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Europe Roundup: Sterling steadies on upbeat UK retail sales, euro slumps as EZ trade surplus shrinks, European shares surge - Friday, February 15th, 2019

Market Roundup

  • Eurozone Dec 2018 eurostat trade nsa, eur decrease to 17 eur vs previous 19 eur
  • United Kingdom Jan 2019 retail sales yy increase to 4.2 % (forecast 3.4 %) vs previous 3.1 % (revised from 3 %)
  • United Kingdom Jan 2019 retail sales ex-fuel yy increase to 4.1 % (forecast 3 %) vs previous 2.9 % (revised from 2.6 %)
  • United Kingdom Jan 2019 retail sales ex-fuel mm increase to 1.2 % (forecast 0.2 %) vs previous -1 % (revised from -1.3 %)
  • United Kingdom Jan 2019 retail sales mm increase to 1 % (forecast 0.2 %) vs previous -0.7 % (revised from -0.9 %)
  • Italy Dec 2018 trade balance EU decrease to -0.613 eur vs previous 0.516 eur (revised from 0.513 eur)
  • Italy Dec 2018 global trade balance decrease to 3.658 eur vs previous 3.847 eur (revised from 3.843 eur)

Economic Data Ahead

  • (0830 ET/1330 GMT) The Federal Reserve Bank of New York is expected to report that New York State manufacturing activity index grew to 7 in February after rising 3.9 in January.
  • (0830 ET/1330 GMT) The U.S. Labor Department publishes import and export prices index for the month of January. The import prices are likely to have declined 0.1 percent after slumping 1.0 percent in December, while exports are expected to have edged down 0.1 percent after decreasing 0.6 percent in the prior month.
  • (0830 ET/1330 GMT) Statistics Canada will report foreign portfolio investment in domestic stocks for the month of December.
  • (0830 ET/1330 GMT) Statistics Canada will release investment in foreign securities figures for the month of December.
  • (0915 ET/1415 GMT) The Federal Reserve is likely to report that industrial production rose 0.1 percent in January, after increasing 0.3 in the prior month.
  • (0915 ET/1415 GMT) The Federal Reserve Board is expected to report that capacity utilization remained unchanged at 75.6 percent in January.
  • (1000 ET/1500 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index rose to 93.0 in February, after posting a final reading of 91.2 in January.
  • (1300 ET/1800 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events Ahead

  • (0800 ET/1300 GMT) European Central Bank's Benoit Coeure participates in C. Peter McColough Series on International Economics organized by CFR - New York City
  • (0955 ET/1455 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic speaks on "Workforce Development" at Public Affairs Research Council of Alabama - Birmingham, Atlanta
  • (1045 ET/1545 GMT) European Central Bank's Ignazio Angeloni participates in panel session titled "The Future of Banking: Will European Banks Survive?" - Bruneck, Italy

FX Beat

DXY: The dollar index steadied near a 2-month peak hit in the prior session, on news that U.S. President Donald Trump agreed to sign a government-funding bill that lacks money for his wall, but prevents another damaging government shutdown. The greenback against a basket of currencies trades 0.1 percent up at 97.09, having touched a high of 97.29 the day before, its highest since December 17. FxWirePro's Hourly Dollar Strength Index stood at -11.64 (Neutral) by 1000 GMT.

EUR/USD: The euro slumped, hovering towards a 3-month low touched in the previous session after data showed the euro zone's trade surplus in goods with the rest of the world shrank in 2018 due to higher imports. Moreover, a separate survey showing a key gauge of the market's long-term expectations for inflation in the euro zone falling to its lowest level in more than two years further intensified the selling pressure in the major. The European currency traded 0.2 percent down at 1.1277, having touched a low of 1.1248 on Thursday, its lowest since Nov. 13. FxWirePro's Hourly Euro Strength Index stood at -33.31 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1329 (Feb 11 High), a break above targets 1.1368 (Feb.7 High). On the downside, support is seen at 1.1216 (Nov. 13 Low), a break below could drag it till 1.1180.

USD/JPY: The dollar declined, extending previous session losses, amid increasing concerns of a global slowdown in the wake of soft economic data out of the United States and China. The major was trading 0.05 percent down at 110.42, having hit a high of 111.12 the day before, its highest since December 27. FxWirePro's Hourly Yen Strength Index stood at 18.34 (Neutral) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of U.S. capacity utilization, industrial production, and export and import price index. Immediate resistance is located at 111.05 (Feb. 13 Low), a break above targets 111.40 (Dec. 26 Low). On the downside, support is seen at 110.11 (10-DMA), a break below could take it lower at 109.60 (Feb. 7 Low).

