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Europe Roundup: Sterling slumps across the board on renewed Brexit concerns, dollar index steadies amid U.S.-China trade war tensions, European shares plunge - Wednesday, August 8th, 2018

Market Roundup

  • EUR/USD -0.05%, USD/JPY -0.34%, GBP/USD -0.41%, EUR/GBP 0.33%
     
  • DXY -0.04%, DAX -0.13%, FTSE 0.55%, Brent 0.05%, Gold 0.05%
     
  • Chinese exports accelerate even as Trump escalates trade war
     
  • Sterling falls to ten-month low against euro as investors hedge against Brexit
     
  • ECB sees scope for further consumption boom
     
  • Italy's economy minister sees lower growth, higher deficit next year
     
  • Iran's foreign minister: U.S. will not stop Iran oil exports - newspaper
     
  • Turkish lira weakens again, eyes on Washington talks
     
  • BOJ board disagreed on new tolerance for yield moves at last meeting
     
  • Oil dips on weak China imports, but Iran sanctions, weak U.S. stocks support
     
  • Gold steady, dollar headwinds on the radar
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The Statistics Canada is likely to report that building permits rose 1.0 percent in June, compared with an increase of 4.7 percent in May
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending July 30.

Key Events Ahead

  • (0830 ET/1230 GMT) Federal Reserve Bank of Richmond President Tom Barkin speaks on "Unlocking Our Potential" before a group of local business and community leaders in Roanoke, Virginia.

FX Beat

DXY: The dollar index rose, regaining early session losses after the U.S. Trade Representative's office said that the U.S. would begin collecting 25 percent tariffs on another $16 billion in Chinese goods later this month. The greenback against a basket of currencies trades 0.1 percent up at 95.27, having touched a high of 95.52 on Monday, its highest since July 19. FxWirePro's Hourly Dollar Strength Index stood at -43.00 (Neutral) by 1000 GMT.

EUR/USD: The euro trimmed gains after rising to a 6-day high earlier in the day after the European Central Bank in its bulletin argued that recovery in private consumption had so far been weak, raising fears that the bloc's remarkable expansion may be coming to an early end. The European currency traded 0.05 percent up at 1.1601, having touched a high of 1.1628, its highest since August 2. FxWirePro's Hourly Euro Strength Index stood at 82.08 (Slightly Bullish) by 1000 GMT. Immediate resistance is located at 1.1638 (10-DMA), a break above targets 1.1662 (21-DMA). On the downside, support is seen at 1.1540 (August 6 Low), a break below could drag it till 1.1508 (June 21 Low).

USD/JPY: The dollar slumped to a 1-week low after the Chinese commerce ministry stated that China will impose additional 25 percent tariffs on 659 U.S. goods worth $50 billion in response to the latest U.S. tariffs on Chinese goods. The major was trading 0.3 percent down at 110.99, having hit a low of 110.83 earlier, its lowest since July 31. FxWirePro's Hourly Yen Strength Index stood at 97.23 (Slightly Bullish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. FOMC member Barkin's speech. Immediate resistance is located at 111.70 (21-DMA), a break above targets 112.17 (July 11 High). On the downside, support is seen at 110.75 (July 31 Low), a break below could take it lower 110.59 (July 26 Low).

GBP/USD: Sterling tumbled to a 1-year low against the dollar and to a 10-month low against the euro as investors feared that Britain could soon leave the European Union without securing a trade deal. Moreover, a survey showing the number of people recruited for permanent jobs in Britain grew at its slowest pace in nine months in July undermined the bid tone around the British pound. The major traded 0.6 percent down at 1.2866, having hit a low of 1.2860 earlier; it’s lowest since Aug. 2017. FxWirePro's Hourly Sterling Strength Index stood at -133.82 (Highly Bearish) 1000 GMT. Immediate resistance is located at 1.3004 (5-DMA), a break above could take it near 1.3083 (July 19 High). On the downside, support is seen at 1.2850, a break below targets 1.2770. Against the euro, the pound was trading 0.6 percent down at 90.12 pence, having hit a low of 90.16, it’s lowest since Oct. 2017.

