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Europe Roundup: Sterling eases on weaker-than-expected CPI, euro fall on downbeat German ZEW economic sentiment, European shares rally - Tuesday, March 20th, 2018

Market Roundup

  • EUR/USD -0.19%, USD/JPY 0.23%, GBP/USD 0.06%, EUR/GBP -0.25%
     
  • DXY 0.31%, DAX -0.01 %, FTSE 0.17%, Brent 0.83%, Gold -0.3%
     
  • Germany ZEW Economic Sentiment Mar, 5.1, forecast 13.0, previous 17.8
     
  • Germany ZEW Current Conditions Mar, 90.7, forecast 90.0, previous 92.3
     
  • Germany Producer Prices YY Feb, 1.8%, forecast 2.0%, previous 2.1%
     
  • Great Britain Core CPI YY Feb, 2.4%, forecast 2.5%, previous 2.7%
     
  • Great Britain CPI YY Feb 2.7%, forecast 2.8%, previous 3.0%
     
  • Great Britain PPI Input Prices YY NSA Feb, 3.4%, forecast 3.8%, previous 4.7%
     
  • Great Britain PPI Output Prices YY NSA Feb, 2.6%, forecast 2.7%, previous 2.8%
     
  • Great Britain PPI Core Output YY NSA Feb, 2.4%, forecast 2.4%, previous 2.2%
     
  • BOJ deputy govs pledge to meet inflation target, show policy flexibility
     
  • China's premier hopes trade war can be averted, pledges more open economy
     
  • U.S.-South Korea military exercises to resume next month
     
  • Oil prices rise on Middle East tension, falling Venezuela output
     
  • Gold edges lower ahead of Fed rate decision

Economic Data Ahead

  • (0830 ET/1230 GMT) Statistics Canada will release its wholesale trade figures for the month of January. The indicator is likely to have stayed unchanged, after unexpectedly declining 0.5 percent in December.
     
  • (1100 ET/1500 GMT) The European Commission releases Eurozone's preliminary Consumer Confidence reading for the month of March. The index posted a final reading of 0.1 in the prior month.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (1300 ET/1700 GMT) The U.S. Federal Reserve's Federal Open Market Committee begins its two-day meeting on interest rate policy.
     
  • N/A Brazil's central bank is scheduled to begin its two-day policy meeting.
     

FX Beat

DXY: The dollar index surged ahead of a U.S. Federal Reserve policy meeting, where it is widely expected to raise interest rates and provide more clues on the future trajectory of rates. The greenback against a basket of currencies 0.2 percent up at 90.09, having touched a high of 90.38 on Friday, its highest since Mar. 1. FxWirePro's Hourly Dollar Strength Index stood at 65.65 (Bullish) by 1100 GMT.

EUR/USD: The euro declined after data showed the sentiment among German investors deteriorated further in March, reflecting growing uncertainty about the possible damage of U.S. import tariffs on the economy. The ZEW research institute showed economic sentiment among investors fell to 5.1 from 17.8 in March, while current conditions edged down to 90.7 from 92.3 last month. The European currency traded 0.2 percent down at 1.2308, having touched a low of 1.2258 the day before, its lowest since Mar. 2. FxWirePro's Hourly Euro Strength Index stood at 11.48 (Neutral) by 1100 GMT. Immediate resistance is located at 1.2358 (Previous Session High), a break above targets 1.2383 (Mar. 15 High). On the downside, support is seen at 1.2300 (Mar. 15 Low), a break below could drag it lower 1.2251 (Mar. 2 Low).

USD/JPY: The dollar rallied to a near 1-week high as investors positioned themselves ahead of Wednesday's policy meeting at the U.S. Federal Reserve, which is widely expected to raise interest rates. The major was trading 0.3 percent up at 106.44, having hit a low of 105.60 on Friday, its lowest since Mar. 7. FxWirePro's Hourly Yen Strength Index stood at -78.83 (Slightly Bearish) by 1100 GMT. Immediate resistance is located at 106.74 (March 14 High), a break above targets 106.97 (Mar 12 High). On the downside, support is seen at 105.67 (Previous Session Low), a break below could take it lower 105.25.

GBP/USD: Sterling eased after data showed British inflation was weaker than expected in February as the impact of the 2016 Brexit vote faded. The economy's consumer prices rose by an annual 2.7 percent last month, the weakest increase since July of last year and down from a rise of 3.0 percent in January. The major traded 0.05 percent down at 1.4019, having hit a high of 1.4088 on Monday, it’s highest since Feb. 16. FxWirePro's Hourly Sterling Strength Index stood at 73.61 (Bullish) by 1100 GMT. Immediate resistance is located at 1.4145, a break above could take it near 1.4233. On the downside, support is seen at 1.3965 (5-DMA), a break below targets 1.3907 (21-DMA). Against the euro, the pound was trading 0.2 percent up at 87.80 pence, having hit a high of 87.45 pence the day before, it’s highest since Feb 8.

