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Europe Roundup: Sterling rebounds as UK unemployment declines, euro eases on soft EZ industrial output, European shares surge - Tuesday, August 14th, 2018

Market Roundup

  • EUR/USD -0.04%, USD/JPY 0.23%, GBP/USD 0.09%, EUR/GBP -0.16%
     
  • DXY -0.12%, DAX 0.28%, FTSE 0.00%, Brent 1.02%, Gold 0.05%
     
  • Turkish lira edges up from record low on central bank pledge, investor call
     
  • EZ Q2 GDP Flash Estimate YY, 2.2%, 2.1% forecast, 2.5% previous
     
  • EZ Jun Industrial Production YY, 2.5%, 2.6% forecast, 2.4% previous, 2.6% revised
     
  • Germany Q2 GDP Flash YY SA, 2.0%, 2.1% forecast, 2.3% previous, 2.1% previous
     
  • Germany Jul HICP Final YY, 2.1%, 2.1% forecast, 2.1% previous
     
  • Germany Aug ZEW Current Conditions, 72.6, 72.3 forecast, 72.4 previous
     
  • Germany Aug ZEW Economic Sentiment, -13.7, -20.7 forecast, -24.7 previous
     
  • Great Britain Jul Claimant Count Unemployment Change, 6.2k, 3.8k forecast, 7.8k previous, 9.0k revised
     
  • Great Britain Jun ILO Unemployment Rate, 4.0%, 4.2% forecast, 4.2% previous
     
  • Sterling nears $1.28 after surprise UK unemployment drop
     
  • Anti-terrorism police lead inquiry after people hit by car at UK parliament
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Labor Department publishes import and export prices index for the month of July. The import prices are likely to have gained 0.1 percent after declining 0.4 percent in June, while exports are expected to have edged up 0.2 percent after increasing 0.3 percent in the prior month.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (1100 ET/1500 GMT) The Federal Reserve Bank of New York issues its second-quarter household debt and credit report, in New York.

FX Beat

DXY: The dollar index edged down as fears over the Turkish currency crisis eased, following the intervention of Turkey’s central bank to provide more liquidity and bring a halt to the unstoppable decline in the lira. The greenback against a basket of currencies trades 0.05 percent down at 96.30, having touched a high of 96.52 on Monday, its highest since July 2017. FxWirePro's Hourly Dollar Strength Index stood at 32.51 (Neutral) by 1000 GMT.

EUR/USD: The euro eased, extending losses for the fourth straight session, as the exposure of European banks to Turkey's lira weighed on investor sentiment. Additionally, soft Eurozone industrial production figures, which fell 0.7 percent in June, below a forecast of 0.4 percent drop dented the bid tone around the major. The European currency traded 0.05 percent down at 1.1410, having touched a low of 1.1365, its lowest since July 2017. FxWirePro's Hourly Euro Strength Index stood at -69.32 (Bearish) by 1000 GMT. Immediate resistance is located at 1.1466 (38.2% retracement of 1.6282 and 1.1365), a break above targets 1.1497 (50% retracement). On the downside, support is seen at 1.1350, a break below could drag it till 1.1310.

USD/JPY: The dollar rose above the 111.00 handle as investor risk sentiment improved after Turkey's central bank pledged to provide liquidity and cut reserve requirements for Turkish banks. The major was trading 0.2 percent up at 111.04, having hit a low of 110.11 on Monday, its lowest since June 28. FxWirePro's Hourly Yen Strength Index stood at 27.05 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. export and import price index. Immediate resistance is located at 111.37 (61.8% retracement of 112.15 and 110.11), a break above targets 111.87 (August 3 High). On the downside, support is seen at 109.96 (June 28 Low), a break below could take it lower 109.36 (June 25 Low).

GBP/USD: Sterling edged up, hovering away from a 13-month low touched on Friday after data showed Britain's unemployment rate fell surprisingly to its lowest since 1975 during the second quarter and productivity gained momentum. However, rising concerns over UK negotiations with the European Union on a future trade deal limited the upside. The major traded 0.1 percent up at 1.2773, having hit a low of 1.2722 on Friday; it’s lowest since June. 2017. FxWirePro's Hourly Sterling Strength Index stood at -32.23 (Neutral) 1000 GMT. Immediate resistance is located at 1.2830 (23.6% retracement of 1.3173 and 1.2722), a break above could take it near 1.2948 (50% retracement). On the downside, support is seen at 1.2700, a break below targets 1.2665. Against the euro, the pound was trading 0.1 percent up at 89.29 pence, having hit a high of 88.96 earlier, it’s highest since August 6.