USD/CHF: The Swiss franc edged down as the greenback steadied amid prospects of a full-blown trade war between U.S. and China. The major trades 0.1 percent down at 0.9960, having touched a high of 0.9984 on Monday, it’s highest since July 20. FxWirePro's Hourly Swiss Franc Strength Index stood at -15.70 (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 0.9931 (10-DMA) and any close below that level will drag it till 0.9897 (August 1 Low).

Equities Recap

European shares slumped as weighed down by downbeat corporate earnings in the pharmaceutical sector, while the greenback steadied as Washington prepared to start collecting tariffs on another $16 billion of Chinese goods.

The pan-European STOXX 600 index declined 0.1 percent at 390.06 points, while the FTSEurofirst 300 index eased 0.05 percent to 1,529.02 points.

Britain's FTSE 100 trades 0.8 percent up at 7,776.62 points, while mid-cap FTSE 250 rose 0.4 percent to 20,752.51 points.

Germany's DAX fell 0.1 percent at 12,634.29 points; France's CAC 40 trades 0.2 percent lower at 5,514.47 points.

Commodities Recap

Crude oil prices surged, supported by declining U.S. crude inventories and the introduction of sanctions against Iran. International benchmark Brent crude was trading 0.3 percent up at $74.68 per barrel by 0946 GMT, having hit a high of $74.86 on Tuesday, its highest since July 31. U.S. West Texas Intermediate was trading 0.2 percent higher at $69.20 a barrel, after rising as high as $69.89 on Monday, its highest since July 31.

Gold prices edged higher, extending gains for a second straight session, as the U.S. dollar weakened against China's yuan and the euro. Spot gold rose 0.05 percent to $1,211.31 an ounce at 1023 GMT, having hit its lowest since July 2017 at $1,204.06 on Friday. U.S. gold futures were also up 0.2 pct at $1,220.80 per ounce.

Treasuries Recap

The U.S. Treasuries remained slightly on the upside ahead of the 10-year Note auction and Federal Open Market Committee (FOMC) member Barkin’s speech, scheduled to be held today by 17:00GMT and 12:45GMT. The yield on the benchmark 10-year Treasuries slipped 1/2 basis point to 2.96 percent, the super-long 30-year bond yields also remained tad lower at 3.11 percent and the yield on the short-term 2-year too traded 1/2 basis point lower at 2.67 percent.

The United Kingdom’s gilt prices trade range-bound during European session as investors wait to watch the country’s gross domestic product (GDP) for the second quarter of this year, which is expected to rise from its previous reading, due to be released on August 10 by 08:30GMT. The yield on the benchmark 10-year gilts, hovered around 1.32 percent, the super-long 30-year bond yields remained tad lower at 1.75 percent and the yield on the short-term 2-year traded 2 basis points higher at 0.74 percent.

The New Zealand bonds closed lower after global dairy prices remained unchanged at the latest GlobalDairyTrade (GDT) price auction, held early today ahead of the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting, which will most likely be non-eventful, scheduled to be held today by 21:00GMT, followed by a press conference at 22:00GMT. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, rose 1 basis point to 2.78 percent, the yield on the long-term 20-year note hovered around 3.09 percent and the yield on short-term 2-year closed 1 basis point higher at 1.81 percent.

The Japanese government bonds traded weaker Wednesday after the Bank of Japan’s (BoJ) monetary policy board members remained divided over long-term interest rates in its July 30-31 meeting Summary of Opinions, released today amid hopes of an improvement in the country’s second-quarter gross domestic product (GDP), scheduled to be released on August 9 by 23:50GMT.  The yield on the benchmark 10-year JGB note, which moves inversely to its price, remained tad higher at 0.112 percent, the yield on the long-term 30-year note rose 1 basis point to 0.862 percent and the yield on short-term 2-year moved 1/2 basis point higher to -0.103 percent.

The Australian government bonds remained narrowly mixed during Asian session as investors remained sidelined in any major trading activity amid lack of economically significant data.  The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose nearly 1 basis point to 2.67 percent, the yield on the long-term 30-year Note hovered around 3.15 percent and the yield on short-term 2-year traded 1 basis point lower 2.02 percent.

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