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Europe Roundup: Sterling off near 14-month lows following better-than-expected UK retail sales, dollar gains against yen as risk-averse sentiment fades, European shares surge - Thursday, August 16th, 2018

Market Roundup

  • EUR/USD 0.24%, USD/JPY 0.08%, GBP/USD 0.06%, EUR/GBP 0.12%
     
  • DXY -0.11%, DAX 0.30%, FTSE 0.59%, Brent 0.25%, Gold 0.43%
     
  • China, U.S. to hold lower-level trade talks in late August
     
  • Sterling stuck near 14-month low despite strong retail data
     
  • Turkish lira firms before finance minister's presentation
     
  • China c bank bars some offshore lending in latest move to support yuan
     
  • Great Britain Jul Retail Sales YY, 3.5%, 3.0% forecast, 2.9% previous
     
  • Great Britain Jul Retail Sales MM, 0.7%, 0.2% forecast, -0.5% previous
     
  • Germany Jul Wholesale Price Index YY, 3.5%, 3.4% previous
  • EZ Jun Eurostat Trade NSA, Eur, 22.5 nln, 18.0 bln forecast, 16.5 bln previous
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to 1.260 million units in July from 1.173 million units in June.
     
  • (0830 ET/1230 GMT) The U.S. building permits are likely to have increased to a 1.310 million-unit pace in July from a 1.273 million-unit pace in June.
     
  • (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 2,000 to a seasonally adjusted 215,000 for the week ended August 11, while continuing claims for the week ended August 6 is expected to decline to 1.750 million from a previous reading of 1.755 million.
     
  • (0830 ET/1230 GMT) Philadelphia Federal Reserve manufacturing survey is likely to show that business activity decreased to 22.0 in August from 25.7 in July.
     
  • (0830 ET/1230 GMT) Statistics Canada releases manufacturing shipments data for the month of June. Manufacturing sales are likely to have increased 0.9 percent after rising 1.4 percent in May.
     
  • (0830 ET/1230 GMT) The Statistics Canada releases employment report for July. The economy shed 10,520 jobs in June.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending August 6.
     

Key Events Ahead

  • N/A Swedish Finance Minister Magdalena Andersson presents new economic forecasts and spending for coming years

FX Beat

DXY: The dollar index eased after the Ministry of Commerce stated that a Chinese delegation led by Vice Minister of Commerce Wang Shouwen will meet with U.S. representatives led by Under Secretary of Treasury for International Affairs David Malpass for a fresh round of trade talks. The greenback against a basket of currencies trades 0.1 percent down at 96.62, having touched a high of 96.98 on Wednesday, its highest since July 2017. FxWirePro's Hourly Dollar Strength Index stood at 35.10 (Neutral) by 1000 GMT.

EUR/USD: The euro surged, drifting away from a 13-month low touched in the prior session after Turkish Finance Minister Berat Albayrak stated that Qatar pledged to make $15 billion of direct investment into Turkey's financial markets and banks. The European currency traded 0.2 percent up at 1.1368, having touched a low of 1.1301 on Wednesday, its lowest since July 2017. FxWirePro's Hourly Euro Strength Index stood at 86.54 (Slightly Bullish) by 1000 GMT. Immediate resistance is located at 1.1427 (38.2% retracement of 1.1628 and 1.1301), a break above targets 1.1503 (50% retracement). On the downside, support is seen at 1.1300, a break below could drag it till 1.1260.

USD/JPY: The dollar recouped some of the previous day's losses after Beijing said it would hold trade talks with Washington this month, spurring a risk appetite recovery. Meanwhile, many emerging market currencies rebounded amid easing fears over the cascading effects from a slide in the Turkish lira. The major was trading 0.1 percent up at 111.86, having hit a high of 111.43 on Wednesday, its highest since August 8. FxWirePro's Hourly Yen Strength Index stood at 28.16 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. building permits, housing starts, and unemployment benefit claims. Immediate resistance is located at 111.71 (78.6% retracement of 112.15 and 110.11), a break above targets 112.15 (August 1 Low). On the downside, support is seen at 110.11 (August 13 Low), a break below could take it lower 109.68 (June 27 Low).

GBP/USD: Sterling slightly nudged up from near 14-month lows after data showed British retail sales grew faster than expected in July, reversing a downward trend in the currency driven by worries over Brexit. The economy's retail sales volumes rose by 0.7 percent in July, and were 3.5 percent higher than a year earlier, above forecasts for a 0.2 percent monthly rise and a 3.0 percent annual gain. The major traded 0.05 percent up at 1.2701, having hit a low of 1.2661 on Wednesday; it’s lowest since June. 2017. FxWirePro's Hourly Sterling Strength Index stood at -124.72 (Highly Bearish) 1000 GMT. Immediate resistance is located at 1.2782 (23.6% retracement of 1.3173 and 1.2661), a break above could take it near 1.2857 (38.2% retracement). On the downside, support is seen at 1.2650, a break below targets 1.2610. Against the euro, the pound was trading 0.2 percent down at 89.51 pence, having hit a low of 89.60 earlier, it’s lowest since August 10.

