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Europe Roundup: Sterling off-lows on upbeat construction PMI, euro gains as Eurozone's Q1 prelim GDP expands, investors eye FOMC monetary statement - Wednesday, May 2nd, 2018

Market Roundup

  • EUR/USD 0.05%, USD/JPY -0.03%, GBP/USD 0.32%, EUR/GBP -0.27%
     
  • DXY -0.07%, DAX 1.13%, FTSE 0.46%, Brent -0.03%, Gold 0.55%
     
  • EZ Apr Markit Manufacturing Final PMI, 56.2, 56.0 forecast, 56.0 previous
     
  • Germany Apr Markit/BME Manufacturing PMI, 58.1, 58.1 forecast, 58.1 previous
     
  • Great Britain Apr Markit/CIPS Cons PMI, 52.5, 50.5 forecast, 47.0 previous
     
  • Close Xi aide to meet U.S. trade delegation in Beijing
     
  • German economy minister urges EU unity in trade conflict with U.S.
     
  • Pro-Brexit lawmakers pressure British PM May over customs plan
     
  • EU proposes to set aside euro zone money in next budget
     
  • EZ Q1 GDP Flash Prelim YY, 2.5%, 2.5% forecast, 2.7% previous,2.8% revised
     
  • EZ Q1 GDP Flash Prelim QQ, 0.4%, 0.4% forecast, 0.6% previous, 0.7% revised
     
  • EZ Mar Unemployment Rate, 8.5%, 8.5% forecast, 8.5% previous
     
  • France Apr Markit Manufacturing PMI, 53.8, 53.4 forecast, 53.4 previous
     
  • Italy Q1 GDP Prelim QQ, 0.3%, 0.3% forecast, 0.3% previous
     
  • Italy Q1 GDP Prelim YY, 1.4%, 1.4% forecast, 1.6% previous
     
  • Italy Apr Markit/ADACI Manufacturing PMI, 53.5, 54.5 forecast, 55.1 previous

Economic Data Ahead

  • (0815 ET/1215 GMT) Payrolls processor ADP releases U.S. employment report for the month of April. The report is expected to show that 200,000 jobs were added as compared with 241,000 jobs in March.
     
  • (0900 ET/1300 GMT) Brazil's releases manufacturing Purchasing Managers' Index for the month of April. The indicator rose to a seasonally adjusted 53.2 in February.
     
  • (0945 ET/1345 GMT) The NAPM-New York releases ISM-New York Index for the month of April. The index stood at 54.0 in the previous month.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending April 27.
     
  • (1030 ET/1430 GMT) Markit releases Mexico's manufacturing PMI data for the month of April. The Manufacturing Purchasing Managers' Index rose to 52.4 in March.
     

Key Events Ahead

  • (1400 ET/1800 GMT) The U.S. Federal Reserve's Federal Open Market Committee announces interest rate decision after concluding its two-day monetary policy meeting. 

FX Beat

DXY: The dollar index slightly edged down ahead of the Federal Reserve policy meeting, where it is likely to keep the benchmark interest rate on hold and outline the future outlook on interest rates. The greenback against a basket of currencies trades 0.1 percent down at 92.38, having touched a high of 92.57 on Tuesday, its highest since Jan. 10. FxWirePro's Hourly Dollar Strength Index stood at 83.37 (Slightly Bullish) by 1000 GMT.

EUR/USD: The euro rose after data showed Eurozone's gross domestic product expanded by 0.6 percent in the first quarter compared to the last quarter of 2017 and by 2.5 percent year on year. The European currency traded 0.1 percent up at 1.2005, having touched a low of 1.1981 the day before, its lowest since Jan. 12. FxWirePro's Hourly Euro Strength Index stood at -54.12 (Bearish) by 1000 GMT. Immediate resistance is located at 1.2092 (5-DMA), a break above targets 1.2190 (10-DMA). On the downside, support is seen at 1.1955, a break below could drag it till 1.1910.

USD/JPY: The dollar held firm near a 3-month peak ahead of the U.S. Federal Reserve policy meeting, where it is set to hold interest rates steady but will likely further encourage expectations that it will lift borrowing costs in June on the back of rising inflation and low unemployment. The major was trading 0.05 percent up at 109.89, having hit a high of 109.91 earlier, its highest since Feb. 5. FxWirePro's Hourly Yen Strength Index stood at -22.23 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. ADP employment change and FOMC policy statement. Immediate resistance is located at 110.48 (Feb. 2 High), a break above targets 111.17 (Jan. 23 High). On the downside, support is seen at 109.38 (5-DMA), a break below could take it lower 108.66 (10- DMA).

