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Europe Roundup: Euro stocks edgy eyeing on ECB’s directives, DXY extends rallies but US stock futures muted after US taxation reforms - Thursday, April 27th, 2017| 12:01 PM GMT

Market Roundup

  • EUR/USD -0.05%, USD/JPY +0.2%, GBP/USD +0.5%, EUR/GBP -0.5%
  • DXY -0.1%, DAX -0.3%, FTSE -0.6%, Brent -1.0%, Iron ore +0.5%
  • GBP/USD rises to new 2017 high at 1.2917 in Europe
  • 3 German states report a rise in Y/Y CPI above ECB 2% target
  • DE May GfK Consumer sentiment 10.2 versus previous 9.8. and 9.9 forecasts
  • Eurozone April Business climate 1.09 versus previous 0.83 and 0.82 forecasts
  • Eurozone April Economic sentiment 109.6 versus previous 108.0 and 108.1 forecasts
  • Eurozone April industry sentiment 2.2 versus 1.3 forecasts. service industry sentiment 14.2 versus 13.0 forecasts
  • Eurozone April Consumer confidence final -3.6 versus previous -3.6. -3.6 forecasts
  • GB April CBI retail sales balance +38 versus +9. +6 forecasts. Strongest since Sept 2015
  • Swiss trade surplus widens y/y to 3.1 bln CHF in March
  • Swiss National Bank posts 7.9 bln Swiss franc Q1 profit
  • Dovish Swedish central bank holds rates, extends bond purchases, SEK falls versus euro after Riksbank hold rates, extends bond-buying
  • Eurozone bailout fund could become European Monetary Fund
  • Brexit noise: Merkel warns against British illusions in Brexit talks, Italy PM says EU must remain united during Brexit negotiations
  • BOJ keeps interest rate targets unchanged, BOJ most upbeat on economy in 9 years, warns stimulus exit distant,
  • Kuroda: Will continue with QQE till CPI target met
  • US President Trump’s tax plans, unveiled yesterday, confirmed expectations for lower corporate tax rates and a repatriation tax for overseas profits, among other measures. There were little addition details, however, to buoy market sentiment further.
  • The US dollar is a little softer overnight after the US administration’s tax plans contained little new that was not already leaked. The Canadian dollar and Mexican peso were supported by reports that US President Trump agreed not to pull out of NAFTA “at this time”.

Economic Data Week Ahead

  • (0830 ET/1230 GMT) U.S. advanced GDP Q/Q seems to have slowed in the Q1; the data from the Commerce Department is expected to show on Friday. Gross domestic product is likely to have dropped to 1.3 pct from 2.1 pct in the previous quarter.
  • Canadian GDP data is due to be released on Friday; a report that is likely to display the economy grew by 0.1 pct in February. While that will mark a step down from January's strong 0.6 pct pace, analysts still expect the economy is on track for a solid first quarter. On Wednesday, a report is expected to show retail sales stalled in February after a surprisingly strong January.
  • The UK Q1 GDP data is scheduled to be announced on Friday that is likely to print at 0.4 pct, a shrink of a tad below from previous 0.6 pct.

Key Events Ahead

  • (8:45 ET - 12:45 GMT) The main focus today is the ECB policy announcement, in central bank’s monetary policy meeting no change in zero% refinance, -0.4% deposit rates and no new announcements for the asset purchase programme. The reduction in monthly purchases from €80bn to €60bn starting this month has been telegraphed well in advance
  • (9:30 ET - 13:30 GMT) - President Draghi’s press conference
  • (9:30 ET - 13:30 GMT) - Initial Jobless Claims (Apr 22 week) mkt 245k, previous 244k
  • (9:30 ET - 13:30 GMT) - Durable Goods Orders (Mar) mkt +1.2% m/m, previous +1.8% m/m
  • (9:30 ET - 13:30 GMT) - Durable Goods Orders ex-Trans (Mar) mkt +0.4% m/m, previous +0.5% m/m
  • (9:30 ET - 13:30 GMT) - Durable Goods Orders ex-Defence (Mar) previous +2.2% m/m
  • (9:30 ET - 13:30 GMT) - Advance Goods Trade Balance (Mar) previous -$63.9 bn
  • (9:30 ET - 13:30 GMT) - Advance Wholesale Inventories (Mar) previous +0.4% m/m
  • (9:30 ET - 13:30 GMT) - Advance Retail Inventories (Mar)
  • (11:00 ET – 15:00 GMT) - Pending Home Sales Index (Mar) mkt 111.2, -1.0% m/m; previous 112.3, +5.5% m/m
  • 15:00  Housing Vacancies and Homeownership Rates (Q4)
  • 16:00  KC Fed Manufacturing Index (Apr) previous 20

FX Beat

DXY:  The broad USD heads into little higher today holding just over recent lows, so far much ado about nothing? That is what US President Trumps “phenomenal “tax reform at the end of his first 100 days in office turns out to be: something that is likely to mainly lead to phenomenal gaps in the budget - in the first year just under $290 bn. and according to estimates by the Committee for a Responsible Federal Budget $5.5 trillion over the coming 10 years.

