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Europe Roundup: Sterling slumps following downbeat retail sales figures, dollar rebounds on rising U.S. Treasury yields, investors eye Trump inaugural ceremony - Friday, January 20th, 2017

Market Roundup

 

  • USD/JPY +0.3%, GBP/USD -0.3%, EUR/USD -0.2%
     
  • DXY +0.2%, DAX +0.2%, Brent +0.6%
     
  • Metals took a hit: Gold -0.4%, Silver -1.0%, Iron (Dalian) -3.25%, Copper -0.6%
     
  • UK ONS Dec retail sales -0.9% m/m, +4.3% vs -0.1% m/m & +7.2% y/y f/c
     
  • Germany Dec Producer Prices +1.0% y/y vs 0.1% previous, 1.0% expected
     
  • ECB Survey: 2017 inflation expectations at 1.4% vs 1.2% seen 3mths ago, largely due to oil prices  
     
  • ECB Coeure: QE will not last forever, too early to have discussion on tapering
     
  • UK Hammond: If we are denied access to EU market, "we will reinvent ourselves"
     
  • BOJ Gov Kuroda: Top priority for macroeconomic policy continues to be overcoming deflation
     
  • Kuroda: Econ will grow around 1/5%, well above potential, in current/next fiscal years

Economic Data Ahead

  • (0830 ET/1330 GMT) Statistics Canada is expected to report that retail sales gained 0.5 percent in November after rising 1.1 percent in October. While excluding autos, retail sales are likely to have risen 0.2 percent, after advancing 1.4 percent in the previous month.
     
  • (0830 ET/1330 GMT) The Statistics Canada is expected to report that annual inflation rate rose 1.7 percent in December from 1.2 percent in November, bringing it closer to the Bank of Canada’s 2 percent target. While core consumer price index fell 0.4 percent in November.
     
  • (1300 ET/1800 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events Ahead

  • (0900 ET/1400 GMT) Federal Reserve Bank of Philadelphia President Patrick Harker speaks on the economic outlook before the New Jersey Bankers Association 6th Annual NJ Economic Leadership Forum, in Somerset, N.J.  
     
  • (0930 ET/1430 GMT) President-elect Donald Trump inaugural ceremony.
     
  • (1145 ET/1645 GMT) FedTrade ops 30-year Fannie Mae/Freddie Mac max $1.725 bln
     
  • (1300 ET/1800 GMT) San Francisco Federal Reserve Bank President John Williams will give his economic outlook for 2017. 
     

FX Beat

DXY: The dollar rebounded versus its major peers, following a sharp spike in the U.S. Treasury bond yields, while investors braced for U.S. President-elect Donald Trump inauguration speech. The greenback against a basket of currencies traded 0.2 percent up at 101.37, hovering towards a high of 101.73 hit on Thursday. FxWirePro's Hourly Dollar Strength Index stood at 122.56 (Highly Bullish) by 1000 GMT.

EUR/USD: The euro eased, reversing early session gains, as the dollar rebounded across the board on the back of high U.S. Treasury yields. However, the major was on track for a fifth consecutive week of gains. The European currency traded 0.2 percent lower at 1.0645, hovering away from a high 1.0719 hit earlier in the week, it’s highest since Dec 8, but was up 0.3 percent for the week. FxWirePro's Hourly Euro Strength Index stood at 60.42 (Bullish) by 0900 GMT. The major has taken support near 38.2% fibo level and break below will drag the pair down till 1.0540 (20- day MA)/1.04800. The major resistance is around 1.07350 and any break above 1.0735 confirms minor bullishness and a jump till 1.0800/1.08750 is possible.

