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Europe Roundup: Sterling eases on Brexit delay uncertainty, greenback off lows as investors eye FOMC policy outcome, European shares plunge - Wednesday, March 20th, 2019

Market Roundup

  • EUR/USD -0.01%, USD/JPY 0.13%, GBP/USD -0.33%, EUR/GBP 0.27%
     
  • DXY 0.09%, DAX -0.98%, FTSE 0.05%, Brent 0.09%, Gold -0.26%
     
  • U.S. Fed's balance sheet plan, economic outlook under microscope
     
  • Brexit delayed? British PM May to request short extension
     
  • Likely Brexit delay ushers more uncertainty for the pound
     
  • Banks shrink capital shortfalls under Basel rules
     
  • Germany Feb Producer Prices MM, -0.1%, 0.2% f'cast, 0.4% prev
     
  • Germany Feb Producer Prices YY, 2.6%, 2.9% f'cast, 2.6% prev
     
  • Great Britain Feb Core CPI YY, 1.8%, 1.9% f'cast, 1.9% prev
     
  • Great Britain Feb CPI MM, 0.5%, 0.5% f'cast, -0.8% prev
     
  • Great Britain Feb CPI YY, 1.9%, 1.8% f'cast, 1.8% prev
     
  • Abe describes BOJ's inflation goal as means to spur growth
     
  • Japan govt downgrades economy view as U.S.-China trade war bites
     

Economic Data Ahead

  • (0900 ET/1400 GMT) Swiss National Bank releases its Quarterly Bulletin.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending March 14.

Key Events Ahead

  • (1400 ET/1800 GMT) U.S. Federal Reserve's Federal Open Market Committee announces its decision on interest rates followed by statement in Washington
     
  • (1430 ET/1830 GMT) U.S. Federal Reserve chairperson holds a news conference in Washington
     
  • (1700 ET/2100 GMT) The Brazilian central bank will meet to set its benchmark Selic rate and is expected to keep interest rates steady.
     

FX Beat

DXY: The dollar index nudged higher as investors focus on the Federal Reserve to see whether the central bank will affirm its commitment to patient monetary policy and for clues about the likely path of U.S. interest rates. The greenback against a basket of currencies traded 0.05 percent up at 96.47, having touched a low of 96.29 on Tuesday, its lowest since March 1. FxWirePro's Hourly Dollar Strength Index stood at -36.31 (Neutral) by 1100 GMT.

EUR/USD: The euro edged higher, extending gains for the fourth straight session after the German cabinet passed a draft budget for 2020 that calls for a 1.7 percent spending hike and relies on ministries to cut costs to avoid new debt amid an economic slowdown. The European currency traded 0.05 percent up at 1.1355, having touched a high of 1.1361 on Tuesday, its highest since Mar. 4. FxWirePro's Hourly Euro Strength Index stood at 64.55 (Bullish) by 1100 GMT. Immediate resistance is located at 1.1367 (78.6% retracement of 1.1176 and 1.1496), a break above targets 1.1408 (March 1 High). On the downside, support is seen at 1.1294 (March 4 Low), a break below could drag it till 1.1243 (Mar. 12 Low).

USD/JPY: The dollar rebounded from a 5-day low on news that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to China next week for another round of trade talks with Chinese counterparts. The major was trading 0.1 percent up at 111.50, having hit a low of 111.15 on Tuesday, its lowest since March 14. FxWirePro's Hourly Yen Strength Index stood at 21.49 (Neutral) by 1100 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the Fed policy meeting. Immediate resistance is located at 112.13 (Mar. 5 High), a break above targets 112.60 (Dec. 20 High). On the downside, support is seen at 111.00 (Mar. 13 Low), a break below could take it lower at 110.66 (Feb.28 Low).

GBP/USD: Sterling plunged as investors grew cautious as Prime Minister Theresa May requests a short delay to Brexit following her failure to get the withdrawal deal ratified. Investors appear to have ignored upbeat inflation report that showed Britain's inflation rate ticked up last month despite Brexit uncertainty. The major traded 0.2 percent down at 1.3235, having hit a high of 1.3380 last week; it’s highest since June 14. FxWirePro's Hourly Sterling Strength Index stood at -55.26 (Bearish) 1000 GMT. Immediate resistance is located at 1.3319 (Feb. 28 High), a break above could take it near 1.3380 (Mar. 13 High). On the downside, support is seen at 1.3202 (Mar. 15 Low), a break below targets 1.3166 (Mar. 4 Low). Against the euro, the pound was trading 0.3 percent down at 85.77 pence, having hit a high of 84.71 last week, it’s highest since May 2017.

