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Europe Roundup: Sterling steadies amid ongoing Brexit fears, euro slumps despite German economy gaining momentum, European shares plunge - Wednesday, May 15th, 2019

Market Roundup

  • EUR/USD -0.03%, USD/JPY -0.25%, GBP/USD -0.01%, EUR/GBP -0.01%
  • DXY -0.01%, DAX -0.50%, FTSE -0.11%, Brent -0.72%, Gold 0.11%
  • EZ Q1 GDP Flash Estimate YY, 1.2%, 1.2% f'cast, 1.2% prev
  • EZ Q1 GDP Flash Estimate QQ, 0.4%, 0.4% f'cast, 0.4% prev
  • EZ Q1 Employment Flash YY, 1.3%, 1.2% f'cast, 1.3% prev
  • Germany Q1 GDP Flash YY NSA, 0.6%, 0.7% f'cast, 0.9% prev
  • Germany Q1 GDP Flash QQ NSA, 0.4%, 0.4% f'cast, 0.0% prev
  • France Apr CPI (EU Nom) Final YY, 1.5%, 1.4% f'cast, 1.4% prev
  • No easy options for China as trade war, U.S. pressure bite
  • China's retail sales growth slumps to 16-year low as trade war risks rise

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Commerce Department is expected to report that retail sales edged up 0.2 percent in April after advancing 1.6 percent in March. While excluding autos, retail sales are likely to have gained 0.7 percent, after surging 1.2 percent in the previous month.
  • (0830 ET/1230 GMT) The Federal Reserve Bank of New York is expected to report that NY State manufacturing activity index in eased to 8.5 percent in May after rising to 10.1 percent in April.
  • (0830 ET/1230 GMT) Statistics Canada is expected to report that the annual inflation rate increased 2.0 percent in April from 1.9 percent in March.
  • (0915 ET/1315 GMT) The Federal Reserve is likely to report that industrial production rose 0.2 percent in April after decreasing 0.1 in the prior month
  • (0915 ET/1315 GMT) The Federal Reserve Board is expected to report that capacity utilization edged down to 78.7 percent in April from 78.8 percent in March.
  • (1000 ET/1400 GMT) The U.S. Commerce Department is expected to report that business inventories remained flat in March, after rising 0.3 percent in February.
  • (1000 ET/1400 GMT) The National Association of Home Builders (NAHB) is expected to report that the U.S. Housing Market Index rose to 64 in May after posting an increase of 63 in April.
  • (1100 ET/1500 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending May 10.

Key Events Ahead

  • (0400 ET/0800 GMT) ECB Governing Council member Philip Lane speaks on "The Euro at 20" in Tallinn
  • (0830 ET/1230 GMT) German Economy Minister Peter Altmaier speaks at a banking congress in Berlin
  • (0930 ET/1330 GMT) Federal Reserve Vice Chair for Supervision Randal Quarles testifies on "Supervision and Regulation" before the Senate Banking Committee in Washington
  • (1015 ET/1415 GMT) ECB board member Benoit Coeure speaks with the Finance Committee of the Assemblee nationale in Paris
  • (1230 ET/1630 GMT) ECB Chief Economist Peter Praet speaks at the Steptoe Brussels Open Conference in Brussels
  • (1300 ET/1700 GMT) Federal Reserve Bank of Richmond President Thomas Barkin participates in discussion before the New York Association for Business Economics in New York

FX Beat

DXY: The dollar index rallied to a 6-day peak as Washington intensified pressure on Beijing to correct trade imbalances in a challenge to China's state-led economic model. The greenback against a basket of currencies traded 0.05 percent up at 97.57, having touched a low of 97.03 on Monday, its lowest since May 1. FxWirePro's Hourly Dollar Strength Index stood at 120.41 (Highly Bullish) by 1000 GMT.

EUR/USD: The euro plunged to a near 1-week low after Italy's deputy prime minister said Rome was ready to break EU fiscal rules. Investors appear to have ignored data from Germany that showed the economy returned to growth in the first quarter, as householders spent more freely and construction activity gained momentum. The European currency traded 0.05 percent down at 1.1199, having touched a high of 1.1263 on Monday, its highest since May 1. FxWirePro's Hourly Euro Strength Index stood at -59.31 (Bearish) by 1000 GMT. Immediate resistance is located at 1.1262 (April 22 High), a break above targets 1.1304 (April 18 High). On the downside, support is seen at 1.1182 (May 8 Low) a break below could drag it till 1.1140 (April 24 Low).

