.

Commodities Recap

Crude oil prices rose to a 1-week peak, boosted by a weak dollar and Saudi comments that it would rather see an undersupplied market than end a deal with OPEC and Russia to withhold production. International benchmark Brent crude was trading 0.6 percent up at $64.67 per barrel by 0958 GMT, having hit a high of $65.12 earlier, its highest since Jan. 8. U.S. West Texas Intermediate was trading 0.8 percent up at $61.14 a barrel, after rising as high as $61.52 earlier, its strongest since Jan. 8.

Gold prices rose as the dollar weakened and investors rushed into the safe-haven metal as a hedge against inflation after data showed a rise in U.S. consumer prices. Spot gold rose 0.3 percent at $1,354.30 an ounce as of 1002 GMT after touching its highest level since Jan. 26 at $1,355.37 on Wednesday. U.S. gold futures were down 0.1 percent at $1,356.8 per ounce on Thursday.

Treasuries Recap

The U.S. Treasuries gained ahead of the country’s Philadelphia Fed Manufacturing Index for the month of February and the producer price index (PP) for the same period, besides the 30-year auction, all scheduled for today at 13:30GMT and 18:00GMT respectively. The yield on the benchmark 10-year Treasuries rose a little over 1 basis point to 2.92 percent, the super-long 30-year bond yields hovered around 3.17 percent and the yield on the short-term 2-year traded 2 basis points higher at 2.19 percent.

The German bunds slumped as investors wait to watch a host of speeches from key members of the European Central Bank, later today as well as tomorrow. The German 10-year bond yields, which move inversely to its price, jumped 2-1/2 basis points to 0.78 percent, the yield on 30-year note surged 2 basis points to 1.41 percent and the yield on short-term 2-year traded nearly 1-1/2 basis points higher at -0.49 percent.

The New Zealand 10-year government bond yields ended Thursday’s session on 4-year high note, tracking overnight movement in the U.S. counterpart after the latter’s consumer price inflation data (CPI) for the month of January, topped market expectations, adding to hopes of a Fed rate hike in the immediate future. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 7 basis points to 3.03 percent, the yield on 20-year surged 7-1/2 basis points to 3.54 percent and the yield on short-term 2-year closed 1 basis point higher at 1.88 percent.

The Japanese government bonds remained flat in a silent trading session ahead of the Chinese Lunar New Year, as investors have largely shrugged-off the higher-than-expected industrial production for the month of December, released early today. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 0.06 percent, the yield on the long-term 30-year note remained flat at 0.79 percent and the yield on short-term 2-year steadied around -0.15 percent.

The Australian bonds slumped following stronger-than-expected January employment report, boosting confidence among investors that the health of the economy is in good shape. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 8-1/2 basis points to 2.919 percent, the yield on the long-term 30-year note also surged 8-1/2 basis points to 3.552 percent and the yield on short-term 2-year up 4 basis points to 2.046 percent.

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