USD/CHF: The Swiss franc consolidated within narrow ranges as risk sentiment improved on news that a Chinese delegation will travel to the United States for trade talks, reviving hopes for progress in resolving a conflict that has set global markets on edge. The major trades 0.05 percent up at 0.9939, having touched a high of 0.9982 on Wednesday, it’s highest since August 6. FxWirePro's Hourly Swiss Franc Strength Index stood at 5.67 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 1.0010 (July 20 High) and any break above will take the pair to next level till 1.0043 (July 19 High). The near-term support is around 0.9915 (August 3 Low) and any close below that level will drag it till 0.9894 (August 9 Low).

Equities Recap

European shares rebounded after Beijing said it would hold trade talks with the U.S. later this month, while sterling attempted a minor recovery following better-than-expected retail sales.

The pan-European STOXX 600 index gained 0.4 percent at 381.21 points, while the FTSEurofirst 300 index rallied 0.3 percent to 1,490.51 points.

Britain's FTSE 100 trades 0.6 percent up at 7,545.37 points, while mid-cap FTSE 250 surged 0.9 percent to 20,492.87 points.

Germany's DAX rose 0.4 percent at 12,210.75 points; France's CAC 40 trades 0.5 percent higher at 5,332.84 points.

Commodities Recap

Crude oil prices edged higher as global markets steadied, however, a weakening outlook for crude demand limited the upside.  International benchmark Brent crude was trading 0.2 percent up at $70.86 per barrel by 1013 GMT, having hit a low of $70.33 on Wednesday, its lowest since April 10. U.S. West Texas Intermediate was trading 0.2 percent higher at $65.01 a barrel, after falling as low as $64.45 earlier, its lowest since June 21.

Gold prices nudged up, retreating from a 19-month low as the U.S. dollar weakened following news that Beijing will hold trade talks with Washington late this month. Spot gold was up 0.5 percent at $1,180.01 an ounce as of 1016 GMT, having hit a low of $1160.11, its lowest since early January 2017. U.S. gold futures were, however, down 0.2 percent at $1,182.1.

Treasuries Recap

The U.S. Treasuries slumped ahead of the country’s Philadelphia Fed manufacturing index for the month of August and initial jobless claims, both scheduled to be released today by 12:30GMT respectively. The yield on the benchmark 10-year Treasuries jumped 3 basis points to 2.88 percent, the super-long 30-year bond yields climbed 2-1/2 basis points to 3.04 percent and the yield on the short-term 2-year traded 2 basis points higher at 2.62 percent.

The United Kingdom’s gilts fell during European session after the country’s retail sales for the month of July rebounded above market expectations amid persistent geopolitical disturbances. The yield on the benchmark 10-year gilts, rose 1 basis point to 1.23 percent, the super-long 30-year bond yields hovered around 1.70 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points higher at 0.70 percent.

The New Zealand bonds gained at the time of closing as investors now remain focussed on the country’s producer price index (PPI) data for the second quarter of this year, scheduled to be released today by 22:45GMT for further direction in the debt market. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, hovered around 2.60 percent, the yield on the long-term 20-year note slipped 1 basis point to 2.91 percent and the yield on short-term 2-year closed 1/2 basis point lower at 1.72 percent.

The Japanese government bonds remained tad lower during late Asian session after investors have largely shrugged-off the wider-than-expected trade deficit for the month of July. There remains no significant economic data to watch out for the rest of the day. The yield on the benchmark 10-year JGB note, which moves inversely to its price, slipped 1/2 basis point to 0.100 percent, the yield on the long-term 30-year note steadied at 0.847 percent and the yield on short-term 2-year traded flat at -0.117 percent.

The Australian long-term government bonds gained after fall in July employment change disappointed investors, but 6-year low jobless rate supported the short-term yield curve. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 1 basis point to 2.563 percent, the yield on the long-term 30-year Note also dipped 1 basis point to 3.060 percent and the yield on short-term 2-year rose 1 basis point to 2.005 percent.

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November 16 21:00 UTC Released

UST Flows,Incl.Swaps

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16.7 Bln USD

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111.5 Bln USD

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-29.1 Bln USD

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108.2 Bln USD

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-1541 %

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