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Europe Roundup: Sterling rebounds on upbeat economic data, euro gains as EZ service PMI surpasses expectations, oil hits highest since mid-2015 - Thursday, January 4th, 2018

Market Roundup

  • EUR/USD 0.34%, USD/JPY 0.04%, GBP/USD 0.26%, EUR/GBP 0.07%
     
  • DXY -0.25%, DAX 0.98%, FTSE 0.04%, Brent -0.22%, Gold 0.03%
     
  • EZ Markit Services Final PMI Dec, 56.6, 56.5 forecast, 56.5 previous
     
  • EZ Markit Composite Final PMI Dec, 58.1, 58.0 forecast, 58.0 previous
     
  • Germany Markit Services PMI Dec, 55.8, 55.8 forecast, 55.8 previous
     
  • Germany  Markit Composite Final PMI Dec, 58.9, 58.7 forecast, 58.7 previous
     
  • Great Britain Markit /CIPS Services PMI Dec, 54.2, 53.8 forecast, 53.8 previous
     
  • Great Britain BOE Consumer Credit Nov, 1.400B, 1.500B forecast, 1.451B previous
     
  • Great Britain Mortgage Lending Nov, 3.499B, 3.400B forecast, 3.392B previous
     
  • Great Britain Mortgage Approvals Nov, 65.139k, 64.000k forecast, 64.575k previous
     
  • Great Britain Nationwide House Price SA Dec, 0.6%, 0.2% forecast, 0.1% previous
     
  • Great Britain Nationwide House Price YY Dec, 2.6%, 2.0% forecast, 2.5% previous
     
  • France Markit Services PMI Dec, 59.1, 59.4 forecast, 59.4 previous
     
  • France Markit Composite PMI Dec, 59.6, 60.0 forecast, 60.0 previous
     
  • China to stick with "around 6.5 pct" growth goal in 2018 –sources
     
  • Oil hits highest since 2015 on Iran unrest, tighter market

Economic Data Ahead

  • (0815 ET/1315 GMT) Payrolls processor ADP releases U.S. employment report for the month of December. The report is expected to show that 190,000 jobs were added as compared with a similar gain in November.
     
  • (0830 ET/1330 GMT) The number of Americans filing for unemployment benefits is likely to have decreased by 5,000 to a seasonally adjusted 240,000 for the week ended Dec. 29, while continuing claims for the week ended Dec. 22 is expected to decline to 1.925 million from previous 1.943 million.
     
  • (0830 ET/1330 GMT) The Statistics Canada releases its Raw Material Price Index for the month of November. The index posted a rise of 3.8 percent in October.
     
  • (0830 ET/1330 GMT) The Statistics Canada will report its industrial producer prices for the month of November. The indicator rose 1.0 percent in the prior month.
     
  • (0945 ET/1445 GMT) Financial firm Markit releases final U.S. composite PMI for the month of December. The index posted a final reading of 53.0 in the previous month.
     
  • (0945 ET/1445 GMT) Markit Economics reports final U.S. services PMI for the month of December. The index posted a final reading of 52.4 in November.
     
  • (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending December 29.
     
  • (1100 ET/1600 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending December 29.
     

Key Events Ahead

  • (1330 ET/1830 GMT) St. Louis Fed President James Bullard gives a presentation on the U.S. economy and monetary policy before the event, "Meltzer's Contributions to Monetary Economics and Public Policy," in Philadelphia.

FX Beat

DXY: The dollar index eased as Fed minutes showed uncertainty over tax cut plan impact. The greenback against a basket of currencies traded 0.3 percent down at 91.95, having touched a low of 91.75 on Tuesday, its lowest since Sept. 20. FxWirePro's Hourly Dollar Strength Index stood at -86.66 (Slightly Bearish) by 1000 GMT.

EUR/USD: The euro rose above the 1.2000 handle after data showed the euro zone economy closed out 2017 with the strongest growth in nearly seven years, driven by accelerating services and manufacturing activity. The European currency traded 0.3 percent up at 1.2048, having touched a high of 1.2081 on Tuesday, its highest since Sept. 8. FxWirePro's Hourly Euro Strength Index stood at 143.12 (Highly Bullish) by 1000 GMT. The near-term is around 1.1999 (4H Kijun-Sen) and any break below will drag the pair down till 1.1948 (55- 4H EMA)/1.1900. On the higher side, near-term resistance is around 1.20920 and any break below will take it till 1.2112 (161.8% fib)/1.21850/1.2297 (138.2% fib).               

USD/JPY: The dollar trimmed gains following the comments from the Japanese PM Abe on North Korean nuke threats. However, upbeat U.S. economic data and minutes from the Federal Reserve policy meeting provided some support the major. The pair was trading flat at 112.55, having hit a low of 112.05 on Tuesday, its lowest since Dec. 15. FxWirePro's Hourly Yen Strength Index stood at -93.67 (Slightly Bearish) by 1000 GMT. The pair should close above trend line resistance at 113.25 and any break above will take the pair to next level till 114/115. The minor weakness can be seen below 200 day EMA at 111.66 and any daily close below will take it to next level till 110.84/110.

