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Europe Roundup: Sterling off multi-month peak on soft wage report, dollar index rebounds from 3-week lows amid receding geopolitical tensions, European shares gain - Tuesday, April 17th, 2018

Market Roundup

  • EUR/USD -0.11%, USD/JPY -0.03%, GBP/USD -0.15%, EUR/GBP 0.05%
     
  • DXY 0.08%, DAX 0.88%, FTSE 0.22%, Brent 0.03%, Gold -0.25%
     
  • China posts strong Q1 growth as robust consumer demand buffers trade worries
     
  • Economic institutes raise German growth forecasts -sources
     
  • BOJ to forecast inflation approaching 2 pct target in FY2019, 2020 - sources
     
  • Great Britain Mar Claimant Count Unemployment Change, 11.6k, 5.0k, 9.2k previous, 15.1k revised
     
  • Great Britain Feb ILO Unemployment Rate, 4.2%, 4.3%, 4.3% previous
     
  • Great Britain Feb Employment Change, 55k, 33k, 168k previous
     
  • Great Britain Feb Average Week Earnings 3M YY, 2.8%, 3.0%, 2.8% previous
     
  • Great Britain Feb Average Earnings (Ex-Bonus), 2.8%, 2.8%, 2.6% previous
     
  • Germany Apr Zew Economic Statement, -8.2, -1.0, 5.1 previous
     
  • Germany Apr Zew Current Conditions, 87.9, 88.0, 90.7 previous
     
  • Gold prices rise as dollar slips to lowest in nearly 3 weeks
  • Oil bolstered as investors factor in supply risks
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to an annualized rate of 1.262 million units in March from 1.236 million units in February.
     
  • (0830 ET/1230 GMT) The U.S. building permits are likely to have increased to a 1.323 million-unit pace in March from a 1.321 million-unit pace in February.
     
  • (0830 ET/1230 GMT) Statistics Canada releases manufacturing shipments data for the month of February. Manufacturing sales are likely to have increased 1.1 percent after falling 1.0 percent in January.
     
  • (0830 ET/1230 GMT) The Statistics Canada will report foreign portfolio investment in domestic stocks for the month of February.
     
  • (0830 ET/1230 GMT) The Statistics Canada will release investment in foreign securities figures for the month of February.
     
  • (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production rose 0.4 percent in March, after increasing 0.9 in the prior month.
     
  • (0915 ET/1315 GMT) The Federal Reserve Board is expected to report that capacity utilization edged up to 77.9 percent in March from 77.7 percent in February.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.
     

Key Events Ahead

  • (0915 ET/1315 GMT) Federal Reserve Bank of San Francisco President John Williams speaks before the NABE-Bank of Spain International Symposium, "Global Recovery: The Good, the Bad, and the Ugly"-Madrid
     
  • (1000 ET/1400 GMT) Federal Reserve Vice Chair for Supervision Randal Quarles testifies before the House Financial Services Committee hearing-Washington D.C.
     
  • (1100 ET/1500 GMT) Federal Reserve Bank of Philadelphia President Patrick Harker lectures on "The Economics of Equitable Education” at Saint Joseph's University-Philidelphia
     
  • (1200 ET/1600 GMT) Deutsche Bundesbank board member Carl-Ludwig Thiele speaks on ""Between Virtuality and Virtuosity - Banks and Central Banks in the Digital Age"-Stuttgart, Germany
     
  • N/A Japanese Prime Minister Shinzo Abe leaves for a four-day summit with U.S. President Donald Trump.
     
  • (1340 ET/1740 GMT) Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions and monetary policy before a Chicago Rotary Club luncheon-Chicago
     
  • (1345 ET/1745 GMT) Deutsche Bundesbank board member Prof Dr Joachim Wuermeling speaks on "Sustainability, Security, Return - A Trilemma in Investment?" at a FAZ Conference -Frankfurt
     
  • (1400 ET/1800 GMT) Swedish Central Bank Governor Stefan Ingves participates in a panel discussion on how the digitalization of money affects the role of central banks-Washington, D.C.
     
  • (1740 ET/2140 GMT) Federal Reserve Bank of Atlanta President Raphael W. Bostic gives a speech.
     

FX Beat

DXY: The dollar index rebounded after falling to a 3-week low earlier in the day, ahead of Abe's and Trump's meeting and Federal Reserve officials delivering speeches. The greenback against a basket of currencies trades 0.05 percent up at 89.45, having touched a low of 89.23 earlier, its lowest since Mar. 27. FxWirePro's Hourly Dollar Strength Index stood at 48.93 (Neutral) by 1000 GMT.

EUR/USD: The euro eased after rising to a 3-week high above the 1.2400 handle on receding worries about more U.S. strikes in Syria revived risk sentiment. However, weaker-than-expected Eurozone ZEW Survey- Economic Sentiment index, which fell to 1.9 in April from 13.4 in March, missing estimates of 13.4 weighed heavily on the major. The European currency traded 0.1 percent down at 1.2365, having touched a high of 1.2413 earlier, its highest since Mar 28. FxWirePro's Hourly Euro Strength Index stood at 31.54 (Neutral) by 1000 GMT. Immediate resistance is located at 1.2421 (Mar. 28 High), a break above targets 1.2476 (Mar. 27 High). On the downside, support is seen at 1.2353 (5-DMA), a break below could drag it lower 1.2260 (Apr. 6 Low).