USD/CHF: The Swiss franc rose to a 5-day high as the greenback pulled back from its recent rally amid persisting concerns over the fallout from the Turkish lira's decline. The major trades 0.2 percent down at 0.9907, having touched a low of 0.9894 on Thursday, it’s lowest since July 31. FxWirePro's Hourly Swiss Franc Strength Index stood at 133.05 (Highly Bullish) 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 0.9894 (August 9 Low) and any close below that level will drag it till 0.9867 (July 31 Low).

Equities Recap

European shares rebounded as investors' anxiety over contagion from a Turkish currency crisis ebbed, while sterling rebounded from recent lows following an unexpected drop in the UK unemployment rate.

The pan-European STOXX 600 index rallied 0.3 percent at 385.91 points, while the FTSEurofirst 300 index surged 0.3 percent to 1,510.33 points.

Britain's FTSE 100 trades 0.05 percent up at 7,643.34 points, while mid-cap FTSE 250 gained 0.3 percent to 20,626.01 points.

Germany's DAX rose 0.3 percent at 12,387.256 points; France's CAC 40 trades 0.2 percent higher at 5,420.40 points.

Commodities Recap

Crude oil prices rose to a 6-day peak after Saudi Arabia said it had cut production in July, however, concerns over a slowdown in global economic growth limited upside. International benchmark Brent crude was trading 0.8 percent up at $73.30 per barrel by 0950 GMT, having hit a low of $71.07 on Monday, its lowest since April 18. U.S. West Texas Intermediate was trading 0.7 percent higher at $67.82 a barrel, after falling as low as $65.74 on Monday, its lowest since June 21.

Gold prices rebounded from an 18-month low hit in the previous session as the U.S. dollar pared gains after scaling a 13-month high. Spot gold was 0.1 percent up at $1,194.74 an ounce by 0959 GMT, having hit a low of $1190.82 on Monday, its lowest since January 27, 2017. U.S. gold futures were up 0.3 percent at $1,202.50 per ounce.

Treasuries Recap

The U.S. Treasury yields rallied after concerns over Turkey’s political deadlock eased to some extent, after the Central Bank of Turkey (CBRT) intervened yesterday, in an attempt to control the free fall of the Turkish lira as investors turned risk averse. The yield on the benchmark 10-year Treasuries jumped 2 basis points to 2.89 percent, the super-long 30-year bond yields climbed 1-1/2 basis points to 3.05 percent and the yield on the short-term 2-year surged 2 basis points to 2.63 percent.

The German bunds remained lower during European session after the country’s gross domestic product (GDP) for the second quarter of this year rose, beating market expectations as well. The German 10-year bond yields, which move inversely to its price, rose 1 basis point to 0.32 percent, the yield on 30-year note remained tad higher at 0.99 percent while the yield on short-term 2-year traded 1/2 basis point lower at -0.64 percent.

The New Zealand bonds closed higher as geopolitical tensions lingered, although Asian markets are expected not to be affected heavily by the ongoing political crisis in Turkey. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, remained tad lower at 2.60 percent, the yield on the long-term 20-year note fell 1-1/2 basis points to 2.91 percent and the yield on short-term 1-year closed 1/2 basis point lower at 1.76 percent.

The Japanese government bonds fell as risk sentiments improved and investors shifted away from safe-haven buying after the Turkish political disturbance calmed to some extent, following the intervention of the country’s central bank to provide more liquidity and bring a halt to the unstoppable decline in the lira. The yield on the benchmark 10-year JGB note, which moves inversely to its price, slipped nearly 1 basis point to 0.105 percent, the yield on the long-term 30-year note jumped 1-1/2 basis points to 0.846 percent and the yield on short-term 2-year traded tad higher at -0.111 percent.

The Australian government bonds traded mixed in subdued session as investors remain side-lined in any major deal ahead of June quarter wage price index data. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 1 basis point to 2.586 percent, the yield on the long-term 30-year Note also climbed 1 basis point to 3.075 percent and the yield on short-term 2-year slumped 1/2 basis point to 2.003 percent.

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