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Europe Roundup: Sterling consolidates below 1.3100 as Brexit talks resume, euro tumbles as German industrial orders rise less than expected, European shares ease - Tuesday, May 7th, 2019

Market Roundup

  • EUR/USD 0.04%, USD/JPY -0.18%, GBP/USD -0.05%, EUR/GBP 0.09%
     
  • DXY -0.03%, DAX -0.43%, FTSE -0.85%, Brent -1.04%, Gold 0.13%
     
  • China vice premier going to U.S. for trade talks despite Trump threats
     
  • Germany Mar Industrial Orders MM, 0.6%, 1.5% f'cast, -4.2% prev, -4.0% rvsd
     
  • France Mar Current Account SA (EUR), -1.3 bln, -0.8 bln prev
     
  • Aussie surges after central bank holds rates; yuan stabilises
     
  • China's April forex reserves drop for first time in 6 months
     
  • Swedish cbank's Ingves says "natural" to postpone rate hike-minutes
     
  • Britain's Hunt says: I am not a believer in a post-Brexit customs union
     

Economic Data Ahead

  • (1000 ET/1400 GMT) The U.S. Labor Department releases Job Openings and Labor Turnover Survey (JOLTS) report for the month of March. The report is expected to show job openings rose to 7.240 million from 7.087 million in February.
     
  • (1000 ET/1400 GMT) The Investor's Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of May. The indicator rose to 54.2 in April.
     
  • (1000 ET/1400 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of April. The index posted a reading of 54.3 in the prior month.
     
  • (1500 ET/1900 GMT) The U.S. Federal Reserve is likely to report that consumer credit rose to $16.0 billion in March from $15.19 billion the month before.
     

Key Events Ahead

  • (1135 ET/1535 GMT) Federal Reserve Vice Chair Randal K. Quarles to speak at Yale University on financial regulation in New Haven
     
  • (1230 ET/1630 GMT) Bank of England Chief Economist and Executive Director, Monetary Analysis & Statistics, Andy Haldane give speech at Sheffield Political Economy Research Institute Annual Lecture 2019 in London
     

FX Beat

DXY: The dollar index rebounded from a near 1-week low after Dallas Federal Reserve President Robert Kaplan said he expects U.S. economy to remain healthy and does not see a downturn or recession coming. The greenback against a basket of currencies traded 0.05 percent up at 97.60, having touched a low of 97.38 earlier, its lowest since May 1. FxWirePro's Hourly Dollar Strength Index stood at 12.37 (Neutral) by 1100 GMT.

EUR/USD: The euro eased after data showed German industrial orders rose less than expected in March following two months of steep declines, weighed down by weaker demand from abroad, trade tensions and business uncertainty caused by Brexit. The European currency traded 0.05 percent down at 1.1190, having touched a low of 1.1135 on Friday, its lowest since Apr. 26. FxWirePro's Hourly Euro Strength Index stood at -8.89 (Neutral) by 1100 GMT. Immediate resistance is located at 1.1229 (April 30 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 1.1096 (May. 2017 Low).

USD/JPY: The Japanese yen gained after data showed Japan's manufacturing activity expanded in April for the first time in three months as companies employed more workers and grew more optimistic about the business outlook. Moreover, risk-off sentiment triggered by U.S. President Donald Trump threat to ramp up trade tariffs on Chinese imports supported the bid tone around the pair. The major was trading 0.1 percent down at 110.58, having hit a low of 110.28 on Monday, its lowest since Mar. 28. FxWirePro's Hourly Yen Strength Index stood at 133.62 (Highly Bullish) by 1100 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. JOLTS Job Opening and Fed Quarles' speech. Immediate resistance is located at 111.07 (Feb. 27 High), a break above targets 111.46 (Mar. 12 High). On the downside, support is seen at 110.01 (Mar.28 Low), a break below could take it lower at 109.70 (Mar. 25 Low).