The index is trading in the narrow range between 98.70 and 99.33 for the past three trading session. It is currently trading around 98.99 0.01% higher. On the higher side, near term resistance is around 99.32 (23.6% retracement of 101.34 and 98.70) and any break above will take the index till 100.03 (Apr 21st high)/100.55 (55- EMA).

The near-term major support is around 98.70 and any break below will drag the index down till 98.

While the FxWirePro currency strength index for the dollar was almost unchanged but has been mildly bullish as the euro dropped earlier today ahead of ECB’s monetary policy meeting, eyed status quo actions but players will seek signs of June change.

EUR/USD: EURUSD has shown the huge decline from the 5-1/2 month peak till 1.08550 lowest for the week. It is currently trading around 1.09049 0.01% higher. The pair jumped from the low of 1.08500 and broken 1.0900 level after US government announces vague tax plan

FX markets await ECB meeting for further direction. As the central banks are expected to maintain status quo the EURO index has been little changed by -0.02% but possibilities of some hints on tapering on account of surrounding French elections are lingering.

On the higher side, major resistance is around 1.0950 and any break above will take the pair towards the critical 1.1000/1.1045 level.

The near term support is around 1.08400- 1.08500 (200- day MA, low formed yesterday) and any violation below targets 1.08200 (Apr 24th 2017 low)/1.07850.

USD/JPY: USD/JPY hits the highest level for this month at 111.77 on the back of BoJ keeping bank rates unchanged and has given up its daily gains, closed in the green.The pair jumped from the low of 108.13 as U.S 10 year bond yields shown a huge recovery from the low of 2.18% and hits 2.33%.

The pair is trading well above all moving averages in the 4H chart and major supply zone is around 111 (200- 4H MA).The near term support is around 110.67 (21- 4H EMA) and any break below targets  110.38 (38.2% retracement of 108.13 and 111.77)/110.15 (100- 4H EMA).

On the higher side, the pair needs to regain the 112 level for further jump till 113.

GBP/USD: The current prices are attempting to push up out of the recent "flag" consolidation phase. Momentum is positive, thus we can foresee a push towards the 1.3000 key resistance region, but we still believe that the upside is limited to these levels as part of a medium-term range. A clear break of 1.30/1.31 would force us to review this outlook as it would risk a broadening of the range expectations to the 1.35 area on the topside.

Cable has broken the high of 1.29035 made on Apr 18th 2017 and jumped till 1.29157 while articulating. It is currently trading around 1.28990.

The break above 1.2900 confirms bullish continuation and a jump till 1.2990 (161.8% retracement of 1.29034 and 1.2754). The 1.2800 psychological level will be acting as near-term support and any violation below will drag the pair till 1.2750(Apr 21st low)/1.2700. Minor trend reversal can be seen only below 1.2500.

USD/CAD: The Canadian dollar recovered sharply after making a low of 1.36475 against US dollar after White house said that Trump will not terminate the participation in NAFTA immediately.

The pair declined till 1.352974 and recovered sharply from that level. Short term trend is still bullish as long as support 1.3410 holds. Break of 1.3647 confirms that decline from 1.46889 and 1.2460 will come to an end, a jump till 1.370/1.3838 (61.8% retracement of 1.4689 and 1.2460) is possible.

On the lower side, major near-term support is around 1.3410 and any break below will drag the pair down till 1.3310 (100- EMA)/1.3220 (Apr 13th 2017 low). A surprise move by Sweden to expand its stimulus programme pushed the crown down sharply, and the Canadian dollar and Mexican peso jumped as the U.S. said it would not scrap the North American Free Trade Agreement.

USD/CHF: USD/CHF is trading in the narrow range between 0.99807 and 0.99186 for the past two trading session. It is currently trading around 0.99311 0.01% lower.

The near term resistance is around 1.000 and any break above target 1.0018 (55- day EMA). Any break above 1.0024 will take the pair till 1.00413 (61.8% retracement of 1.03435 and 0.98135)/1.0120/1.0170.On the lower side, support stands at 0.9860 and any decline below that will drag the pair till 0.9800.

AUD/USD: Aussie broken major support of 0.7490 and declined till 0.74520 yesterday. It is currently trading around 0.7475 0.04% lower. On the lower side, near term support is around 0.7450 and break below targets 0.7380 (61.8% retracement of 0.71599 and 0.7749)/ 0.7330 (161.8% retracement of 0.74910 and 0.77493) most likely.

The pair’s near term resistance is around 0.74925 (23.6% retracement of 0.76105 and 0.74548) and any break above targets 0.7550 (200- day MA) 0.7580/0.7610 (Apr 17th 2017 high)/0.7650.

Equities Recap

European stocks opened lower on Thursday, as investors eyed the European Central Bank’s monetary policy decision due later in the day and focused on a fresh round of corporate earnings reports.

During European morning trade, the EURO STOXX50 dropped by 0.47%, France’s CAC40 slipped 0.29%, while Germany’s DAX30 also declined 0.28%.