USD/CHF: The Swiss franc eased, reversing some of its previous session gains as the greenback rose on the back of expectation of more U.S. interest rate hikes. The major trades 0.2 percent up at 0.9531, having touched a high of 0.9551 the day before, it’s highest since Jan. 24. FxWirePro's Hourly Swiss Franc Strength Index stood at -75.26 (Slightly Bearish) by 1100 GMT. On the higher side, near-term resistance is around 0.9633 (Jan. 23 High) and any break above will take the pair to next level till 0.9666 (Jan 18 High). The near-term support is around 0.9486 (5-DMA) and any close below that level will drag it till 0.9424.

Equities Recap

European shares rose, while the greenback surged ahead of a U.S. Federal Reserve policy meeting, where it is widely expected to hike interest rates.

The pan-European STOXX 600 index rallied 0.5 percent to 374.16 points, while the FTSEurofirst 300 index surged 0.2 percent to 1,464.34 points.

Britain's FTSE 100 trades 0.4 percent higher at 7,066.70 points, while mid-cap FTSE 250 added 0.1 percent to 19,709.81 points.

Germany's DAX rose 0.2 percent at 12,235.08 points; France's CAC 40 trades 0.1 percent declined at 5,228.50 points.

Commodities Recap

Crude oil prices rallied by almost 1 percent, boosted by tensions in the Middle East and concerns of a further fall in Venezuelan output. International benchmark Brent crude was trading 0.8 percent up at $66.64 per barrel by 1050 GMT, having hit a high of $66.75 earlier, its highest since Feb. 28. U.S. West Texas Intermediate was trading 0.9 percent up at $62.69 a barrel, after rising as high as $62.86 earlier, its strongest since Mar. 6.

Gold prices declined as the dollar steadied while traders waited to gauge the path of U.S. monetary policy for the rest of the year from the two-day Federal Reserve meeting that commences later in the day. Spot gold was down 0.3 percent to $1,313.05 per ounce at 1053 GMT, having hit a low of $1,307.71 an ounce on Monday, its lowest since Mar. 1. U.S. gold futures for April delivery dropped 0.2 percent to $1,314.70 per ounce.

Treasuries Recap

The U.S. Treasuries lost ground as investors moved away from safe-haven assets on hopes of a rate hike by the Federal Reserve in its monetary policy meeting, followed by a press conference, scheduled to be held on March 21 by 18:00GMT and 18:30GMT respectively. The yield on the benchmark 10-year Treasuries jumped 2 basis points to 2.86 percent, the super-long 30-year bond yields surged nearly 2-1/2 basis points to 3.10 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points higher at 2.31 percent.

The UK gilts plunged after the country and the European Union agreed to a 21-month post-Brexit transition deal, in an attempt to avoid a ‘hard border’ issue with Ireland, raising optimism among investors in an otherwise, disturbed scenario. The yield on the benchmark 10-year gilts, jumped nearly 2 basis points to 1.46 percent, the super-long 30-year bond yields climbed nearly 1 basis point to 1.78 percent and the yield on the short-term 2-year traded 3 basis points higher at 0.85 percent

The German bunds slipped as investors have largely shrugged-off the country’s worse-than-expected ZEW economic sentiment index for the month of March. The German 10-year bond yields, which move inversely to its price, jumped 1-1/2 basis points to 0.58 percent, the yield on the 30-year note rose 1/2 basis point to 1.22 percent and the yield on short-term 2-year traded 1 basis point higher at -0.57 percent.

The New Zealand government bonds surged at the time of closing as investors wait to watch the country’s GlobalDairyTrade (GDT) auction, scheduled to be held later today. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1-1/2 basis points to 2.85 percent, the yield on 20-year slumped 2 basis points to 3.35 percent and the yield on short-term 2-year closed flat at 1.91 percent.

The Japanese government bonds traded tad lower during Asian session as investors wait to see a slight rise in the country’s national consumer price inflation data, scheduled to be released on March 22 by 23:30GMT. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slightly rose to 0.04 percent, the yield on the long-term 20-year note edged nearly 1/2 basis point higher to 0.75 percent and the yield on short-term 2-year hovered around -0.15 percent.

The Australian government bonds traded mixed as investors await the Federal Reserve monetary policy decision, where it is widely expected to hike interest rate by 25 basis points to 1.50-1.75 percent. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis points to 2.700 percent, the yield on the long-term 30-year note traded flat at 3.290 percent and the yield on short-term 2-year climbed 2 basis points to 1.999 percent.

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