USD/JPY: The dollar tumbled to a 5-day low as U.S. President Donald Trump's comments about China and Russia trying to devalue their currencies this week weighed on investor sentiment. Investors now brace for a meeting between Trump and Japanese Prime Minister Shinzo Abe on Tuesday and Wednesday. The major was trading 0.05 percent down at 107.07, having hit a high of 107.78 on Friday, its highest since Feb. 21. FxWirePro's Hourly Yen Strength Index stood at -17.66 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. building permits, housing starts, industrial production and FOMC members' speech. Immediate resistance is located at 107.90 (Feb. 21 High), a break above targets 108.50. On the downside, support is seen at 106.77 (Apr. 6 Low), a break below could take it lower 106.26 (Mar. 29 Low).

GBP/USD: Sterling slumped after rising to its highest level since Brexit referendum in June 2016 as Britain's wages rose less quickly than inflation despite unemployment falling to its lowest rate since 1975. The economy's wages in the three months to February rose by 2.8 percent, unchanged from the growth rate in the three months to January. The British pound traded 0.1 percent down at 1.4319, having hit a high of 1.4376, it’s highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 111.23 (Highly Bullish) by 1000 GMT. Immediate resistance is located at 1.4380, a break above could take it near 1.4420. On the downside, support is seen at 1.4231 (5-DMA), a break below targets 1.4150 (10-DMA). Against the euro, the pound was trading 0.05 percent down at 86.37 pence, having hit a high of 86.27 pence earlier, it’s highest since July 2017.

USD/CHF: The Swiss franc eased after rising for two straight sessions, amid receding worries about more U.S. strikes in Syria. Moreover, solid Chinese economic data revived risk sentiment. The major trades 0.2 percent up at 0.9615, having touched a high of 0.9656 on Thursday, it’s highest since Apr. 6. FxWirePro's Hourly Swiss Franc Strength Index stood at -36.15 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9684 (Jan 15 High) and any break above will take the pair to next level till 0.9748 (Dec 29 High). The near-term support is around 0.9553 (21-DMA) and any close below that level will drag it till 0.9500.

Equities Recap

European shares rose in early trade as investor attention shifted to the first-quarter earnings season and merger& acquisition activities, while greenback rebounded from 3-week lows on easing U.S.-China trade tensions.

The pan-European STOXX 600 index rallied 0.4 percent to 379.33 points, while the FTSEurofirst 300 index advanced 0.5 percent to 1,487.32 points.

Britain's FTSE 100 trades 0.3 percent up at 7,218.01 points, while mid-cap FTSE 250 gained 0.3 percent to 19,819.32 points.

Germany's DAX rose 0.9 percent at 12,504.93 points; France's CAC 40 trades 0.5 percent higher at 5,339.65 points.

Commodities Recap

Crude oil prices declined, extending previous session losses, amid growing concern over the potential for disruptions to crude supply, especially in the Middle East. International benchmark Brent crude was trading 0.1 percent down at $71.43 per barrel by 1025 GMT, having hit a high of $73.05 on Wednesday, its highest since Nov. 2014. U.S. West Texas Intermediate was trading 0.1 percent up at $66.26 a barrel, after rising as high as $67.42 on Wednesday, its highest since Nov. 2014.

Gold prices nudged lower as the U.S. dollar retreated from its weakest level in about three-weeks, as worries over U.S.-China trade tensions receded. Spot gold eased 0.3 percent to $1,342.29 an ounce by 1027 GMT, having hit a high of $1,365.16 an ounce on Wednesday, its highest since Jan. 25. U.S. gold futures were steady at $1,350.60 an ounce.

Treasuries Recap

The U.S. Treasuries traded tad lower as investors wait to watch the country’s industrial production for the month of March, scheduled to be released today 13:15GMT. The yield on the benchmark 10-year Treasuries rose 1/2 basis point to 2.83 percent, the super-long 30-year bond yields hovered around 3.03 percent and the yield on the short-term 2-year traded tad higher at 2.38 percent.

The UK gilts steadied after the country’s employment report for the month of February showcased mixed results as well, with the average earnings index coming in at 2.8 percent, lower than market expectations of 3.0 percent, compared to 2.8 percent in January. The yield on the benchmark 10-year gilts, remained tad higher at 1.46 percent, the super-long 30-year bond yields rose a little over 1/2 basis point to 1.84 percent and the yield on the short-term 2-year traded nearly flat at 0.91 percent.

The German bunds traded nearly flat after the country’s ZEW economic sentiment index for the month April disappointed market sentiments, coming in worse than what had been anticipated, at -8.2, vs consensus estimates of -0.8, from 5.1 in March. The German 10-year bond yields, which move inversely to its price, loitered around 0.52 percent, the yield on 30-year note edged negligibly lower to 1.19 percent and the yield on short-term 2-year fell 1 basis point to -0.56 percent.

The New Zealand government bonds ended Tuesday’s session on a tad higher note even as investors expect to see a rise in the country’s consumer price inflation (CPI)  for the first quarter of this year, scheduled to be released on April 18 by 22:45GMT. The yield on New Zealand’s benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 2.84 percent, the yield on the long-term 20-year note also dipped 1/2 basis point to 3.43 percent and the yield on short-term 2-year too closed 1/2 basis point lower at 1.95 percent.

The Japanese 10-year government bond yields slumped over 60 percent in just two months, from 0.102 to 0.04 pips and the Bank of Japan (BoJ) seems in no mood to hint at any exit plan from the current quantitative easing to keep the debt market elevated. However as of Tuesday, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 0.04 percent, the yield on the long-term 30-year note nearly steadied at 0.70 percent and the yield on short-term 2-year remained flat at -0.15 percent.

The Australian government bonds slumped after the Reserve Bank of Australia (RBA) April meeting minutes confirmed the board members believe next policy move likely to be an interest rate hike. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 2 basis points to 2.762 percent, the yield on the long-term 30-year Note climbed 1-1/2 basis points to 3.356 percent and the yield on short-term 2-year also surged 2-1/2 basis points to 2.123 percent.

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