GBP/USD: Sterling rebounded after declining from a three-month high hit in the previous session, following the Bank of England's report that showed the British consumers increased their borrowing by the smallest amount since mid-2015 in the three months to November, indicating households are slowly reining in spending. The major traded 0.2 percent up at 1.3543, having hit a high of 1.3612 on Wednesday; it’s highest since Sept. 20. FxWirePro's Hourly Sterling Strength Index stood at 6.29 (Neutral) by 1000 GMT. On the lower side, near-term support is around 1.3475 (7- day MA) and any break below will drag the pair to next level till 1.3440 (10- day MA)/1.34020 (61.8% retracement). The near-term resistance is around 1.3600 and any break above will take it to next level till 1.3655/1.3700.

USD/CHF: The Swiss franc rose, reversing some of its previous session losses as the greenback eased across the board. The major trades 0.1 percent down at 0.9757, having touched a low of 0.9699 on Tuesday, it’s lowest since Jan. 2. FxWirePro's Hourly Swiss Franc Strength Index stood at -94.04 (Slightly Bearish) by 1000 GMT. On the higher side, near-term resistance is around 0.9800 and any break above will take the pair to next level till 0.9865/0.9900/0.9970 (Dec 8th, 2017 high)/1.000. The near-term support is around 0.9705 and any close below that level will drag it to next level till 0.9635/0.9600.

AUD/USD: The Australian dollar rallied to a 2-1/2 month high, underpinned by the prevailing positive trading sentiment around oil prices and today's better-than-expected release of Chinese Caixin Services PMI print. The Aussie trades 0.2 percent up at 0.7848, having hit a high of 0.7856 earlier; it’s highest since Oct. 20. FxWirePro's Hourly Aussie Strength Index stood at 113.55 (Highly Bullish) by 1000 GMT. On the lower side, the near term support is around 0.7818 (4H Kijun-Sen) and any convincing break below will drag the pair till 0.7770 (55- 4H EMA)/0.7692. The near-term resistance is around 0.7900 and any convincing break above targets 0.7950/0.8000.

Equities Recap

European stocks gained as rising oil prices drove auto and energy stocks higher, while the euro rose on better-than-expected Eurozone service PMI figures.

The pan-European STOXX 600 index advanced 0.5 percent to 392.14 points, while the FTSEurofirst 300 index rallied 0.5 percent to 1,541.55 points.

Britain's FTSE 100 trades 0.2 percent higher at 7,684.26 points, while mid-cap FTSE 250 gained 0.05 percent to 20,750.86 points.

Germany's DAX rose 0.8 percent at 13,078.47 points; France's CAC 40 trades 0.8 percent up at 5,376.13 points.

Commodities Recap

Crude oil prices rose to their highest in more than two and a half years, boosted by tensions in key producer Iran and by ongoing OPEC-led output cuts. International benchmark Brent crude was trading 0.1 percent up at $68.02 per barrel by 0952 GMT, having hit a high of $68.25 earlier, its highest since May 2015. U.S. West Texas Intermediate was trading 0.1 percent higher at $61.98 a barrel, after rising as high as $62.18, its highest since May 2015.

Gold prices steadied after falling from a 3-1/2-month high in the session before, dragged down as investors took profits and as the U.S. dollar firmed. Spot gold was firm at 0.05 percent at $1,313.70 an ounce at 0955 GMT, after touching its highest since Sept. 15 at $1,321.39 on Wednesday.  U.S. gold futures dropped 0.6 percent to $1,310 an ounce.

Treasuries Recap

The U.S. Treasuries slumped ahead of the country’s ADP non-farm employment change data for the month of December and the weekly initial jobless claims, scheduled to be released later today. The yield on the benchmark 10-year Treasuries jumped nearly 3 basis points to 2.47 percent, the super-long 30-year bond yields also climbed 3 basis points to 2.81 percent and the yield on the short-term 2-year traded a little over 2 basis points higher at 1.95 percent.

The UK gilts plunged after the country’s services PMI for the month of December came in better than what markets had initially anticipated. The yield on the benchmark 10-year gilts, jumped 3 basis points to 1.25 percent, the super-long 30-year bond yields surged 2-1/2 basis points to 1.79 percent and the yield on the short-term 2-year traded 3-1/2 basis points higher at 0.50 percent.

The German bunds slumped after the country’s composite PMI topped market expectations, thus weighing on safe-haven assets. The German 10-year bond yields, which move inversely to its price, rose 1-1/2 basis points to 0.45 percent, the yield on 30-year note jumped nearly 2 basis points to 1.29 percent and the yield on short-term 2-year traded flat at -0.61 percent.

The New Zealand government bonds rallied at the time of closing on continuing signal from a subdued dairy supply outlook despite an improvement in the global dairy prices at the country’s latest GlobalDairyTrade Price auction held lately. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 2.80 percent, the yield on 20-year slumped 2-1/2 basis points to 3.28 percent and the yield on short-term 2-year ended 2 basis points lower at 1.94 percent.

The Australian government bonds gained as FOMC December meeting minutes showed that stubbornly weak inflation could slow the pace of interest rate hikes in 2018. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 3 basis points to 2.664 percent, the yield on the long-term 30-year note dipped 4 basis points to 3.362 percent and the yield on short-term 2-year down 2 basis point to 1.973 percent.

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