USD/JPY: The dollar rose above the 115.00 handle, extending gains for the third straight session, as the U.S. 10-year treasury yield rose to 2-1/2 week high. However, investors refrained from placing large bets ahead of Donald Trump's inaugural speech. The major trades 0.2 percent up at 115.06, drifting closer to a high of 115.61hit in the previous session, it’s strongest since Jan. 11. FxWirePro's Hourly Yen Strength Index stood at -109.33 (Highly Bearish) by 0900 GMT. The major resistance is around 115.62 (38.2% retracement of 118.61 and 112.57) and any break above will take the pair till 116.30 (61.8% fibo)/117. On the lower side, minor support is around 114.40 (30- 4H EMA) and any break below targets 113.75/113.

GBP/USD: Sterling slumped below the 1.2300 handle after data showed Britain’s retail sales declined sharply in December as British consumers showed signs of Brexit fears. The economy's retail sales volumes dropped 1.9 percent in December, below estimates of 0.1 percent decline, recording its biggest fall since April 2012.  Sterling trades 0.5 percent lower at 1.2284, after rising to a high 1.2416 on Tuesday, it’s strongest since Jan. 6. FxWirePro's Hourly Sterling Strength Index stood at 49.67 (Neutral) by 1000 GMT. The upside remains capped by 1.2435 (Jan 6 High) and any break above will take it till 1.2475 (61.8% retracement of 1.27780 and 1.19860). On the lower side, short term support stands at 1.2200 and any break below will drag the pair down till 1.2080/1.2030/1.2000. Against the euro, the pound trades 0.3 percent down at 86.68 pence, having hit a peak of 86.07 on Thursday, it’s strongest since Jan. 9.

USD/CHF: The Swiss franc declined as the greenback rose on the back of higher U.S. Treasury bond yields. The major trades 0.2 percent higher at 1.0083, having hit a low of 0.9996 on earlier in the week, it’s lowest since Nov. 17. FxWirePro's Hourly Swiss Franc Strength Index stood at 13.11 (Neutral) by 1000 GMT. Any violation above 1.01220 will take the pair to next level till 1.01365 (Jan 16 High)/1.01520 (61.8% retracement of 1.02440 and 0.99965. On the lower side, any close below 1 confirms that jump from 0.9549 till 1.03435 got over and a decline till 0.9950/0.9820 is possible.

AUD/USD: The Australian dollar reversed better-than-expected Chinese GDP led-gains, as the greenback advanced following a rise in the U.S. Treasury yields. The major rose to a fresh 2-month high earlier in the day on the back of upbeat China's gross domestic product report and Australia's new home sales data. The Aussie trades 0.4 percent lower at 0.7524, having hit a high of 0.7588 earlier, it’s strongest since Nov. 11. FxWirePro's Hourly Aussie Strength Index stood at -37.02 (Neutral) by 1000 GMT. On the higher side, it should close above 0.7600 for further bullishness. Any break above will take the pair till 0.7645/0.7700. The minor support is around 0.7485 (23.6% retracement of 0.7155 and 0.75885) and a break below will drag it till 0.7420(60- day EMA)/0.7393 (30- day EMA).

NZD/USD: The New Zealand dollar declined after hitting a fresh five-week high above the 0.7200 handle, amid resurgent greenback buying interest. The Kiwi trades 0.65 percent down at 0.7141, having hit an early high of 0.7225, it’s strongest since Dec. 14. FxWirePro's Hourly Kiwi Strength Index was at -79.87 (Slightly Bearish) by 1000 GMT. Immediate resistance is located at 0.7238 (Dec 14 High), a break above could take it near 0.7300. On the downside, support is seen at 0.7116 (9-EMA), a break below could drag it till 0.7100.

Equities Recap

European shares tumbled in early deals and were on course for a weekly loss of more than 1 percent, as investors refrained from talking positions ahead of President-elect Donald Trump's inauguration and a speech that could provide insights on his economic policies.

The pan-European STOXX 600 index decreased 0.02 percent to 362.77 points, while the FTSEurofirst 300 index rose 0.05 percent to 1,432.20 points.

Britain's FTSE 100 trades 0.2 percent down at 7,195.69 points, while mid-cap FTSE 250 slumped 0.05 percent to 18,214.87 points.

