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Europe Roundup: Sterling steadies amid second Brexit referendum speculation, euro holds above 1.2200, European shares rebound - Thursday, January 18th, 2018

Market Roundup

  • EUR/USD 0.38%, USD/JPY -0.04%, GBP/USD 0.22%, EUR/GBP 0.18%
     
  • DXY 0.09%, DAX 0.37%, FTSE -0.39%, Brent -0.1%, Gold 0.18%
     
  • Republicans in U.S. Congress rush to gain support to avoid shutdown
     
  • Great Britain RICS Housing Survey Dec, 8, 0 forecast, 0 previous

  • Republicans in U.S. Congress rush to gain support to avoid shutdown
     
  • China's 2017 GDP growth accelerates for first time in 7 years
     
  • Eurozone bond yields head back towards multi-month highs, supply weighs
     
  • Oil holds near 2014 high, supported by threat of Nigeria attack
     
  • Gold inches higher as dollar pares gains

Economic Data Ahead

  • (0830 ET/1330 GMT) Payrolls processor ADP releases Canada's employment report for the month of December. The report showed that 59,200
    jobs were added in November.
     
  • (0830 ET/1330 GMT) The U.S. Department of Commerce is expected to report that housing starts decreased to an annualized rate of 1.275 million units in December from 1.297 million units in November.
     
  • (0830 ET/1330 GMT) The U.S. building permits are likely to have decreased to a 1.290 million-unit pace in December from a revised rate of 1.303 million-unit in November.
     
  • (0830 ET/1330 GMT) The number of Americans filing for unemployment benefits is likely to have decreased by 11,000 to a seasonally adjusted 250,000 for the week ended Jan. 12, while continuing claims for the week ended Jan. 5 is expected to decline to 1.900 million from previous 1.867 million.
     
  • (0830 ET/1330 GMT) Philadelphia Federal Reserve manufacturing survey is likely to show that business activity decreased to 25.0 in January from 26.2 in December.
     
  • (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending January 12.

  • (1100 ET/1600 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending January 12.
     
  • (1630 ET/2130 GMT) New Zealand will release its Business PMI index for the month of December. The index stood at 57.7 in the previous month. 

Key Events Ahead

  • (0930 ET/1430 GMT) European Central Bank's Benoit Coeure participates in 'A post-crisis agenda for the euro area and Germany: which way forward?', a joint conference by the IMF and Bundesbank on "Germany – Current Economic Policy Debates" in Frankfurt.
     
  • (1805 ET /2305 GMT) Federal Reserve Bank of Cleveland President Loretta Mester speaks on monetary policy at the Council for Economic Education's Economists on the Economy in New York.

FX Beat

DXY: The dollar index slumped as the market remained cautious on the outlook for the currency amidst a lack of price pressures. The greenback against a basket of currencies traded 0.5 percent down at 90.56, having touched a low of 90.11 earlier, its lowest since January 2015. FxWirePro's Hourly Dollar Strength Index stood at -73.41 (Bearish) by 1000 GMT.

EUR/USD: The euro steadied above the 1.2200 handle after falling to a near 1-week low earlier in the session following ECB policymaker Ewald Nowotny's comments citing that the currency's recent strength against the dollar is not helpful, which triggered a bout of profit-taking. The European currency traded 0.3 percent up at 1.2219, having touched a high of 1.2322 the day before, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at -40.90 (Neutral) by 1000 GMT. Immediate resistance is located at 1.2300, a break above targets 1.2370. On the downside, support is seen at 1.2120 (50.0% retracement of 1.1916 and 1.2322), a break below could drag it lower 1.2072 (38.2% retracement).

USD/JPY: The dollar rose to a 6-day high as expectations the Federal Reserve will continue to tighten monetary policy this year underpinned the U.S. Treasury yields. The major was trading 0.1 percent up at 111.33, having hit a low of 110.19 the day before, its lowest since Sept 15. FxWirePro's Hourly Yen Strength Index stood at -162.74 (Highly Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. housing starts, building permits, and unemployment benefit claims report for further momentum. Immediate resistance is located at 111.78 (50.0% retracement of 110.19 and 113.38), a break above targets 112.16 (61.8% retracement). On the downside, support is seen at 110.19 (Previous Session Low), a break below could take it lower 110.00.

GBP/USD: Sterling steadied near its highest levels since Britain's vote to leave the European Union in 2016, as investor focus remained on looming Brexit concerns amid speculation over a second Brexit referendum. The major traded flat at 1.3830, having hit a high of 1.3941 the day before, it’s highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 152.67 (Highly Bullish) by 1000 GMT. Immediate resistance is located at 1.3950, a break above could take it near 1.4000. On the downside, support is seen at 1.3757 (61.8% retracement of 1.3458 and 1.3941), a break below targets 1.3700 (50.80 retracement). Against the euro, the pound was trading 0.2 percent down at 88.31 pence, having hit a high of 88.08 pence earlier, it’s highest since Dec. 19.