GBP/USD: Sterling steadied above the 1.2800 handle after data showed British retail sales rebounded strongly in January, bucking a slowdown in consumer spending ahead of Brexit. On Thursday, the major slumped to a 1-month low after Prime Minister Theresa May lost a Brexit vote in parliament that undermined her pledge to renegotiate her withdrawal agreement with Brussels. The major traded 0.1 percent up at 1.2816, having hit a low of 1.2772 on Thursday; it’s lowest since January 15. FxWirePro's Hourly Sterling Strength Index stood at -83.26 (Slightly Bearish) 1000 GMT. Immediate resistance is located at 1.2911 (10-DMA), a break above could take it near 1.2996 (February 7 High). On the downside, support is seen at 1.2766 (Nov 22 Low), a break below targets 1.2728 (Jan. 10 Low). Against the euro, the pound was trading 0.3 percent up at 87.98 pence, having hit a low of 88.40 on Thursday, it’s lowest since Jan. 21.

USD/CHF: The Swiss franc eased after U.S. Treasury Secretary Steven Mnuchin said that he and U.S. Trade Representative Robert Lighthizer had productive meetings with China's Vice Premier Liu He. The major trades 0.2 percent up at 1.0067, having touched a high of 1.0099 on Monday; it’s highest since November 14. FxWirePro's Hourly Swiss Franc Strength Index stood at -91.55 (Slightly Bearish) by 1000 GMT. On the higher side, near-term resistance is around 1.0111 (November 12 High) and any break above will take the pair to next level till 1.0150. The near-term support is around 0.9961 (January 22 Low), and any close below that level will drag it till 0.9889 (December 7 Low).

Equities Recap

European shares slightly edged higher as gains in telecoms and industrials helped offset concerns over weak inflation data from China.

The pan-European STOXX 600 index rallied 0.4 percent at 365.19 points, while the FTSEurofirst 300 index surged 0.5 percent to 1,437.81 points.

Britain's FTSE 100 trades 0.2 percent up at 7,213.77 points, while mid-cap FTSE 250 eased 0.05 to 18,894.67 points.

Germany's DAX rose 0.05 percent at 11,090.28 points; France's CAC 40 trades 0.8 percent higher at 5,100.25 points

Commodities Recap

Crude oil prices rallied, as OPEC-led supply cuts and the announcement of a higher-than-expected cut by Saudi Arabia boosted investor sentiment. International benchmark Brent crude was trading 0.2 percent up at $64.73 per barrel by 1009 GMT, having hit a high of $65.08 earlier, its highest since November 20. U.S. West Texas Intermediate was trading 0.1 percent higher at $54.49 a barrel, after rising as high as $54.97, its highest since the February 5.

Gold prices rose, extending gains from the previous session as investors looked for signs of progress in ongoing U.S.-China trade talks. Spot gold rose 0.3 percent to $1,315.92 per ounce as of 1011 GMT, having touched a high of $1,318.02 on Wednesday, its highest level since February 4. U.S. gold futures gained 0.2 percent to $1,316.90.

Treasuries Recap

The Spanish government bond yields rose as Prime Minister Pedro Sanchez called a snap election for April 28, while Italian bonds declined as concerns about the country's ratings outlook moved into focus. The Spanish 10-year bond yields held 2 basis points higher at 1.26 percent, while the Italian 10-year yields were 6.5 basis points higher at 2.87 percent. The German benchmark 10-year government bond yield was at 0.105 percent

The Japanese government bond prices rose as U.S. Treasuries held on to overnight gains. The 10-year JGB futures rose 0.06 points to 152.85, the benchmark 10-year cash JGB yield fell one basis point to minus 0.025 percent. The 20-year yield declined 1.5 basis points to 0.415 percent, the 30-year yield eased 2.5 basis points to 0.590 percent, and the 40-year yield also gave up 2.5 basis points to 0.665 percent.

The Australian government bond futures rose, with the three-year bond contract adding 2.5 ticks to 98.340, while the 10-year contract rose 4 ticks to 97.8950.

The yields on New Zealand's 2-year paper shot back up to 1.725 percent having hit historic lows at 1.61 percent early in the week

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