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Europe Roundup: Sterling slumps on worse-than-expected retail sales, dollar rebounds from 15-month low against the yen, European shares surge - Friday, February 16th, 2018

Market Roundup

  • EUR/USD -0.22 %, USD/JPY 0.04%, GBP/USD -0.23%, EUR/GBP 0.01%
     
  • DXY 0.13%, DAX 0.56%, FTSE 0.68 %, Brent 0.26%, Gold 0.4%
     
  • Germany Wholesale Price Index MM Jan, 0.9%, previous -0.3%
     
  • Germany  Wholesale Price Index YY Jan, 2.0%. previous 1.8%
     
  • Great Britain Retail Sales MM Jan, 0.1%, forecast 0.5%, previous -1.5%
     
  • Great Britain Retail Sales Ex-Fuel MM Jan, 0.1%, forecast 0.6%, previous -1.6%
     
  • Great Britain Retail Sales YY Jan, 1.6%, forecast 2.6%, previous 1.4%
     
  • Great Britain Retail Sales Ex-Fuel YY Jan, 1.5%, forecast 2.5%, previous 1.3%
     
  • ECB sees market volatility contained to stocks: Coeure
     
  • Merkel sees good chance of SPD members backing coalition deal
     
  • UK PM May heads to Berlin to face tough German line on Brexit
     
  • Japan policymakers step up warnings over "one-sided" yen gains
     
  • Japan reappoints Kuroda as BOJ chief, picks reflationist academic as deputy
     
  • Uncertainty reigns in final polls ahead of Italy election
     
  • US oil hits 1-wk high as dollar sags; many Asian markets shut
     
  • Gold hits 3-week high as dollar slides to lowest since 2014
     

Economic Data Ahead

  • (0830 ET/1330 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to 1.234 million units in January from 1.192 million units in December.
     
  • (0830 ET/1330 GMT) The U.S. building permits are likely to have decreased to a 1.300 million-unit pace in January from a 1.302 million-unit pace in December.
     
  • (0830 ET/1330 GMT) The U.S. Labor Department publishes import and export prices index for the month of January. The import prices are likely to have gained 0.6 percent after rising 0.1 percent in December, while exports are expected to have edged up 0.3 percent after falling 0.1 percent in the prior month
     
  • (0830 ET/1330 GMT) Statistics Canada releases manufacturing shipments data for the month of December. Manufacturing sales are likely to have increased 0.2 percent after surging 3.4 percent in November.
     
  • (0830 ET/1330 GMT) The Statistics Canada will report foreign portfolio investment in domestic stocks for the month of December.
     
  • (0830 ET/1330 GMT) The Statistics Canada will release investment in foreign securities figures for the month of December.
     
  • (1000 ET/1500 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index declined to 95.5 in February, after posting a final reading of 95.7 in January.
     
  • (1300 ET/1800 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events

  • No Significant Event Scheduled

FX Beat

DXY: The dollar index rebounded after falling to a 3-year low earlier in the session on concerns that U.S. might pursue a weak dollar strategy. The greenback against a basket of currencies traded 0.05 percent down at 88.58, having touched a low of 88.25, its lowest since Dec. 2014. FxWirePro's Hourly Dollar Strength Index stood at -55.99 (Bearish) by 1000 GMT.

EUR/USD: The euro surged to a 3-year peak after a Reuter’s poll showed the European Central Bank will end its asset purchase programme by the end of the year and then wait six months before raising interest rates. The European currency traded 0.1 percent up at 1.2522, having touched a high of 1.2555 earlier, its highest since Dec 2014. FxWirePro's Hourly Euro Strength Index stood at -3.80 (Neutral) by 1000 GMT. Immediate resistance is located at 1.2570, a break above targets 1.2620. On the downside, support is seen at 1.2369 (5-DMA), a break below could drag it lower 1.2245 (Feb 7 Low).

USD/JPY: The dollar trimmed losses after falling to a 15-month low below the 106.00 handle earlier in the day on growing worries over the U.S. budget deficit which is expected to rise to near $1 trillion in 2019. The major was trading 0.1 percent down at 106.05, having hit a low of 105.55 earlier, its lowest since Nov. 2016. FxWirePro's Hourly Yen Strength Index stood at 25.29 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. building permits, housing starts and export and import index for further momentum. Immediate resistance is located at 106.63 (78.6% retracement of 110.48 and 105.74), a break above targets 107.45 (61.8% retracement). On the downside, support is seen at 105.60, a break below could take it lower 105.30.