A record-setting rally in world stocks ran out of steam on Thursday, with unconvincing U.S. tax cut plans cooling investors' spirits and caution setting in as the European Central Bank met.

The main elements of the tax reform are: (1) lowering the top income tax rate from 39.6% to 35% (2) reduction of tax brackets from 7 to 3, with income tax levels of 10%, 25% and 35% (3) cutting corporate tax from 35% to 15% (4) ending inheritance tax (5) doubling the standard deduction (6) lowering capital gains tax from 23.8% to 20% (7) abolition of all kinds of deductions except for those related to mortgage interest and charitable giving. Sounds good? Many of these ideas seem like a good idea to me personally as well.

Europe's main bourses were as much as 0.7 pct lower as traders pulled back after six days of unbroken gains fuelled by relief at the outcome of the first round of France's presidential election and encouraging earnings and economic data. 

Asian felt groggy too. The Bank of Japan offered its most upbeat economic assessment in nine years but Asia-Pacific shares ended flat a day after hitting their highest in almost two years.

World stocks hit a record high on Wednesday after strong earnings and the prospect of tax cuts for corporate America pushed U.S. shares to stratospheric levels and the euro held on to recent gains as political concerns in France ebbed. The blue-chip Dow futures inched up 19 points, or 0.09%, at (7:01AM ET - 12:01GMT), the S&P500 futures crawled up 1 point, or 0.04%, while the tech-heavy Nasdaq 100 futures also increased 6 points, or 0.10%.

European shares drew back somewhat from 20-month highs as some unsatisfactory corporate results weighed on the market but Asian stocks powered ahead.

Commodities Recap

Crude oil: Oil prices fell on Thursday, weighed down by oversupply, but losses were limited by expectations that major exporters would agree to extend production cuts to try to rebalance the market.

Benchmark Brent crude was down 60 cents at $51.22 a barrel by 0915 GMT, almost 10 pct below this month's peak. U.S. light crude was down 55 cents at $49.07.

Brent futures dropped to $51.60 per barrel, down 22 cents, or 0.42 pct, from their last close. Brent is almost 9 pct below its April peak.

Precious metals: Gold prices seem edgy today as speculators snapped some profit from yesterday’s rallies, but some analysts expect further weakness due to easing political risks.

Consequently, Gold falls on global risk sentiment ebbed, but doubts over Trump tax plan cap losses, the feasibility of U.S. tax plan uncertain.

Spot gold still targets crucial technical levels of $1,249.

Silver off over one-month lows hit on Wednesday

Spot gold was down 0.3 pct at $1,264.60 per ounce as of 0736 GMT. Bullion prices edged away from a two-week low of 1,259.90 hit on Wednesday. U.S. gold futures climbed 0.1 pct to $1,265.90 an ounce.

Silver slipped 0.1 pct to $17.45 an ounce after hitting its lowest in over a month in the previous session at $17.28.

Platinum gained 0.3 pct to $944.90 an ounce and palladium dropped 0.1 pct at $807.20 an ounce.

Treasuries Recap

USTs: The U.S. Treasuries gained ahead of the country’s Q1 gross domestic product (GDP), scheduled to be released on April 28. The yield on the benchmark 10-year Treasury fell nearly 1 basis points to 2.30 pct, the super-long 30-year bond yields slumped 1 basis point to 2.96 pct while the yield on short-term 2-year note also traded close to 1 basis point higher at 1.27 pct.

UK gilts: The UK gilts traded flat ahead of the country’s Q1 gross domestic product (GDP), scheduled to be released on April 28. The yield on the benchmark 10-year gilts hovered around 1.08 pct, the super-long 30-year bond yields traded flat at 1.72 pct while the yield on the short-term 2-year fell 1 basis point to 0.08 pct.

German bunds: The German bunds slid ahead of the Eurozone’s consumer price inflation for the month of April, scheduled to be released on April 28. The yield on the benchmark 10-year bond, rose 1/2 basis point to 0.37 pct, the long-term 30-year bond yields rose nearly 1 basis point to 1.11 pct and the yield on short-term 2-year bond remained steady at -0.69 pct.

JGBs:  The Japanese government bonds traded flat after the Bank of Japan (BoJ) left its benchmark policy rate unchanged at its monetary policy meeting held earlier today. Also, markets will be focusing on the country’s March consumer price inflation (CPI), scheduled to be released on April 28 for detailed direction in the debt market. The benchmark 10-year bond yield, traded flat at 0.02 pct, the long-term 30-year bond yields hovered around 0.80 pct and the yield on the short-term 2-year note also remained steady at -0.18 pct.

Australia: The Australian government bonds jumped as investors poured into safe-haven assets post the unveiling of the United States tax reform by President Donald Trump on Wednesday. The yield on the benchmark 10-year Treasury note, plunged 2-1/2 basis points to 2.62 pct, the yield on 15-year note slumped nearly 2 basis points to 3.02 pct and the yield on short-term 2-year traded 1-1/2 basis points lower at 1.68 pct.

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