GBP/USD: Sterling retreated from a near 4-month low touched earlier in the day after British construction activity rebounded faster than expected in April. However, the upturn in data did little to change the view of investors that the Bank of England will leave interest rates unchanged next week. The economy's construction Purchasing Managers' Index rose to 52.5 from 47.0 in March. The major traded 0.3 percent up at 1.3659, having hit a low of 1.3580, it’s lowest since Jan. 12. FxWirePro's Hourly Sterling Strength Index stood at -43.25 (Neutral) by 1000 GMT. Immediate resistance is located at 1.3687, a break above could take it near 1.3749. On the downside, support is seen at 1.3550, a break below targets 1.3510. Against the euro, the pound was trading 0.3 percent up at 87.85 pence, having hit a low of 88.30 pence earlier, it’s lowest since Mar. 16.

USD/CHF: The Swiss franc gained after falling to a near 5-month low as the greenback rallied on expectations that the Federal Reserve looks certain to hike interest rates next month, given signs of possible acceleration in the U.S. economy. The major trades 0.1 percent down at 0.9955, having touched a high of 0.9969 earlier, it’s highest since Dec. 8. FxWirePro's Hourly Swiss Franc Strength Index stood at -24.37 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9977 (Dec. 8 High) and any break above will take the pair to next level till 1.0000. The near-term support is around 0.9894 (5-DMA) and any close below that level will drag it till 0.9819 (10-DMA).

Equities Recap

European shares gained, bolstered by strong earnings updates and a rising tech sector, while the greenback eased ahead of U.S. Federal Reserve's Federal Open Market Committee policy meeting.

The pan-European STOXX 600 index surged 0.6 percent at 387.28 points, while the FTSEurofirst 300 index rallied 0.6 percent to 1,519.13 points.

Britain's FTSE 100 trades 0.5 percent up at 7,553.69 points, while mid-cap FTSE 250 gained 0.6 percent to 20,277.29 points.

Germany's DAX rose 1.1 percent at 12,753.42 points; France's CAC 40 trades 0.2 percent higher at 5,529.72 points.

Commodities Recap

Crude oil prices declined, weighed down soaring U.S. supplies, however, concerns that the United States may reimpose sanctions on major exporter Iran limited downside. International benchmark Brent crude was trading 0.5 percent down at $72.91 per barrel by 1016 GMT, having hit a high of $75.58 on Monday, its highest since Nov. 2014. U.S. West Texas Intermediate was trading 0.2 percent down at $67.36 a barrel, after rising as high as $69.53 in mid-April, its highest since Nov. 2014.

Gold prices rose, hovering away from a 4-month low hit in the previous session, as investors waited for cues on U.S. monetary policy from a two-day Federal Reserve meeting. Spot gold was up 0.5 percent at $1,310.39 per ounce at 1019 GMT, having eased to $1,301.70 on Tuesday, their lowest level since Dec 29. U.S. gold futures for June delivery rose 0.31 percent to $1,310.80 per ounce on Wednesday.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.990 percent higher by 0.015 bps, while 5-year yield was 0.01 bps up at 2.831 percent.

The Euro zone government bond yields rose, taking their cue from a selloff in the U.S. bond market. Most 10-year bond yields in Eurozone bloc were up 1-2 basis points on the day. Germany's Bund yield climbed to 0.58 percent, but held below 6-week peaks set last week above 0.65 percent.

The Japanese government bond prices edged down as investors lightened their positions. The benchmark 10-year JGB yield rose 0.5 basis point to 0.040 percent. The 20-year JGB yield rose 1.0 basis point to 0.520 percent and the 30-year JGB yield ticked up 1.0 basis point to 0.725 percent. The two-year JGB yield rose 1 basis point to minus 0.135 percent, while the five-year JGB yield rose 1.5 basis points to minus 0.105 percent.

The Australian government bond futures slipped, with the three-year bond contract off half a tick at 97.775. The 10-year contract fell 3 ticks to 97.20. The New Zealand government bonds eased, sending yields 1.5 basis points higher on the long-end of the curve.

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