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Europe Roundup: Sterling off highs on UK poll projections; Swiss franc, yen gains on U.S.-China trade concerns, greenback steadies ahead of Fed policy statement - Wednesday, December 11th, 2019

Market Roundup

  • Oil ease on surprise U.S. crude inventory build
     
  • Gold consolidates ahead of Fed policy statement
     
  • Majority for Prime Minister Boris Johnson narrows
     

Economic Data Ahead

  • (0830 ET/1330 GMT) The U.S. consumer price index likely increased 0.2 percent in November after posting 0.4 percent gain in October, while in the 12 months through November, the CPI is expected to have risen 2.0 percent.  Excluding food and energy, the core CPI probably rose 0.2 percent, matching the gain in the previous month.
     
  • (0830 ET/1330 GMT) Canada's releases industrial capacity utilization data for the third quarter. The indicator stood at 83.3 percent in the previous quarter.
     
  • (1100 ET/1600 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending December 6.
     
  • (1400 ET/1900 GMT) The U.S. reports its monthly budget statement for the month of November. The government's budget deficit widened to $196 billion from $134 billion in the previous month.
     

Key Events Ahead

  • (1400 ET/1900 GMT) The Federal Open Market Committee concludes its two-day meeting on interest rate policy and releases its statement.
     
  • (1430 ET/1930 GMT) Federal Open Market Committee's press conference
     

FX Beat

DXY: The dollar index steadied amid a lack of clarity on whether Washington would impose increased U.S. tariffs on Chinese goods on Dec. 1. Investors also eye U.S. Federal Reserve policy meeting outcome, where it is expected to leave policy unchanged. The greenback against a basket of currencies traded flat at 97.48, having touched a low of 97.36 on Friday, its lowest since November 4.

EUR/USD: The euro declined after rallying in the previous session on the ZEW research institute's monthly index that showed economic morale among German investors improvement far beyond that of December. The European currency traded 0.1 percent down at 1.1083, having touched a low of 1.1039 on Friday, its lowest since December 2. Immediate resistance is located at 1.1106, a break above targets 1.1140. On the downside, support is seen at 1.1071, a break below could drag it below 1.1047 (21-DMA).

USD/JPY: The dollar eased as investor remained cautious over whether U.S. President Donald Trump will impose tariffs on nearly $160 billion worth of Chinese consumer goods from December 15. The major was trading 0.05 percent down at 108.68, having hit a low of 108.42 on Monday, its lowest since Nov 21. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. consumer prices, monthly budget statement and Fed monetary policy decision. Immediate resistance is located at 108.99, a break above targets 109.20. On the downside, support is seen at 108.34, a break below could take it near at 108.18.

GBP/USD: Sterling retreated from an over 8-month peak hit in the previous session after a poll showed a narrowing lead for Prime Minister Boris Johnson’s Conservative Party in an election scheduled for later in the week. The major traded 0.1 percent down at 1.3138, having hit a high of 1.3215 on Tuesday, it’s highest since March 27. Investors’ attention will remain on the development surrounding the general elections, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3196, a break above could take it near 1.3246. On the downside, support is seen at 1.3100, a break below targets 1.3067. Against the euro, the pound was trading 0.1 percent down at 84.35 pence, having hit a high of 83.92 on Monday, it’s highest since May 2017.

USD/CHF: The Swiss franc consolidated near a 3-month peak recorded in the previous session, as investors awaited fresh developments in the 17-month-long U.S.-China trade war. The major trades 0.05 percent down at 0.9847, having touched a low of 0.9833 on Tuesday, it’s lowest since September 5. On the higher side, near-term resistance is around 0.9874 (5-DMA) and any break above will take the pair to the next level till 0.9917 (21-DMA). The near-term support is around 0.9813, and any close below that level will drag it till 0.9798.

Equities Recap

European shares declined as investors remained cautious ahead of British election on Thursday and central bank meetings in the United States and eurozone this week.

The pan-European STOXX 600 index slumped 0.2 percent at 404.65 points, while the FTSEurofirst 300 fell 0.1 percent to 1,581.95 points.

Britain's FTSE 100 trades 0.05 percent down at 7,210.36 points, while mid-cap FTSE 250 eased 0.6 to 20,656.61 points.

Germany's DAX surged 0.1 percent at 13,074.92 points; France's CAC 40 trades 0.2 percent lower at 5,835.22 points.

Commodities Recap

Crude oil prices declined after industry data showed a surprise build in crude oil inventory in the United States and as investors waited for news on whether a fresh round of U.S. tariffs on Chinese goods would take effect on Sunday. International benchmark Brent crude was trading 0.2 percent down at $64.01 per barrel by 0936 GMT, having hit a high of $64.86 on Friday, its highest since September 23. U.S. West Texas Intermediate was trading 0.1 percent down at $59.01 a barrel, after rising as high as $59.81 on Friday, its highest since September 17.

Gold prices surged as investors remained cautious ahead of the U.S. central bank’s economic policy statement and a tariffs deadline. Spot gold gained 0.2 percent to $1,466.43 per ounce by 0940 GMT, having touched a low of $1458.57 on Monday, its lowest since Dec. 2. U.S. gold futures were up 0.1 percent at $1,469.50.

Treasuries Recap

The yield on benchmark 10-year Treasury notes, which moves inversely to price, last stood a little higher at 1.8399 percent.

The European government bond yields drifted lower ahead of a deadline for new U.S. tariffs on Chinese goods this Sunday. The benchmark 10-year bond yields in Germany fell one basis point to -0.2930 percent, moving further away from a 3-week high of -0.26 percent reached last week. The yields in 10-year Italian bonds held near a 2-week low of 1.345 percent.

The Japanese government bond yields rose for most tenors. The 10-year futures expiring in December fell 0.36 point to 152.03, while contracts expiring in March fell 0.26 point to 152.07. The 10-year JGB yield rose 2 basis points to minus 0.005 percent. The 20-year JGB yield rose 0.5 basis point to 0.285 percent, while the 30-year JGB yield was flat at 0.420 percent. At the super-long end of the yield curve, the 40-year JGB yield fell 0.5 basis point to 0.435 percent. The five-year yield rose 2 basis points to minus 0.090 percent. At the short end of the curve, the two-year JGB yield rose 1.5 basis points to minus 0.105 percent.

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