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Europe Roundup: Sterling slumps on  EU trade talk concerns, euro consolidates near 1-week low following ECB Lagarde comments, European shares surge - Thursday, February 6th, 2020

Market Roundup

  • Gold gains as markets assess economic impact of virus
     
  • Eurozone growth weak but showing signs of stabilization: Lagarde

Economic Data Ahead

  • (0830 ET/1330 GMT) U.S. Initial Jobless Claims (Jan 31)
     
  • (0830 ET/1330 GMT) U.S. Continuing Jobless Claims (Jan 24)
     
  • (0830 ET/1330 GMT) U.S. Unit Labor Costs (Q4) PREL 

Key Events Ahead

  • (0915 ET/1415 GMT) Fed's Kaplan speech

FX Beat

DXY: The dollar index held firm near a 2-month peak, supported by positive data from the United States including a rise in January private payrolls and services sector activity. The greenback against a basket of currencies traded up at 97.27, having touched a high of 98.34 earlier, its highest since Dec. 2.

EUR/USD: The euro consolidated near a 1-week low after European Central Bank President Christine Lagarde stated that eurozone growth remains modest but there are tentative signs of stabilization. The European currency traded flat at 1.0996, having touched a low of 1.0993 earlier, its lowest since November 29. Immediate resistance is located at 1.1025, a break above targets 1.1039. On the downside, support is seen at 1.0981, a break below could drag it below 1.0957.

USD/JPY: The dollar surged to a 2-week peak after Beijing unexpectedly said it would reduce tariffs on some U.S. imports, fueling demand for riskier assets. The major was trading 0.1 percent up at 109.92, having hit a high of 109.98 earlier, its highest since Jan. 22. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims and Fed Kaplan's speech. Immediate resistance is located at 110.10, a break above targets 110.29. On the downside, support is seen at 109.50, a break below could take it near at 109.26.

GBP/USD: Sterling plunged hovering towards a 6-week low earlier in the week, as concerns about negotiations between Britain and the European Union for a post-Brexit trade deal dented investor sentiment. The major traded 0.3 percent lower at 1.2958, having hit a low of 1.2941 on Tuesday, it’s lowest since Dec. 24. Investors’ attention will remain on the trade negotiations, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3061 (21-DMA), a break above could take it near 1.3083. On the downside, support is seen at 1.2940, a break below targets 1.2904. Against the euro, the pound was trading 0.4 percent down at 84.87 pence, having hit a low of 85.37 on Tuesday, it’s lowest since Jan. 20.

USD/CHF: The Swiss franc slumped to a 1-week low as risk sentiment improved amid hopes the global economy will avoid a major shock from a coronavirus outbreak. The major trades 0.1 percent up at 0.9744, having touched a high of 0.9749 earlier, it’s highest since January 29. On the higher side, near-term resistance is around 0.9760 and any break above will take the pair to the next level till 0.9801. The near-term support is around 0.9730, and any close below that level will drag it till 0.9694.

Equities Recap

European shares rose to a record high, helped by China’s plan to cut tariffs on some U.S. goods.

The pan-European STOXX 600 index rallied 0.3 percent at 424.75 points, while the FTSEurofirst 300 surged 0.3 percent to 1,658.27 points.

Britain's FTSE 100 trades 0.4 percent up at 7,514.01 points, while mid-cap FTSE 250 gained 0.4 to 21,596.38 points.

Germany's DAX rose 0.6 percent at 13,560.57 points; France's CAC 40 trades 0.6 percent higher at 6,091.62 points.

Commodities Recap

Crude oil prices eased, amid concerns caused by the virus outbreak and indications of oversupply. International benchmark Brent crude was trading 0.6 percent lower at $55.34 per barrel by 1130 GMT, having hit a low of $53.68 on Tuesday, its lowest since Jan. 2019. U.S. West Texas Intermediate was trading 0.1 percent up at $51.21 a barrel, after falling as low as $49.42 on Tuesday, its lowest since Jan. 2019.

Gold prices surged as investors evaluated the economic impact of the coronavirus outbreak as the death toll jumped past 500, although the gains were limited by China’s decision to halve tariffs on U.S. imports. Spot gold was trading 0.2 percent up at $1,565.03 per ounce by 1134 GMT, having touched a low of $1547.55 on Wednesday, its lowest since Jan. 15. U.S. gold futures were flat at $1,563.30.

Treasuries Recap

The U.S. Treasuries gained during the afternoon session ahead of the country’s weekly initial jobless claims, scheduled to be released today by 13:30GMT, besides, FOMC member Kaplan’s speech, also due today by 14:15GMT. The yield on the benchmark 10-year Treasury yield slipped nearly 1 basis point to 1.642 percent, the super-long 30-year bond yield suffered 1-1/2 basis points to 2.117 percent and the yield on the short-term 2-year lost 1/2 basis point to trade at 1.437 percent.

The German bunds remained narrowly mixed during European trading session amid a muted trading session that witnessed data of little economic significance ahead of the country’s trade balance for the month of December, scheduled to be released on February 7 by 07:00GMT. The German 10-year bond yield, which moves inversely to its price, gained nearly 1 basis point to -0.362 percent, the long-term 30-year yield remained tad down at 0.159 percent and the yield on short-term 2-year hovered around -0.637 percent.

The Australian bonds remained flat during Asian session after investors experienced a disappointment in the country’s retail sales for the month of December, released early today ahead of the Reserve Bank of Australia (RBA) Governor Philip Lowe’s speech, due later today by 22:30GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, hovered around 1.097 percent, the yield on the long-term 30-year bond slipped 1 basis point to 1.702 percent and the yield on short-term 2-year also barely lost 1 basis point to trade at 0.789 percent.

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