Germany's DAX edged up 0.07 percent at 11,606.16 points; France's CAC 40 trades 0.2 percent higher at 4,852.67 points.

Tokyo's Nikkei rose 0.34 percent to 19,137.91 points, Australia's S&P/ASX 200 index fell 0.56 percent to 5,660.10 points and South Korea's KOSPI dropped 0.35 percent to 2,065.61 points.

Shanghai composite index gained 0.7 percent to 3,123.14 points, while CSI300 index climbed 0.8 percent to 3,354.89 points. Hong Kong’s Hang Seng shed 0.7 percent at 22,855.91 points.

Commodities Recap

Crude oil rose, halting its three-day losing streak, as expectations of tighter supply and reports of record Chinese demand strengthened market sentiment, however, rising U.S. crude and gasoline inventories limited upside.  International benchmark Brent crude was trading 0.4 percent higher at $54.38 per barrel by 0911 GMT, having hit a low of $53.75 on Wednesday, its lowest since Jan. 11. U.S. West Texas Intermediate crude rallied 2.04 percent at $52.43 a barrel, after falling as low as $50.89 earlier in the week.

Gold prices edged down but were on track for their fourth consecutive weekly gains, ahead of the inauguration of U.S. President-elect Donald Trump later in the day. Spot gold was 0.1 percent down at $1,203.01 per ounce by 0915 GMT, after falling to a low of $1,195.75 in the previous session. U.S. gold futures climbed 0.4 percent to $1,206.60 per ounce.

Treasuries Recap

The U.S. Treasuries witnessed massive selling across the curve following the downward pressure in jobless claims (to 234k), alongside notable gains in both housing starts (to 1226k) and Philadelphia Fed manufacturing releases (to 23.6). The yield on the benchmark 10-year Treasury rose nearly 5 basis points to 2.50 percent, the super-long 30-year bond yield jumped nearly 4-1/2 basis points to 3.08 percent and the yield on short-term 2-year note moved higher by nearly 2 basis points to 1.24 percent.

The UK gilts slumped as investors cashed in profits on the last trading day of the week after markets largely shrugged off worse-than-expected retail sales data. The yield on the benchmark 10-year gilts, rose nearly 3-1/2 basis points to 1.44 percent, the super-long 30-year bond yields also moved higher by 3-1/2 basis points to 2.08 percent while the yield on short-term 2-year remained flat at 0.20 percent.

The German bunds traded range bound in a subdued trading session Friday amid a lack of major domestic events. The yield on the benchmark 10-year bond, which moves inversely to its price, hovered around 0.38 percent, the long-term 30-year bond yields also rose nearly 3 basis points to 1.15 percent and the yield on short-term 2-year bond also traded flat at -0.68 percent.

The Japanese government bonds traded mixed post a healthy open market operation (OMOs) by the Bank of Japan today. However, the country’s long-term bond yields jumped in intra-day trading, following current firmness in the United States debt market. The benchmark 10-year bond yield, fell 1 basis point to 0.06 percent, while the long-term 30-year bond yields jumped 3 basis points to 0.80 percent and the yield on the short-term 2-year note remained fell nearly 1 basis point to -0.23 percent.

The New Zealand government bonds ended the week on a softer note, following a strong reading of China’s gross domestic product (GDP) which further dragged the country’s debt market.  The yield on the benchmark 10-year bond, jumped 4 basis points at the time of closing at 3.27 percent, the yield on 7-year note also ended 3-1/2 basis points higher at 2.94 percent and the yield on short-term 2-year note surged 2 basis points to 2.31 percent.

The Australian government bonds shrank, investors cashed in profits on the last trading day of the week after relishing previous gains, observing a relatively subdued trading session. The yield on the benchmark 10-year Treasury note, rose 1/2 basis point to 2.79 percent, the yield on 15-year note also moved 1/2 basis point higher to 3.24 percent and the yield on short-term 2-year moved higher nearly 1 basis point to 1.90 percent.

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