USD/CHF: The Swiss franc rallied towards a 2-week peak hit in the prior session, supported by further tension in U.S.-China trade negotiations. The major trades 0.05 percent down at 0.9990, having touched a low of 0.9984 on Tuesday; it’s lowest since March 5. FxWirePro's Hourly Swiss Franc Strength Index stood at 139.26 (Highly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 1.0037 (5-DMA) and any break above will take the pair to next level till 1.0124 (Mar. 7 High). The near-term support is around 0.9974 (March 4 Low), and any close below that level will drag it till 0.9962 (February 27 Low).

Equities Recap

European shares retreated from near 6-month highs, as investors eye U.S. Federal Reserve statement and news conference later in the day.

The pan-European STOXX 600 index plunged 0.3 percent at 383.02 points, while the FTSEurofirst 300 index eased 0.5 percent to 1,503.70 points.

Britain's FTSE 100 trades 0.05 percent down at 7,319.14 points, while mid-cap FTSE 250 fell 0.05 to 19,541.76 points.

Germany's DAX declined 1.2 percent at 11,644.22 points; France's CAC 40 trades 0.05 percent lower at 5,425.30 points.

Commodities Recap

Crude oil prices declined, amid growing concerns over economic growth, however, ongoing supply cuts led by producer cartel OPEC and U.S. sanctions against Iran and Venezuela limited downside. International benchmark Brent crude was trading 0.6 percent down at $67.28 per barrel by 1046 GMT, having hit a high of $68.18 on Tuesday, its highest since Nov. 16. U.S. West Texas Intermediate was trading 0.7 percent lower at $58.61 a barrel, after rising as high as $59.55 on Tuesday, its highest since the Nov. 13.

Gold prices eased as the greenback steadied ahead of the U.S. Federal Reserve policy meeting outcome. Spot gold was 0.2 percent down at $1,303.47 per ounce at 1049, having touched a high of $1,310.83 on Tuesday, its highest since March 13.  U.S. gold futures slipped 0.4 percent to $1,301.7.

Treasuries Recap

The U.S. Treasuries gained slightly during afternoon session ahead of the Federal Reserve’s monetary policy decision, scheduled to be unveiled today by 18:00GMT. The yield on the benchmark 10-year Treasury yield slipped 1-1/2 percent to 2.5948 percent, the super-long 30-year bond yields also remained 1-1/2 basis points lower at 3.011 percent and the yield on the short-term 2-year traded tad lower at 2.464 percent.

The United Kingdom’s gilts surged during the afternoon session, after investors have largely shrugged-off the better-than-expected consumer price inflation for the month of February. The yield on the benchmark 10-year gilts, slipped 1-1/2 basis points to 1.174 percent, the super-long 30-year bond yields suffered 2 basis points to 1.655 percent and the yield on the short-term 2-year traded tad lower at 0.750 percent.

The German bunds remained nearly flat during European session ahead of the European Union leaders’ summit, due to on March 21, besides, the country’s manufacturing PMI for the month of March, scheduled to be released on March 22 by 08:30GMT, which shall provide further direction to the debt market. The German 10-year bond yields, which move inversely to its price, hovered around 0.100 percent, the yield on 30-year note edged tad lower to 0.748 percent and the yield on short-term 2-year too traded flat at -0.515 percent.

The Japanese government bonds slid at the end of Asian session as investors continue to keep a close eye on the Federal Reserve’s monetary policy decision, scheduled to be unveiled later in the day. The yield on the benchmark 10-year JGB note, which moves inversely to its price, rose 5 basis points to -0.037 percent, the yield on the long-term 30-year also climbed 4 basis points to 0.567 percent and the yield on short-term 2-year hovered around -0.161 percent.

The Australian government bonds surged during Asian trading session tracking a similar movement in the United States’ Treasuries ahead of the country’s employment report for the month of February, scheduled to be released on March 21 by 00:30GMT, besides, the Federal Reserve’s monetary policy meeting, due for later in the day, for further direction in the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell 2 basis points to 1.930 percent, the yield on the long-term 30-year bond traded tad lower at 2.573 percent and the yield on short-term 2-year plunged 3-1/2 basis points to 1.531 percent.

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