USD/CHF: The Swiss franc gained, hovering towards a 4-month peak hit in the previous session, as the greenback against a basket of currencies eased to its lowest since January 2015. The major trades 0.3 percent up at 0.9625, having touched a low of 0.9572 earlier, it’s lowest since Sept. 15. FxWirePro's Hourly Swiss Franc Strength Index stood at 119.75 (Highly Bullish) by 1000 GMT.  On the higher side, near-term resistance is around 0.9677 (61.8% retracement of 0.9845 and 0.9572) and any break above will take the pair to next level till 0.9728 (10-DMA). The near-term support is around 0.9570 and any close below that level will drag it to next level till 0.9530.

AUD/USD: The Australian dollar steadied just below multi-month highs after data showed that Australia's participation rate rose to its highest since January 2011 at 65.7 percent. The Aussie trades 0.3 percent up at 0.7991, having hit a high of 0.8022 the day before; it’s highest since Sept. 21. FxWirePro's Hourly Aussie Strength Index stood at 51.80 (Bullish) by 1000 GMT. Immediate support is seen at 0.7916 (50.0% retracement of 0.7807 and 0.8022), a break below targets 0.7891 (38.2% retracement). On the upside, resistance is located at 0.8050, a break above could take it near 0.8100.

Equities Recap

European shares advanced in early deals, while the greenback declined to a fresh 3-year low against the basket of currencies as central banks of other major economies begin to move toward tighter monetary policy.

The pan-European STOXX 600 index gained 0.1 percent to 398.51 points, while the FTSEurofirst 300 index edged up 0.1 percent to 1,565.97 points.

Britain's FTSE 100 trades 0.3 percent lower at 7,702.60 points, while mid-cap FTSE 250 eased 0.2 percent to 20,727.89 points.

Germany's DAX rose 0.4 percent at 13,232.18 points; France's CAC 40 trades 0.1 percent up at 5,501.06 points.

Commodities Recap

Crude oil prices declined, weighed down by a rise in U.S. fuel stocks, however, tighter inventories of crude, as well as rebel threats of an attack on Nigeria's petroleum industry, supported prices. International benchmark Brent crude was trading 0.3 percent down at $69.19 per barrel by 0949 GMT, having hit a high of $70.33 on Monday, its highest since Dec. 2014. U.S. West Texas Intermediate was trading 0.2 percent up at $63.91 a barrel, after rising as high as $64.86 on Monday, its highest since Dec. 2014.

Gold prices rose after falling to its lowest in nearly a week, as the dollar edged higher from three-year lows on stronger-than-expected U.S. economic data. Spot gold was 0.2 percent up at $1,328.91 per ounce as of 0952 GMT, having touched its lowest since Jan. 12 at $1,324.15 earlier in the session. U.S. gold futures for February delivery slipped 0.9 percent to $1,326.60 per ounce.

Treasuries Recap

The U.S. Treasuries continued to be beaten as investors look forward to the country’s weekly initial jobless claims, scheduled to be released today by 13:30GMT, followed by the Philly Fed Manufacturing index, due by the same time. The yield on the benchmark 10-year Treasuries jumped nearly 3 basis points to 2.60 percent, the super-long 30-year bond yields also surged 3 basis points to 2.87 percent and the yield on the short-term 2-year traded 1 basis point higher at 2.05 percent.

The UK gilts slumped on expectations that the country’s December retail sales, due on January 19 by 09:30GMT will fall -0.6 percent, compared to 1.1 percent in November, adding further direction to the debt market. The yield on the benchmark 10-year gilts, jumped nearly 3-1/2 basis points to 1.34 percent, the super-long 30-year bond yields climbed 2-1/2 basis points to 1.84 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.59 percent.

The German bunds plunged amid a silent trading session ahead of European Central Bank (ECB) member Coeure’s speech, scheduled to be held today by 14:30GMT for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, jumped 2 basis points to 0.57 percent, the yield on 30-year note surged 2-1/2 1 basis points to 1.31 percent and the yield on short-term 2-year traded 1/2 basis point higher at -0.57 percent.

The New Zealand government bonds jumped at the time of closing, tracking a solid jump in dairy product prices at Fonterra's GlobalDairyTrade auction amid concerns about a decline in the country’s supply following dry weather conditions. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 2 basis points to 2.89 percent, the yield on 20-year also plunged 2 basis points to 3.36 percent and the yield on short-term 2-year ended 1 basis point lower at 2.00 percent.

The yields on 10-year JGBs stalled near 3-month high after Japan’s industrial production for the month of November missed market expectations, coming in at 0.5 percent m/m, compared to expectations of and from 0.6 percent m/m in October. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 0.08 percent, the yield on the long-term 30-year note rose nearly 1 basis point to 0.84 percent and the yield on short-term 2-year traded flat at -0.12 percent.

The Australian government bonds slumped as investors preferred riskier assets following a rise in Westpac’s consumer sentiment for January. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 2.761 percent, the yield on the long-term 30-year note climbed 1/2 basis point to 3.446 percent and the yield on short-term 2-year up 1-1/2 basis points to 2.089 percent.

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