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Europe Roundup: Sterling rebounds from 1-1/2 week low, dollar rallies against yen on renewed U.S.-China deal hopes, investors eye Fed Powell's speech - Monday, November 25th, 2019

Market Roundup

  • German business morale rises in November
     
  • Gold eases on trade deal hopes
     
  • Pound rallies as Tory election lead promises end to political uncertainty
     
  • Markets focus on U.S. Federal Reserve Chairman Jerome Powell
     

Economic Data Ahead

  • (0830 ET/1330 GMT) Statistics Canada will release its wholesale trade figures for the month of September. The indicator is expected to have increased by 0.4 percent, after unexpectedly slumping 1.2 percent in August.
     
  • (0830 ET/1330 GMT) The Federal Reserve Bank of Chicago will release its Chicago Fed National Activity Index (CFNAI) for the month of October. The index stood at -0.45 in the prior month.
     
  • (1030 ET/1530 GMT) The Dallas Fed releases its Manufacturing Business Index for the month of November. The index posted a decline of 5.1 percent in the previous month.
     

Key Events Ahead

  • (1300 ET/1800 GMT) European Central Bank Executive Board member Philip Richard Lane's speech
     
  • (1300 ET/1800 GMT) European Central Bank Executive Board member Yves Mersch gives a speech
     

FX Beat

DXY: The dollar index rallied to an 11-day peak as markets focus on speeches by European Central Bank’s Chief Economist Philip Lane and U.S. Federal Reserve Chairman Jerome Powell. The greenback against a basket of currencies traded up at 98.30, having touched a high of 98.31 earlier, its highest since November 14.

EUR/USD: The euro plunged to a 1-1/2 week low after Germany’s Ifo institute said that German manufacturing sector was still stuck in recession. The European currency traded down at 1.1014, having touched a low of 1.1010 earlier, its lowest since November 14. Immediate resistance is located at 1.1059 (5-DMA), a break above targets 1.1091. On the downside, support is seen at 1.1002, a break below could drag it below 1.0966.

USD/JPY: The dollar rallied to a 1-week peak on the likelihood of a trade agreement between the United States and China by year-end. The major was trading 0.2 percent up at 108.84, having hit a low of 108.27 on Thursday, its lowest since November 14. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. Chicago Fed National Activity Index and Dallas Fed Manufacturing Business Index. Immediate resistance is located at 109.03, a break above targets 109.25 (November 5 High). On the downside, support is seen at 108.36, a break below could take it near at 108.03.

GBP/USD: Sterling bounced from a 1-1/2 week low as opinion polls continued to show the Conservative Party to be favourite to win the December 12 election with a pledge to implement Brexit and halt 3-1/2-years of political uncertainty. On Sunday, Prime Minister Boris Johnson unveiled an election manifesto that promised more public sector spending and no further extensions to the protracted departure from the EU. The major traded at 0.4 percent up 1.2881, having hit a low of 1.2829 on Friday, it’s lowest since November 13. Investors’ attention will remain on the development surrounding the general elections, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2906 (5-DMA), a break above could take it near 1.2942. On the downside, support is seen at 1.2815, a break below targets 1.2768. Against the euro, the pound was trading 0.4 percent down at 85.49 pence, having hit a low of 86.05 on Friday, it’s lowest since Nov. 12.

USD/CHF: The Swiss franc tumbled to 1-1/2 month low as optimism that Washington and Beijing would be able to settle their trade war lifted investor sentiment. The major trades at 0.05 percent up at 0.9975, having touched a high of 0.9982 earlier, it’s highest since October 16. On the higher side, near-term resistance is around 0.9995 and any break above will take the pair to the next level till 1.0027. The near-term support is around 0.9957, and any close below that level will drag it till 0.9922 (5-DMA).

Equities Recap

European shares rallied to a 1-week high boosted by optimism that Washington and Beijing would be able to settle their trade dispute.

The pan-European STOXX 600 index advanced 0.8 percent at 407.04 points, while the FTSEurofirst 300 rallied 0.8 percent to 1,594.17 points.

Britain's FTSE 100 trades 0.7 percent up at 7,378.70 points, while mid-cap FTSE 250 rose 0.3 to 20,542.91 points.

Germany's DAX surged 0.5 percent at 13,230.41 points; France's CAC 40 trades 0.5 percent higher at 5,924.50 points.

Commodities Recap

Crude oil prices declined as positive comments from the United States and China rekindled hopes in global markets that both the economies could soon sign an interim deal to end their trade war. International benchmark Brent crude was trading 0.2 percent down at $63.35 per barrel by 1018 GMT, having hit a high of $64.25 on Friday, its highest since September 24. U.S. West Texas Intermediate was trading 0.3 percent lower at $57.70 a barrel, after rising as high as $58.71 on Friday, its highest since September 23.

Gold prices plunged to a 1-week low after the United States and China expressed willingness to sign an initial trade deal by the year-end, lifting demand for riskier assets. Spot gold was trading 0.2 percent down to $1,459.38 per ounce by 1029 GMT, having touched a low of $1456.36 earlier, its lowest since Nov. 18. U.S. gold futures were down 0.2 percent to $1,460.80.

Treasuries Recap

The Eurozone bond yields rose slightly in early London trading on positive trade war developments. The German benchmark 10-year bond yield was up two basis points, recovering from its biggest intraday fall of the week last Friday. The spread between German and Portuguese 10-year yields, which widened to its most in two months last Friday, started to narrow again, down to 75.1 from highs of 77.5.

The prices for most Japanese government bonds rose after the Bank of Japan conducted regular buying operations for monetary policy. The Benchmark 10-year JGB futures rose 0.13 point to 153.29. The 10-year JGB yield fell 1 basis point to minus 0.095 percent, while the 20-year JGB yield fell 0.5 basis point to 0.270 percent. The two-year JGB yield fell 1 basis point to minus 0.200 percent. At the super-long end of the yield curve, the 30-year JGB yield rose 1 basis point to 0.435 percent, while the 40-year JGB yield rose 1 basis point to 0.465percent.

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