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Europe Roundup: Sterling rebounds on Brexit deal hopes, euro gains as EZ current account surplus widens, European shares ease on EU's budget warning - Friday, October 19th, 2018

Market Roundup

  • EUR/USD 0.12%, USD/JPY 0.2%, GBP/USD 0.21%, EUR/GBP -0.09%
     
  • DXY 0.02%, DAX -0.75%, FTSE -0.05%, Brent 0.63%, Gold 0.28%
     
  • EZ Aug Current Account SA EUR, 23.9B, 19.5B revised
     
  • Italy's Salvini tells 5-Star to end budget squabbles
     
  • Italy bond selloff accelerates on EU's budget warning
     
  • BOJ's Kuroda warns of risks from protectionism, volatile markets
     
  • EU's Barnier says Brexit deal 90 pct done, but Ireland issue could derail it
     
  • Sterling gains after EU's Barnier says Brexit deal 90 pct done
     

Economic Data Ahead

  • (0830 ET/1230 GMT) Statistics Canada is expected to report that retail sales remained unchanged at 0.3 percent in August, while excluding autos, retail sales are likely to have risen 0.2 percent, after advancing 0.9 percent in the previous month.
     
  • (0830 ET/1230 GMT) The Statistics Canada is expected to report that annual inflation rate declined to 2.7 percent in September from 2.8 percent in August.
     
  • (1000 ET/1400 GMT) National Association of Realtors is likely to show that U.S. existing home sales declined 0.7 percent to 5.30 million units in September,  compared with 5.34 million units in August.
     
  • (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count. 
     

Key Events Ahead

  • (1130 ET/1530 GMT) BoE Governor Mark Carney gives a Speech at the Economic Club of New York
     
  • (1200 ET/1600 GMT) Fed Atlanta President Raphael Bostic participates in armchair discussion on the economic outlook in Macon
     
  • (1245 ET/1645 GMT) Federal Reserve Bank of Dallas President Robert Kaplan participates in moderated question-and-answer session before a Shadow Open Market Committee/Manhattan Institute event, "10 Years After the Crisis: the State of Monetary and Fiscal Policy," in New York.
     

FX Beat

DXY: The dollar index nudged lower after rising to an over 1-week peak earlier in the day on recent upbeat data that supported expectations of a tighter U.S. monetary policy.  The greenback against a basket of currencies trades 0.2 percent down at 95.84, having touched a high of 96.09 earlier, its highest since October 9. FxWirePro's Hourly Dollar Strength Index stood at 47.02 (Neutral) by 1000 GMT.

EUR/USD: The euro rebounded from a 9-day low after the European Central Bank stated that euro zone's current account surplus widened to 24 billion euros in August from 19 billion euros the previous month as the trade surplus also increased. The European currency traded 0.1 percent up at 1.1461, having touched a low of 1.1433 earlier, its lowest since October 9. FxWirePro's Hourly Euro Strength Index stood at -32.76 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1503 (October 9 High), a break above targets 1.1545 (October 10 High). On the downside, support is seen at 1.1432 (October 9 Low), a break below could drag it till 1.1400.

USD/JPY: The dollar gained after a Reuters survey showed the Federal Reserve will raise rates three times next year compared with just two in a poll taken only a month ago. The major was trading 0.2 percent up at 112.38, having hit a high of 112.73 on Thursday, its highest since October 10. FxWirePro's Hourly Yen Strength Index stood at 50.67 (Bullish) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. existing home sales and FOMC members’ speech. Immediate resistance is located at 112.87 (September 21 High), a break above targets 113.13 (September 26 High). On the downside, support is seen at 112.04 (September 20 Low), a break below could take it lower 111.62 (September 15 Low)

GBP/USD: Sterling rebounded from a 2-week low after Britain's government recorded a smaller budget deficit than expected in September. The economy's deficit in September came in at 4.123 billion pounds, compared with 4.958 billion pounds a year ago, below a forecast of 4.5 billion pounds. Moreover, comments from EU negotiator Michel Barnier, citing that a Brexit deal with the United Kingdom was 90 percent done bolstered investor sentiment. The major traded 0.1 percent up at 1.3030, having hit a low of 1.3011 earlier; it’s lowest since October 4. FxWirePro's Hourly Sterling Strength Index stood at -150.11 (Highly Bearish) 1000 GMT. Immediate resistance is located at 1.3090 (September 28 High), a break above could take it near 1.3150 (October 9 High). On the downside, support is seen at 1.2979 (September 12 Low), a break below targets 1.2941 (October 2 Low). Against the euro, the pound was trading flat at 87.99 pence, having hit a low of 88.25 on Monday, it’s lowest since October 5.

USD/CHF: The Swiss franc slumped to an over 2-month low as EU-Brexit deal hopes eased geopolitical tensions. The major trades flat at 0.9958, having touched a high of 0.9976 earlier, it’s highest since August 15. FxWirePro's Hourly Swiss Franc Strength Index stood at -12.11 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9984 (August 6 High) and any break above will take the pair to next level till 1.0010 (July 20 High). The near-term support is around 0.9881 (October 12 Low) and any close below that level will drag it till 0.9842 (August 21 Low).

Equities Recap

European shares plunged as a showdown between Italy's populist government and the European Union weighed heavily on investor sentiment.

The pan-European STOXX 600 index slumped 0.3 percent at 360.50 points, while the FTSEurofirst 300 index declined 0.2 percent to 1,417.36 points.

Britain's FTSE 100 trades 0.2 percent up at 7,039.44 points, while mid-cap FTSE 250 eased 0.7 percent to 18,826.81 points.

Germany's DAX fell 0.7 percent at 11,509.45 points; France's CAC 40 trades 0.5 percent lower at 5,059.21 points.

Commodities Recap

Crude oil prices surged on signs of surging demand in China, however, the market was heading for a second week of losses on rising U.S. inventories.  International benchmark Brent crude was trading 0.6 percent up at $79.80 per barrel by 1014 GMT, having hit a low of $78.67 on Thursday, its lowest since September 21. U.S. West Texas Intermediate was trading 0.4 percent up at $68.85 a barrel, after falling as low as $68.50 on Thursday, its lowest since September 14.

Gold prices rallied and were on track for a third straight weekly gain as renewed political and economic concerns including China's weak growth weighed on investor sentiment. Spot gold was 0.2 percent up at $1,228.31 per ounce as of 1025 GMT, having hit a high of $1233.14 on Monday, its highest since July 26 and was up about 0.7 percent for the week. U.S. gold futures were up 0.1 percent at $1,230.9 an ounce.

Treasuries Recap

Italy's 10-year and 30-year bond yields hit their highest levels since early 2014 after the European Union warned of rules breaches in Italy's draft budget. Hungarian bond yields rose 3-4 basis points along the curve, with 10-year papers trading at 3.8 percent, while Poland's 10-year yield rose 8 basis points to 3.28 percent,

The Japanese government bonds remained mixed on the last trading day of the week as investors have largely shrugged-off the slight increase in the country’s national core consumer price inflation (CPI), released earlier today. The yield on the benchmark 10-year JGB note, which moves inversely to its price, jumped 15 basis points to 0.150 percent, the yield on the long-term 30-year note hovered around 0.911 percent and the yield on short-term 2-year slumped 11-1/2 basis points to -0.116 percent.

The Australian government bond yields slumped during Asian session tracking the after-effects of the country’s lower-than-expected employment change for the month of September. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 5 basis points to 2.693 percent, the yield on the long-term 30-year bond also plunged 5 basis points to 3.165 percent and the yield on short-term 2-year traded 3-1/2 basis points lower at 2.038 percent.

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