GBP/USD: Sterling consolidated below the 1.3100 handle as investors refrained from taking big positions as Brexit talks resumed between the British government and the opposition Labour party over the terms of Brexit, in particular the shape of a customs union. The major traded at 0.1 percent down 1.3082, having hit a high of 1.3176 on Friday; it’s highest since Apr. 4. FxWirePro's Hourly Sterling Strength Index stood at 64.26 (Bullish) 1100 GMT. Immediate resistance is located at 1.3176 (May 3 High), a break above could take it near 1.3223 (Mar. 22 High). On the downside, support is seen at 1.3060 (April 4 Low), a break below targets 1.3022 (Apr. 8 Low). Against the euro, the pound was trading 0.1 percent down at 85.59 pence, having hit a high of 84.88 on Monday, it’s highest since Mar. 27

USD/CHF: The Swiss franc eased, extending prior session losses, as the greenback rebounded from a near 1-week low. The major trades 0.2 percent up at 1.0196, having touched a high of 1.0214 on Friday; it’s highest since Apr. 29. FxWirePro's Hourly Swiss Franc Strength Index stood at -44.50 (Neutral) by 1100 GMT. On the higher side, near-term resistance is around 1.0248 (Jan. 11 2017 High) and any break above will take the pair to next level till 1.0280 (Dec. 29, 2016, High). The near-term support is around 1.0130 (April 19 Low), and any close below that level will drag it till 1.0100.

Equities Recap

European shares declined as Trump's threat to raise tariffs on hundreds of billions of dollars of Chinese goods triggered a sell-off in equities.

The pan-European STOXX 600 index slumped 0.4 percent at 385.34 points, while the FTSEurofirst 300 index plunged 0.5 percent to 1,513.67 points.

Britain's FTSE 100 trades 1.1 percent down at 7,300.97 points, while mid-cap FTSE 250 fell 0.9 to 19,535.33 points.

Germany's DAX declined 0.5 percent at 12,227.25 points; France's CAC 40 trades 0.6 percent lower at 5,452.31 points.

Commodities Recap

Crude oil prices declined more than 1 percent as renewed doubts over U.S.-China trade talks stoked fears over global growth, however, a U.S. military deployment to the Gulf to deter Iran kept the losses in check. International benchmark Brent crude was trading 1.1 percent lower at $70.55 per barrel by 1052 GMT, having hit a low of $68.82 on Monday, its lowest since Apr, 3. U.S. West Texas Intermediate was trading 1.2 percent down at $61.76 a barrel, after falling as low as $60.02 on Monday, its lowest since the Mar, 29.

Gold prices rallied as investors moved away from riskier assets after U.S. President Donald Trump threatened to hike tariffs on Chinese imports, re-kindling trade tensions. Spot gold was trading 0.1 percent up at $1,281.11 per ounce by 1054 GMT, having touched a high of $1,285.73 on Monday, its highest since May 1. U.S. gold futures fell 0.1 percent to $1,282.70 an ounce.

Treasuries Recap

The U.S. Treasuries rose during the afternoon session, ahead of the country’s JOLTS job openings data for the month of March, scheduled to be released today by 14:00GMT, besides, FOMC member Quarles’ speech, also due today at 15:35GMT and the short-term 3-year auction at 17:00GMT, which shall provide further direction to the debt market. The yield on the benchmark 10-year Treasury yield slumped 2-1/2 basis points to 2.475 percent, the super-long 30-year bond yields suffered 2 basis points to 2.888 percent and the yield on the short-term 2-year traded 1-1/2 basis points to 2.292 percent.

The German bunds rallied during European trading session ahead of European Central Bank (ECB) President Mario Draghi’s speech, scheduled to be held on May 8 by 11:30GMT and the central bank account of the latest monetary policy meeting, also due on the same day for direction in the debt market. The German 10-year bond yields, which move inversely to its price, slumped nearly 2-1/2 basis points to -0.011 percent, the yield on 30-year note suffered nearly 2 basis points to 0.642 percent and the yield on short-term 2-year traded tad nearly 1 basis point lower at -0.609 percent.

The Japanese government bond yields plunged at close tracking a similar movement in the United States counterpart after a trade threat conquered markets as President Donald Trump said the White House will impose higher tariffs on Chinese goods. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, slumped 5 basis points to -0.050 percent, the yield on the long-term 30-year suffered 2-1/2 basis points to 0.540 percent and the yield on short-term 2-year plunged 15-1/2 basis points to -0.154 percent.

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