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Europe Roundup: Sterling at 4-month trough as Labour Party declares Brexit talks dead, euro plunges amid European election concerns, European shares slump – Friday, May 17th, 2019

Market Roundup

  • EUR/USD -0.04%, USD/JPY -0.18%, GBP/USD -0.34%, EUR/GBP 0.30%
  • DXY 0.04%, DAX -0.75%, FTSE -0.23%, Brent 0.66%, Gold -0.11%
  • After Huawei blow, China says US must show sincerity for talks
  • China's central bank won't let yuan weaken past 7 to the dollar-sources
  • Labour declares Brexit talks dead as May's premiership crumbles
  • Bank of England turns to quick-fire data to help with Brexit dilemma
  • EZ Apr HICP Final YY, 1.7%, 1.7% f'cast, 1.7% prev
  • EZ Apr HICP Final MM, 0.7%, 0.7% f'cast, 1.0% prev
  • EZ Mar Construction Output MM, -0.27%, 2.96% prev, 3.04% rvsd

Economic Data Ahead

  • (1000 ET/1400 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index declined to 97.5 in May, after posting a final reading of 97.2 in April.
  • N/A The index of U.S. leading economic indicators is expected to have increased 0.2 percent in April after rising 0.4 percent the month before.

Key Events Ahead

  • (0800 ET/1200 GMT) BoE's Executive Director, Financial Stability Strategy and Risk, Alex Brazier, speaks at Allen & Overy in London
  • (1000 ET/1400 GMT) Federal Reserve Board Vice Chair Richard Clarida meets with LEAP Academy students and tours campus in Camden, New Jersey
  • (1115 ET/1515 GMT) Federal Reserve Bank of New York President John Williams participates in meeting with members of the Community League of the Heights (CLOTH) in New York
  • (1215 ET/1615 GMT) Federal Reserve Bank of New York President John Williams is expected to attend meetings at the Advanced Science Research Center, the City College, New York
  • (1330 ET/1730 GMT) Philadelphia Fed President Patrick Harker speaks before the "Fed Listens: Education, Employment, and Monetary Policy in the Third District" in Philadelphia
  • (1340 ET/1740 GMT) Fed's Clarida speaks at "Fed Listens: Education, Employment and Monetary Policy in the Third District" in Philadelphia
  • (1400 ET/1800 GMT) Federal Reserve Bank of New York President John Williams will participate in a meeting with members of the Asian Americans for Equality

FX Beat

DXY: The dollar index rallied to a 2-week peak, bolstered by data that showed U.S. homebuilding increased more than expected in April. The greenback against a basket of currencies traded 0.1 percent up at 97.89, having touched a high of 97.95 earlier, its highest since May 3. FxWirePro's Hourly Dollar Strength Index stood at 122.08 (HIghly Bullish) by 0900 GMT

EUR/USD: The euro plunged to a 2-week low, weighed down by concerns about next week's European parliamentary elections and comments from Italian Deputy Prime Minister Matteo Salvini. On Thursday, Salvini stated that he would break EU budget rules that were strangling Italy if his party did well in the elections. The European currency traded 0.1 percent down at 1.1162, having touched a low of 1.1158, its highest since May 3. FxWirePro's Hourly Euro Strength Index stood at -49.98 (Neutral) by 0900 GMT. Immediate resistance is located at 1.1218 (May 7 High), a break above targets 1.1262 (April 22 High). On the downside, support is seen at 1.1140 (April 24 Low), a break below could drag it till 1.1100.

USD/JPY: The dollar declined from a 1-week peak hit earlier in the day amid lingering concerns among investors about trade tensions and impending European Parliament elections. The major was trading 0.1 percent down at 109.70, having hit a low of 109.01 on Monday, its lowest since Feb. 1. FxWirePro's Hourly Yen Strength Index stood at 123.9 (Highly Bullish) by 0900 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the preliminary Michigan consumer sentiment index, and speeches by Fed's Clarida and Williams. Immediate resistance is located at 110.36 (50.0% retracement of 111.68 and 109.01), a break above targets 110.67 (61.8% retracement). On the downside, support is seen at 109.01 (May 14 Low), a break below could take it lower at 108.49 (Jan. 31 Low).

GBP/USD: Sterling slumped to a 4-month low below the 1.2800 handle on news that Brexit talks between May's Conservatives and the opposition Labour Party are about to end without an agreement. The major traded 0.3 percent down at 1.2758, having hit a low of 1.2754 earlier; it’s lowest since Feb. 14. FxWirePro's Hourly Sterling Strength Index stood at -89.79 (Slightly Bearish) 0900 GMT. Immediate resistance is located at 1.2878 (Feb. 14 High), a break above could take it near 1.2939 (Feb. 11 High). On the downside, support is seen at 1.2727 (Jan. 10 Low), a break below targets 1.2709 (Jan. 11 Low). Against the euro, the pound was trading 0.2 percent down at 87.47 pence, having hit a low of 87.52, it’s lowest since Feb. 19.

USD/CHF: The Swiss franc eased to a 5-day low, as the greenback surged, boosted by strong U.S. economic data and a bounce in Treasury yields. The major trades 0.1 percent up at 1.0109, having touched a low of 1.0049 on Monday; it’s lowest since Apr. 16. FxWirePro's Hourly Swiss Franc Strength Index stood at 88.34 (Slightly Bullish) by 0900 GMT. On the higher side, near-term resistance is around 1.0159 (Apr. 18 High) and any break above will take the pair to next level till 1.0196 (May 6 High). The near-term support is around 1.0032 (Apr. 16 Low), and any close below that level will drag it till 1.0000.

Equities Recap

European shares plunged amid an escalating trade war between the United States and China, which threatens to hamper global growth.

The pan-European STOXX 600 index tumbled 0.6 percent at 380.50 points, while the FTSEurofirst 300 index fell 0.6 percent to 1,496.76 points.

Britain's FTSE 100 trades 0.4 percent down at 7,322.04 points, while mid-cap FTSE 250 eased 0.4 to 19,454.59 points.

Germany's DAX declined 0.9 percent at 12,205.29 points; France's CAC 40 trades 0.6 percent lower at 5,415.15 points.

Commodities Recap

Crude oil prices declined, giving up earlier gains, but were on track for the first weekly increases this month, as rising tensions in the Middle East stoked fears of supply disruptions. International benchmark Brent crude was trading 0.1 percent lower at $72.72 per barrel by 0904 GMT, having hit a high of $73.33 on Thursday, its highest since Apr, 26. U.S. West Texas Intermediate was trading 0.05 percent up at $63.14 a barrel, after rising as high as $63.46 on Thursday, its highest since the May 2.

Gold prices rose after recording its biggest one-day percentage loss in a month in the previous session on a firmer dollar due to strong U.S. data and corporate results. Spot gold was trading 0.1 percent up at $1,286.75 per ounce by 0906 GMT, having touched a high of $1,303.21 on Tuesday, its highest since Apr. 11. U.S. gold futures were steady at $1,286.90 an ounce.

Treasuries Reap

The 10-year U.S. Treasury note yielded 2.387 percent, having pulled back from a near two-month low of 2.354 percent recorded the previous day.

The German 10-year bond yields fell back towards 2-1/2 year lows, while French and Spanish yields were set for their biggest weekly drop in two months, down 7 and 12 bps, respectively. The Italian bond yields were down as much as six basis points, while most Eurozone 10-year bond yields fell one to two basis points.

The Japanese government bond prices fell, with the five-year and 10-year JGB yields rising half a basis point each to minus 0.170 percent and minus 0.060 percent, respectively. The 30-year yield climbed 1 basis point to 0.520 percent.

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