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Europe Roundup: Sterling rebounds on better-than-expected GDP, dollar tumbles as U.S.-China talks resume, European shares plunge - Thursday, October 10th, 2019

Market Roundup

  • UK economy on track to dodge pre-Brexit recession
  • EU approves Greece's plan to reduce bad loans by 30 billion euros
  • Gold rises to a one-week peak
  • Oil prices consolidate

Economic Data Ahead

  • (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have stayed unchanged at 219,000 for the week ended Oct. 4, while continuing claims for the week ended Sept. 27 is expected to rise to 1.653 million from previous week's reading of 1.651 million.
  • (0830 ET/1230 GMT) The U.S. consumer price index likely increased 0.1 percent in September after posting similar gains in August, while in the 12 months through September, the CPI is expected to have risen 1.8 percent.  Excluding food and energy, the core CPI probably rose 0.2 percent, after rising 0.3 percent in the previous month.
  • (0830 ET/1230 GMT) Statistics Canada releases its New Housing Price Index (NHPI) for the month of August. The index eased 0.1 percent in July.
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending October 4.
  • (1400 ET/1800 GMT) The U.S. reports its monthly budget statement for the month of September. The government posted a deficit of $200 billion in the previous month.

Key Events Ahead

  • (1215 ET/1615 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari's speech
  • (1330 ET/1730 GMT) European Central Bank Executive Board member Philip Richard Lane's speech
  • (1730 ET/2130 GMT) Cleveland Fed President Loretta Mester gives a speech

FX Beat

DXY: The dollar index plunged to a 1-week low as the 10-year Treasuries yield dipped to one basis point to 1.577 percent, while U.S.-China trade talks resumed. The greenback against a basket of currencies traded 0.4 percent down at 98.75, having touched a low of 98.66 earlier, its lowest since October 3.

EUR/USD: The euro rallied to a near 3-week peak after the Financial Times reported that the ECB had restarted its bond-buying programme last month despite objections of its own officials. The European currency traded 0.6 percent up at 1.1031, having touched a high of 1.1033 earlier, its highest since September 20. Immediate resistance is located at 1.1059 (78.6% retracement of 1.1109 and 1.0879), a break above targets 1.1087. On the downside, support is seen at 1.0948 (10-DMA), a break below could drag it below 1.0904.

USD/JPY: The dollar declined after rising to a 1-week peak earlier in the day, following contradictory reports about U.S.-China trade talks. The major was trading 0.1 percent down at 107.40, having hit a high of 107.77 earlier, its highest since October 2. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims, consumer price index, Fed official's speeches. Immediate resistance is located at 107.88 (September 25 High), a break above targets 108.25 (September 13 High). On the downside, support is seen at 106.96 (September 24 Low), a break below could take it near at 106.62 (September 6 Low).

GBP/USD: Sterling rebounded from recent lows on data that showed Britain’s economy likely dodged recession in the run-up to its deadline for leaving the European Union this month. The economy's gross domestic product in the three months to August was 0.3 percent higher than in the previous three months, beating all forecasts and accelerating from an upwardly revised 0.1 percent in the three months to July. Investors now await a meeting between the British and Irish leaders just three weeks before Britain is due to leave the European Union. The major traded 0.3 percent up at 1.2248, having hit a low of 1.2195 on Tuesday, it’s lowest since September 4. Immediate resistance is located at 1.2285 (10-DMA), a break above could take it near 1.2364 (21-DMA). On the downside, support is seen at 1.2154 (August 28 Low), a break below targets 1.2108 (August 22 Low). Against the euro, the pound was trading 0.2percent down at 89.80 pence, having hit a low of 90.10 earlier, it’s lowest since Sept. 9.

USD/CHF: The Swiss franc gained, reversing most of its previous session losses, as fading prospects of a partial trade deal between China and the United States weakened investor risk sentiment. The major trades 0.3 percent down at 0.9930, having touched a low of 0.9904 on Tuesday, it’s lowest since September 30. On the higher side, near-term resistance is around 0.9987 and any break above will take the pair to next level till 1.0027. The near-term support is around 0.9897, and any close below that level will drag it till 0.9865.

Equities Recap

European shares declined, weighed down by losses in healthcare companies, U.S.-China trade war and uncertainty over Brexit.

The pan-European STOXX 600 index fell 0.2 percent at 379.58 points, while the FTSEurofirst 300 declined 0.2 percent to 1,494.11 points.

Britain's FTSE 100 trades 0.2 percent down at 7,154.69 points, while mid-cap FTSE 250 eased 0.4 to 19,091.78 points.

Germany's DAX rose 0.05 percent at 12,099.05 points; France's CAC 40 trades 0.3 percent higher at 5,516.85 points.

Commodities Recap

Crude oil prices consolidated as the U.S.-China trade war continued to cloud prospects for the global economy and fuel demand despite a resumption in talks seeking a resolution to the 15-month conflict.  International benchmark Brent crude was trading 0.3 percent up at $58.39 per barrel by 1115 GMT, having hit a low of $57.13 last week, its lowest since August 7. U.S. West Texas Intermediate was trading 0.3 percent higher at $52.71 a barrel, after falling as low as $51.39 earlier, its lowest since October 3.

Gold prices rallied to 1-week highs as investors flocked to the safety of safe-haven assets following contradictory reports about U.S.-China trade talks. Spot gold gained 0.2 percent to $1,507.80 per ounce by 1118 GMT, having touched a high of $1,516.96 earlier, its highest since October 3. U.S. gold futures dropped 0.1 percent to $1,511.80.

Treasuries Recap

The U.S. Treasuries remained mixed during the afternoon session ahead of the country’s consumer price inflation (CPI) for the month of September, scheduled to be released today by 12:30GMT, besides, the weekly initial jobless claims, also due later today. In addition, speeches by Federal Open Market Committee (FOMC) members Kashkari and Mester, due today at 16:15GMT and 21:30GMT respectively, will add further direction to the debt markets. The yield on the benchmark 10-year Treasury yield remained flat at 1.587 percent, the super-long 30-year bond yield gained 1 basis point to 2.096 percent while the yield on the short-term 2-year slipped 1-1/2 basis point to 1.460 percent.

The German bunds plunged during European session despite a lower-than-expected trade surplus registered for the month of August, while eyes still remain on the country’s consumer price inflation (CPI) for the month of September, due for release on October 11 by 06:00GMT for further direction in the debt market. The German 10-year bond yield, which move inversely to its price, jumped 3-1/2 basis points to -0.518 percent, the yield on 30-year note surged 3 basis points to -0.034 percent and the yield on short-term 2-year traded 2 basis points higher at -0.719 percent.

The Australian government bonds traded lower as markets are hopeful of a resolution from the U.S.-China trade talks scheduled to be held later today. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, climbed 1 basis point to 0.898 percent, the yield on the long-term 30-year bond surged nearly 1-1/2 basis points to 1.497 percent while the yield on short-term 2-year traded flat at 0.638 percent.

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