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Europe Roundup: Sterling rebounds after EU court adviser says Britain can revoke Brexit unilaterally, dollar slumps across the board as U.S. Treasury yields plunge, European shares tumble - Tuesday, December 4th, 2018

Market Roundup

  • Eurozone Oct 2018 producer prices yy increase to 4.9 % (forecast 4.5 %) vs previous 4.6 % (revised from 4.5 %)
     
  • Eurozone Oct 2018 producer prices mm increase to 0.8 % (forecast 0.5 %) vs previous 0.6 % (revised from 0.5 %)
     
  • United Kingdom Nov 2018 Markit/CIPS Construction PMI increase to 53.4 diff.idx (forecast 52.5 diff.idx) vs previous 53.2 diff.idx
     
  • Switzerland Nov 2018 CPI nsa decrease to 101.79 vs previous 102.05
     
  • Switzerland Nov 2018 CPI yy decrease to 0.9 % (forecast 1 %) vs previous 1.1 %
     
  • Switzerland Nov 2018 CPI mm decrease to -0.3 % (forecast -0.1 %) vs previous 0.2 %
     
  • Switzerland Nov 2018 CPI nsa decrease to 101.8 vs previous 102.05
     
  • France Oct 2018 budget balance increase to -86.98 eur vs previous -87.1 eur
     

Economic Data Ahead

  • (0830 ET/1330 GMT) The statistics Canada is expected to report that labor productivity rate of Canadian businesses increased by 0.4 percent for the third quarter, after rising 0.7 percent in the first quarter.
     
  • (0945 ET/1445 GMT) The NAPM-New York releases ISM-New York Index for the month of November. The index stood at 69.8 in the previous month.
     
  • (1000 ET/1500 GMT) The Investor's Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of December. The indicator rose to 56.4 in November.
     
  • (1400 ET/1900 GMT) Argentina releases industrial output data for the month of October. The economy's Industrial output fell 11.5 percent in September.
     
  • (1630 ET/2130 GMT) API reports its weekly crude oil stock.
     

Key Events Ahead

  • (1000 ET/1500 GMT) Federal Reserve Bank of New York President John Williams participates in panel in New York
     
  • (1300 ET/1800 GMT) Bank of England Monetary Policy Committee Member Gertjan Vlieghe speaks in Plymouth
     

FX Beat

DXY: The dollar index plunged as the gap in interest rates between 2-year and 10-year U.S. Treasury securities narrowed to its smallest in more than a decade. The greenback against a basket of currencies trades 0.5 percent down at 96.43, having touched a low of 96.38 earlier, its lowest since Nov 22. FxWirePro's Hourly Dollar Strength Index stood at -166.10 (Highly Bearish) by 1000 GMT.

EUR/USD: The euro rallied to an over 1-week peak after data showed Eurozone producer prices rose more than expected in October on the back of rising energy costs. Moreover, broad-based U.S. dollar selling supported the bid tone around the major. The European currency traded 0.5 percent up at 1.1405, having touched a high of 1.1418 earlier, its highest since Nov. 23. FxWirePro's Hourly Euro Strength Index stood at 55.47 (Bullish) by 1000 GMT. Immediate resistance is located at 1.1433 (November 22 High), a break above targets 1.1472 (November 20 High). On the downside, support is seen at 1.1305 (November 30 Low), a break below could drag it till 1.1263 (November 26 Low).

USD/JPY: The dollar slumped to a near 2-week low, weighed down by a slump in U.S. Treasury yields and growing concerns about China and the United States' ability to resolve their trade differences. Earlier, a White House official stated that the U.S. expects China to take immediate action to slash tariffs on U.S. car imports and end intellectual property theft as both the economies move toward a broader trade deal. The major was trading 0.8 percent down at 112.76, having hit a low of 112.73 earlier, its lowest since November 23. FxWirePro's Hourly Yen Strength Index stood at 50.51 (Bullish) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the New York business confidence index and economic optimism, and FOMC member William's speech. Immediate resistance is located at 113.23 (November 22 High), a break above targets 113.81 (November 7 High). On the downside, support is seen at 112.64 (November 16 Low), a break below could take it lower 112.30 (November 20 Low).