GBP/USD: Sterling retreated from an 11-day peak after data showed Britain's retail sales came in weaker-than-expected in January. The economy's retail sales rose at an annualized rate of 1.6 percent, below estimate of 2.6 percent, whole retail sales excluding fuel stood at 1.5 percent y/y, missing forecast of 2.5 percent. The major traded 0.1 percent down at 1.4084, having hit a high of 1.4144 earlier, it’s highest since Feb 5. FxWirePro's Hourly Sterling Strength Index stood at -65.63 (Bearish) by 1000 GMT.  Immediate resistance is located at 1.4150 (Feb 5 High), a break above could take it near 1.4278 (Feb 2 High). On the downside, support is seen at 1.4018 (21-DMA), a break below targets 1.3946 (10-DMA). Against the euro, the pound was trading 0.1 percent down at 88.76 pence, having hit a low of 89.19 pence on Wednesday, it’s lowest since Jan. 12. 

USD/CHF: The Swiss franc rallied to a 2-1/2 year high, as the greenback slipped to a three-year low against a basket of currencies on bearish factors. The major trades 0.1 percent down at 0.9212, having touched a low of 0.9187 earlier, it’s lowest since Jun 2015. FxWirePro's Hourly Swiss Franc Strength Index stood at -8.31 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9275 (61.8% retracement of 0.9406 and 0.9187) and any break above will take the pair to next level till 0.9343 (10-DMA). The near-term support is around 0.9150 and any close below that level will drag it lower 0.9100.

Equities Recap

European shares rose and were set to snap a three-week losing streak, boosted by strength in earnings updates, while the greenback rebounded against a basket of currencies after falling to a 3-year low.

The pan-European STOXX 600 index rallied 0.9 percent to 380.12 points, while the FTSEurofirst 300 index surged 0.9 percent to 1,489.52 points.

Britain's FTSE 100 trades 0.8 percent higher at 7,291.10 points, while mid-cap FTSE 250 gained 0.8 percent to 19,717.92 points.

Germany's DAX rose 0.9 percent at 12,464.29 points; France's CAC 40 trades 0.9 percent up at 5,272.79 points.

Commodities Recap

Crude oil prices rose, extending previous session gains as the dollar slipped to a three-year low, with many Asian markets closed for the Lunar New Year holiday. International benchmark Brent crude was trading 0.6 percent up at $64.83 per barrel by 0952 GMT, having hit a high of $65.12 on Thursday, its highest since Jan. 8. U.S. West Texas Intermediate was trading 0.7 percent up at $61.82 a barrel, after rising as high as $61.87 earlier, its strongest since Jan. 8.

Gold prices edged higher and were heading for their biggest weekly percentage gain in nearly two years, supported by a weaker U.S. dollar and as investors looked to hedge against inflation. Spot gold was 0.5 percent up at $1,360.18 an ounce as of 0955 GMT, after touching its highest level since Jan. 25 at $1,361.61 earlier and was up more than 3 percent this week. U.S. gold futures climbed 0.4 percent to $1,360.90 per ounce on Friday.

Treasuries Recap

The UK gilts jumped after the country’s retail sales for the month of January, missed market expectations, albeit registering figures higher than the ones seen in December. The yield on the benchmark 10-year gilts, slumped 3 basis points to 1.61 percent, the super-long 30-year bond yields plunged 3-1/2 basis points to 2.00 percent while the yield on the short-term 2-year traded 2 basis points lower at 0.68 percent

The German bunds remained flat in a muted trading session that witnessed the least participation from investors. The German 10-year bond yields, which move inversely to its price, fell nearly 1-1/2 basis points to 0.74 percent, the yield on 30-year note also slid 1-1/2 basis points to 1.38 percent and the yield on short-term 2-year traded tad lower at -0.50 percent.

The Japanese government bonds rose during early Asian session amid a silent trading day that witnessed no data of any primary economic significance, following a shutdown in major Asian markets on the occasion of Chinese New Year holidays. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 0.06 percent, the yield on the long-term 30-year note hovered around 0.78 percent and the yield on short-term 2-year steadied tad lower at -0.15 percent.

The Australian bonds slumped on the last trading day of the week following weakness in the U.S. Treasuries, which hovers around 4-year high. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 2.904 percent, the yield on the long-term 20-year note also surged nearly 1 basis point to 3.313 percent and the yield on short-term 3-year up 1 basis point to 2.143 percent.

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