USD/JPY: The dollar declined, reversing some of its previous session gains, amid an escalating dispute between Washington and Beijing since last week. Additionally, China's surprisingly weaker growth in retail sales and industrial output for April added pressure on Beijing to roll out more stimulus as the trade war with the United States intensified. The major was trading 0.2 percent down at 109.39, having hit a low of 109.01 on Monday, its lowest since Feb. 1. FxWirePro's Hourly Yen Strength Index stood at 105.07 (Highly Bullish) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. retail sales, industrial production, capacity utilization, housing market index and a speech by Fed's Quarles. Immediate resistance is located at 110.04 (38.2% retracement of 111.68 and 109.01), a break above targets 110.67 (61.8% retracement). On the downside, support is seen at 109.01 (May 14 Low), a break below could take it lower at 108.49 (Jan. 31 Low).

GBP/USD: Sterling steadied after falling to a near 3-week low in the prior session after PM May's spokesman stated that she planned to put forward her thrice-rejected Brexit deal in the week beginning June 3, to try to secure an agreement before lawmakers go on summer holiday. The major traded flat at 1.2905, having hit a low of 1.2896 on Tuesday; it’s lowest since Apr. 26. FxWirePro's Hourly Sterling Strength Index stood at -133.62 (Highly Bearish) 1000 GMT. Immediate resistance is located at 1.2963 (Apr. 24 High), a break above could take it near 1.3049 (Apr. 30 High). On the downside, support is seen at 1.2865 (Feb. 7 Low), a break below targets 1.2854 (Apr. 25 Low). Against the euro, the pound was trading 0.1 percent down at 86.73 pence, having hit a low of 86.91 on Tuesday, it’s lowest since Mar. 21.

USD/CHF: The Swiss franc surged, hovering towards a 4-week peak hit earlier in the week, as weak China data and fresh Italian debt woes cast a shadow over global markets. The major trades 0.1 percent down at 1.0074, having touched a low of 1.0049 on Monday; it’s lowest since Apr. 16. FxWirePro's Hourly Swiss Franc Strength Index stood at 66.65 (Bullish) by 1000 GMT. On the higher side, near-term resistance is around 1.0159 (Apr. 18 High) and any break above will take the pair to next level till 1.0196 (May 6 High). The near-term support is around 1.0032 (Apr. 16 Low), and any close below that level will drag it till 1.0000.

Equities Recap

European shares slumped, weighed down by losses in Italian shares, while sterling steadied amid fears PM May's Brexit deal will be voted down again.

The pan-European STOXX 600 index tumbled 0.3 percent at 375.25 points, while the FTSEurofirst 300 index declined 0.3 percent to 1,476.33 points.

Britain's FTSE 100 trades 0.05 percent up at 7,243.00 points, while mid-cap FTSE 250 eased 0.05 to 19,363.59 points.

Germany's DAX fell 0.5 percent at 11,934.53 points; France's CAC 40 trades 0.4 percent lower at 5,321.23 points.

Commodities Recap

Crude oil prices declined after data showed a surprise rise in U.S. crude inventories and the U.S.-Chinese trade dispute threatened oil demand, although Middle East tensions limited downside. International benchmark Brent crude was trading 0.3 percent lower at $70.67 per barrel by 1014 GMT, having hit a high of $72.56 on Monday, its highest since Apr, 30. U.S. West Texas Intermediate was trading 0.5 percent down at $61.04 a barrel, after rising as high as $63.32 on Monday, its highest since the May 2.

Gold prices steadied after falling from a 1-month peak hit in the previous session as optimism surrounding trade talks between Washington and Beijing soothed investor concerns. Spot gold was trading 0.1 percent down at $1,297.93 an ounce by 1018 GMT, having touched a high of $1,303.21 on Tuesday, its highest since Apr. 11. U.S. gold futures edged 0.1 percent higher to $1,297.20 an ounce.

Treasuries Recap

The U.S. Treasury yields slumped during the afternoon session, ahead of the country’s retail sales for the month of April, scheduled to be released today by 12:30GMT, besides, a host of speeches by Federal Open Market Committee (FOMC) members – Quarles, and Barkin, shall add further direction to the debt market. The yield on the benchmark 10-year Treasury yield plunged 4-1/2 basis points to 2.375 percent, the super-long 30-year bond yields slumped 3-1/2 basis points to 2.818 percent and the yield on the short-term 2-year also traded 3-1/2 basis points lower at 2.168 percent.

The German bunds jumped during European trading session after investors have largely shrugged-off the rise in the country’s gross domestic product (GDP) for the first quarter of this year, released early this year. The German 10-year bond yields, which move inversely to its price, slumped 3 basis points to -0.101 percent, the yield on 30-year note plunged nearly 4 basis points to 0.536 percent and the yield on short-term 2-year traded 2 basis points down at -0.659 percent.

The Australian government bonds rallied during Asian trading session as trade tensions continued to bother market sentiments, thus pushing them towards safe-haven assets, while the country’s employment report for the month of April, scheduled to be released on May 16 by 01:30GMT, will be closely eyed for further direction in the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1-1/2 basis points to 1.695 percent, the yield on the long-term 30-year bond edged nearly 1 basis point down to 2.332 percent and the yield on short-term 2-year traded 1 basis point lower at 1.285 percent.

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