GBP/USD: Sterling rallied, halting a 3-day losing streak, after the European Court of Justice's Advocate General Campos Sanchez-Bordona stated that Britain should be allowed to unilaterally revoke its departure notice. The major traded 0.8 percent up at 1.2822, having hit a low of 1.2698 on Monday; it’s lowest since October 31. FxWirePro's Hourly Sterling Strength Index stood at -42.69 (Neutral) 1000 GMT. Immediate resistance is located at 1.2884 (November 19 High), a break above could take it near 1.2926 (November 22 High). On the downside, support is seen at 1.2695 (October 30 Low), a break below targets 1.2661 (August 15 Low). Against the euro, the pound was trading 0.3 percent up at 88.95 pence, having hit a low of 89.44 earlier, it’s lowest since Sept. 26.

USD/CHF: The Swiss franc rose to a 5-day low, as renewed concerns over the United States and China trade dispute sent investors seeking safety into safe-haven assets. The major trades 0.4 percent down at 0.9942, having touched a high of 1.0005 on Wednesday; it’s highest since Nov. 19. FxWirePro's Hourly Swiss Franc Strength Index stood at 17.66 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 1.0026 (Oct. 26 High) and any break above will take the pair to next level till 1.0050 (Nov. 7 High). The near-term support is around 0.9908 (November 20 Low), and any close below that level will drag it till 0.9881 (October 12 Low).

Equities Recap

European shares tumbled as investors raised doubts over the truce agreed by the United States and China on their trade dispute.

The pan-European STOXX 600 index slumped 0.5 percent at 359.45 points, while the FTSEurofirst 300 index declined 0.4 percent to 1,418.69 points.

Britain's FTSE 100 trades 0.4 percent down at 7,038.75 points, while mid-cap FTSE 250 fell 0.3 to 18,503.14 points.

Germany's DAX declined 0.8 percent at 11,374.90 points; France's CAC 40 trades 0.8 percent lower at 5,014.70 points.

Commodities Recap

Crude oil prices surged by more than 2 percent ahead of expected output cuts by producer cartel OPEC and a mandated reduction in Canadian supply. International benchmark Brent crude was trading 2.3 percent up at $63.20 per barrel by 1017 GMT, having hit a high of $63.27 earlier, its highest since November 22. U.S. West Texas Intermediate was trading 2.3 percent up at $54.27 a barrel, after rising as high as $54.30, its highest since the November 22.

Gold prices rallied to an over 1-month high earlier in the session, as the dollar plunged after the United States and China agreed to a temporary truce in their trade conflict. Spot gold rose 0.8 percent to $1,239.85 per ounce at 1020 GMT, having touched a high of $1,241.01, its highest level since October 26. U.S. gold futures were up 0.3 percent at $1,243.4 per ounce.

Treasuries Recap

The U.S. Treasuries gained during late afternoon session as investors shifted away from safe-haven assets after enjoying a solid rally yesterday, owing to the Saudi-Russia deal to work together this week to manage supply – and supported by the weekend’s de-escalation of trade tensions between the US and China at the G20 Summit. However, the excitement surrounding U.S.-China talks faded, thus weighing on the bond yields. The yield on the benchmark 10-year Treasuries slumped 3-1/2 basis points to 2.957 percent, the super-long 30-year bond yields plunged 5-1/2 basis points to 3.224 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points lower at 2.821 percent.

The United Kingdom’s gilts traded mixed during the afternoon session after the country’s construction PMI for the month of November remained tad higher, also slightly above market expectations as well amid ongoing Brexit uncertainties. The yield on the benchmark 10-year gilts, remained tad higher at 1.318 percent, the super-long 30-year bond yields slumped nearly 5 basis points to 1.979 percent and the yield on the short-term 2-year traded nearly 2-1/2 basis points higher at 0.745 percent.

The German bunds gained during European session amid a muted trading session that witnessed data of little economic significance ahead of European Central Bank (ECB) President Mario Draghi’s speech, scheduled to be held on December 5 by 08:30GMT for added direction in the debt market. The German 10-year bond yields, which move inversely to its price, fell 2 basis points to 0.286 percent, the yield on 30-year note slumped nearly 3 basis points to 0.948 percent and the yield on short-term 2-year traded nearly 1 basis point lower at -0.609 percent.

The Australian government bonds surged during Asian session after the Reserve Bank of Australia (RBA) decided to remain unchanged at its policy decision, concluded early today, while maintaining a steady outlook for some time now. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 8-1/2 basis points to 2.539 percent, the yield on the long-term 30-year bond also slumped nearly 8-1/2 basis points to 3.062 percent and the yield on short-term 2-year traded nearly 3 basis points down at 1.988 percent.

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