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Europe Roundup: Dollar index flirting with two-week highs, upbeat data keeps Cable supported, US Oil edges above $ 55.50, Gold slips on risk recovery - Friday, August 16, 2019

Market Roundup

  • Malaysia's GDP growth accelerated to 4.9 percent year-on-year in 2Q19 (Consensus 4.7 percent, Prior 4.5 percent)
     
  • China's Jan-July fiscal revenues up 3.1% year-on-year
     
  • Stocks buoyed by stimulus hopes but still head for third losing week
     
  • China stimulus hopes, chip stocks push European shares higher
     
  • LSE's FTSE stock market suffers longest outage in years
     
  • Hong Kong second-quarter GDP grows 0.5% year-on-year, but trade war, protests stoke recession risk
     
  • Thailand plans $10 billion stimulus to support economy
     
  • Euro drops to two-week low against the dollar
     
  • Gold drops on profit-taking; set for third weekly rise
     
  • UK Prime Minister (PM) Boris Johnson’s government would win a vote of no confidence - UK EnergyMin Kwarteng

Economic Data Ahead

  • (0830 ET/1230 GMT) U.S. Housing Starts M/M (Jul) (Forecasts 1.257M, Prior 1.253M)
     
  • (0830 ET/1230 GMT) U.S. Building Permits M/M (Jul) (Forecasts 1.270M, Prior 1.232M)
     
  • (1000 ET/1400 GMT) University of Michigan Consumer Sentiment Index (Aug) (Forecasts 97.2, Prior 98.4)

Key Events Ahead 

  • No Significant Event Scheduled

FX Beat

DXY:  Dollar index hits new 2-week highs at 98.30. Technical studies suggest further gains. Upper Bollinger Band at 98.58 is next resistance. Focus on U.S Housing Starts, Building Permits and UMitch Consumer Sentiment data. 

EUR/USD: EUR/USD extends weakness amid broad-based US dollar strength. Greenback bulls take back control on upbeat Dollar also boosted after Atlanta Fed raised its Q3 GDPNow forecast from 1.85 percent to 2.16 percent annualised pace. EUR/USD is extending declines for the fourth straight session. Scope for test of 1.1026 (Aug 1st low). 55-EMA is major resistance at 1.1201. Break above negates near-term bearish bias.

USD/CHF: USD/CHF spikes higher for the second straight session. The major was trading at 0.9806 at 10:00 GMT, up 0.44 percent at the time of writing. US dollar buoyed by upbeat data and improving risk sentiment adds support higher. Major trend in the pair is bearish. However, price has broken above 21-EMA and technical indicators support further gains. Next major resistance lies at 55-EMA at 0.9863. Rejection at 21-EMA will see resumption of downside.

GBP/USD: Cable extends recovery despite broad-based US dollar strength. Thursday’s UK Retail Sales keeps the Cable buoyed despite political uncertainty at home. GBP/USD was trading 0.60 percent higher at 1.2153 at 10:10 GMT. Focus now on UK Chancellor’s visit to Berlin to discuss Brexit deal. With lack of data from the UK, traders will closely observe Brexit headlines for fresh directions. Major trend is bearish. Minor recovery may extend upto 21-EMA at 1.2205. Breakout above could see further gains.

USD/JPY: USD/JPY extends recovery as risk recovery gathers pace. The major hit session highs at 106.49. Data released on Thursday showed U.S. July retail sales printed at +0.7 percent MoM beating estimates of +0.3 percent. Dollar also boosted after Atlanta Fed raised its Q3 GDPNow forecast from 1.85 percent to 2.16 percent annualised pace. Price action is holding above 5-DMA support. 21-EMA (106.86) is immediate resistance. Break above will see further gains. 

Equities Recap

European Stocks buoyed by stimulus hopes. The pan-European stock benchmark index EURO STOXX 600 was up around 1.13 percent at 368.30 at 10:40 GMT. FTSEurofirst 300 index was up 1.04 percent at 1,442.81 points.

Britain's FTSE 100 was trading 0.55 percent up at 7,106.15 points, while mid-cap FTSE 250 was up 0.33 percent at 18,701.57 points.

Germany's DAX trades 0.97 percent higher at 11,523.46 points; France's CAC 40 trades 0.98 percent up at 5,288.28 points.

Commodities Recap

US Oil pauses downside, edges above $ 55.50 as recession fears ebb. WTI was trading at $ 55.45 at 09:55 GMT.

Gold bull take a breather as risk recovery gathers pace. Spot gold was trading at $ 1,509.06 at 09:55 GMT.

Among other precious metals, silver was down 0.65 percent at 17.09 at 09:55 GMT. 

Treasuries Recap

U.S.: The U.S. Treasury yields recovered during Friday’s afternoon session as risk sentiments started to stabilize overnight, following comments from President Donald Trump that a call with China is scheduled around the corner concerning trade tariffs. However, uncertainties still remain as a couple of US Federal Reserve members, Kashkari and Bullard continue to indicate to the likelihood of further interest rate cuts in the country, although the latter (voter 2019) suggested that there was no urgency to take action between scheduled meetings. The yield on the benchmark 10-year Treasury yield jumped nearly 3-1/2 basis points to 1.559 percent, the super-long 30-year bond yields surged nearly 4-1/2 basis points to 2.023 percent and the yield on the short-term 2-year traded 2 basis points higher at 1.515 percent.

UK: The United Kingdom’s 2-10Y gilt yields inverted during European trading hours Friday, intrigued by the global growth concerns and uncertainties over U.S.-China trade relations, although President Trump said that he has a call scheduled “very soon” with Chinese counterpart Xi over trade. This has been further dragged lower by lower bond yields in the United States, with the 10-year benchmark briefly dropping to a three-year low below 1.50 percent yesterday. The yield on the benchmark 10-year gilts, jumped 5 basis points to 0.459 percent, the 30-year yield slipped nearly 1 basis point to 0.945 percent and the yield on the short-term 2-year surged nearly 7-1/2 basis points to 0.520 percent.

 JGBs: The Japanese government bonds remained mixed on Friday amid ongoing global economic worries in a muted trading session that barely witnessed any data of esteemed economic significance. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, hovered around -0.233 percent, the yield on the long-term 30-year jumped 2 basis points to 0.182 percent and the yield on short-term 2-year slumped 27 basis points to -0.274 percent.

AUS: The Australian government bonds traded mixed in subdued Asian session on Friday as global risk appetite attempted to stabilize amid better-than-expected U.S. retail sales data. However, comments from President Donald Trump and China kept traders on their toes over trade war tensions. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell 1 basis point to 0.877 percent, the yield on the long-term 30-year bond also dipped 1 basis point to 1.437 percent while the yield on short-term 2-year traded nearly flat at 0.731 percent.

By Anupama Grandhi
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