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Europe Roundup: Sterling near 4-week peak on election optimism, gold declines on U.S.-China trade deal hopes, European shares at record peak - Monday, November 18th, 2019

Market Roundup

  • Oil prices edge up ahead of OPEC meeting
     
  • Gold prices ease on optimism over U.S.-China trade deal
     

Economic Data Ahead

  • (1000 ET/1500 GMT) The National Association of Home Builders (NAHB) is expected to report that the U.S. Housing Market Index rose to 71 in October, after posting a similar increase in September.

Key Events Ahead

  • (0805 ET/1305 GMT) European Central Bank Executive Board member Philip Richard Lane's speech

FX Beat

DXY: The dollar index slumped as investors raised concerns over the strength of the U.S. economy after data from the U.S. Federal Reserve on Friday showed manufacturing downturn deepened in October. Markets now await minutes of the Federal Reserve’s last policy meeting, due later in week, for clues about the future interest rate trajectory. The greenback against a basket of currencies traded 0.1 percent down at 97.91, having touched a high of 98.45 on Wednesday, its highest since October 15.

EUR/USD: The euro rose to an over 1-week peak as the greenback eased to multi-week lows against a basket of currencies. The European currency traded 0.1 percent up at 1.1057, having touched a high of 1.1047 earlier, its highest since November 7. Immediate resistance is located at 1.1090 (21-DMA), a break above targets 1.1123. On the downside, support is seen at 1.1023, a break below could drag it below 1.1002.

USD/JPY: The dollar rallied on growing expectations that Washington and Beijing can soon sign off on a deal to end a trade war that has been a drag on global economic growth. The major was trading 0.3 percent up at 109.04, having hit a low of 108.24 on Thursday, its lowest since November 4. Investors’ will continue to track the broad-based market sentiment, amid a lack of economic data from the U.S. docket. Immediate resistance is located at 108.15 (November 13 High), a break above targets 109.28 (October 30 High). On the downside, support is seen at 108.53, a break below could take it near at 108.29.

GBP/USD: Sterling surged to a near 4-week peak after Prime Minister Boris Johnson told the Telegraph newspaper in an interview published on Saturday that all 635 Conservative candidates standing in the UK election would vote in parliament to pass the withdrawal agreement. The major traded 0.5 percent up at 1.2965, having hit a high of 1.2985 earlier, it’s highest since October 22. Immediate resistance is located at 1.2995, a break above could take it near 1.3012 (October 21 High). On the downside, support is seen at 1.2876 (21-DMA), a break below targets 1.2852 (10-DMA). Against the euro, the pound was trading 0.4 percent up at 85.29 pence, having hit a high of 85.21 earlier, it’s highest since May 6.

USD/CHF: The Swiss franc declined, extending previous session losses, amid a recovery in risk sentiment across the board as investors remained optimistic about the phase one deal to go through before Christmas. The major trades at 0.1 percent up at 0.9902, having touched a low of 0.9870 on Thursday, it’s lowest since November 4. On the higher side, near-term resistance is around 0.9936 and any break above will take the pair to the next level till 0.9983. The near-term support is around 0.9855, and any close below that level will drag it till 0.9815.

Equities Recap

European shares nudged closer to a record level as optimism around U.S.-China trade talks and a surprise move by China’s central bank in cutting a key interest rate boosted investor sentiment.

The pan-European STOXX 600 index surged 0.1 percent at 406.39 points, while the FTSEurofirst 300 rallied 0.05 percent to 1,590.94 points.

Britain's FTSE 100 trades 0.1 percent up at 7,309.09 points, while mid-cap FTSE 250 surged 0.5 to 20,497.54 points.

Germany's DAX eased 0.2 percent at 13,215.66 points; France's CAC 40 trades 0.3 percent lower at 5,923.42 points.

Commodities Recap

Crude oil prices surged, extending previous session gains, with investors awaiting fresh clues over prospects for a trade deal between the United States and China. International benchmark Brent crude was trading 0.1 percent up at $63.37 per barrel by 1055 GMT, having hit a high of $63.63 on Friday, its highest since September 24. U.S. West Texas Intermediate was trading 0.2 percent lower at $57.67 a barrel, after rising as high as $58.06 earlier, its highest since September 24.

Gold prices declined as optimism grew about U.S.-China trade ties following a report of constructive talks over the weekend. Spot gold was trading 0.7 percent down to $1,458.08 per ounce at 1057 GMT, having touched a higher of $1,474.52 on Thursday, its highest November 7. U.S. gold futures were 0.4 percent lower at $1,462.90.

Treasuries Recap

The U.S. Treasuries edged tad lower during the afternoon session amid a relatively quiet day ahead of FOMC member Mester’s speech, scheduled to be delivered today by 17:00GMT. The yield on the benchmark 10-year Treasury yield rose 1-1/2 basis points to 1.848 percent, the super-long 30-year bond yield also edged tad 1-1/2 basis points higher to 2.327 percent and the yield on the short-term 2-year too traded 1-1/2 basis points higher at 1.627 percent.

The United Kingdom’s gilts fell during European trading hours as investors remained side-lined amid a muted trading session that witnessed data of little economic significance. However, attention might turn towards the country’s manufacturing and services PMIs for the month of November, both scheduled to be released by end of this trading week for further direction into the debt market. The yield on the benchmark 10-year gilts, rose 1-1/2 basis points to 0.746 percent, the 30-year yield slipped jumped 2 basis points to 1.281 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.566 percent.

The German bunds remained flat during European session amid silent trading hours that barely witnessed any data of major economic significance ahead of the country’s gross domestic product (GDP) for the third quarter of this year and November month manufacturing PMI, both scheduled to be released by end of this week. The German 10-year bond yield, which move inversely to its price, hovered around -0.325 percent, the yield on 30-year note traded flat at 0.160 percent and the yield on short-term 2-year edged tad lower to -0.639 percent

The Australian bonds slightly gained during Asian session of the first trading day of the week amid a muted day that witnessed data of little economic significance ahead of the Reserve Bank of Australia’s (RBA) November monetary policy meeting minutes, scheduled to be released on November 19 by 00:30GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, edged tad 1/2 basis point down to 1.155 percent, the yield on the long-term 30-year bond suffered 2-1/2basis points to 1.768 percent and the yield on short-term 2-year slipped 1 basis point to 0.794 percent.

By Lactus Fernandes
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