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Europe Roundup: Swiss franc, yen at 5-week lows as risk appetite improves, greenback gains as U.S. Treasury yields surge, sterling off 6-week peak amid persisting political uncertainty - Tuesday, September 10th, 2019

Market Roundup

  • Germany's booming construction sector lifts sales forecast
  • UK pay growth hits 4% for the first time since 2008 
  • Germany's retailers uphold 2019 sales growth forecast of 2%
  • Oil rises on expectations of extended output cuts

Economic Data Ahead

  • (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of August. The indicator is expected to decline at a seasonally adjusted annualized rate to 215,000 after increasing 222,000 in the previous month.
  • (0830 ET/1230 GMT) Statistics Canada is likely to report that building permits increased 2.3 percent in July after easing 3.7 percent in June.
  • (1000 ET/1400 GMT) The U.S. Labor Department releases Job Openings and Labor Turnover Survey (JOLTS) report for the month of July. The report is expected to show job openings declined to 7.311 million from 7.348 million in June.
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • No significant events scheduled

FX Beat

DXY: The dollar index rose after U.S. Treasury Secretary Steven Mnuchin's comments pushed U.S. benchmark 10-year Treasuries to a three-week high. The greenback against a basket of currencies traded 0.1 percent up at 98.43, having touched a low of 98.01 on Friday, its lowest since August 28.

EUR/USD: The euro declined amid growing caution over the extent to which the European Central Bank will add stimulus to boost an ailing economy this week. On Thursday, the European Central Bank is widely expected to deliver a cut to interest rates and point to further bond-buying stimulus. The European currency traded 0.1 percent down at 1.1039, having touched a high of 1.1084 on Thursday, its highest since August 29. Immediate resistance is located at 1.1075 (21-DMA), a break above targets 1.1116 (August 27 High). On the downside, support is seen at 1.1000, a break below could drag it below 1.0963 (August 30 High).

USD/JPY: The dollar surged to a 5-1/2 week peak against the safe-haven Japanese yen, boosted by a report of German stimulus plans, diminishing chances of a no-deal Brexit and hopes of a trade war breakthrough. However, weak Chinese economic data indicating factory-gate prices shrank at their fastest pace since August limited the upside. The major was trading 0.1 percent up at 107.34, having hit a high of 107.49 earlier, its highest since August 2. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. JOLTS job opening data. Immediate resistance is located at 107.56 (August 2 High), a break above targets 108.00. On the downside, support is seen at 106.67 (5-DMA), a break below could take it lower at 105.73 (September 3 Low).

GBP/USD: Sterling eased from a 6-week peak hit in the previous session amid expectations of more political uncertainty after John Bercow, Speaker of Britain's House of Commons, announced that he would be standing down. However, the British currency trimmed losses after data showed Britain’s workers received their biggest pay rises in more than 11 years this summer as the unemployment rate fell back to its lowest since the mid-1970s. The major traded 0.1 percent down at 1.2331, having hit a high of 1.2384 on Monday, it’s highest since July 26. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2400, a break above could take it near 1.2456 (July 17 High). On the downside, support is seen at 1.2258 (5-DMA), a break below targets 1.2218 (10-DMA). Against the euro, the pound was trading 0.1percent down at 89.53 pence, having hit a high of 89.04 on Monday, it’s highest since July 25.

USD/CHF: The Swiss franc fell to a near 6-week peak as a rebound in government bond yields prompted some investors to cut back on bearish bets on the global economy. The major trades 0.1 percent down at 0.9908, having touched a high of 0.9931 earlier, it’s highest since August 1. On the higher side, near-term resistance is around 0.9949 (July 31 High) and any break above will take the pair to next level till 0.9975 (August 1 High). The near-term support is around 0.9864 (5-DMA), and any close below that level will drag it till 0.9813 (August 22 Low).

Equities Recap

European shares tumbled as investors remained on the sidelines ahead of the European Central Bank’s monetary policy meeting later this week.

The pan-European STOXX 600 index eased 0.5 percent at 384.33 points, while the FTSEurofirst 300 declined 0.5 percent to 1,512.08 points.

Britain's FTSE 100 trades 0.2 percent down at 7,223.66 points, while mid-cap FTSE 250 fell 0.05 to 19,667.45 points.

Germany's DAX slumped 0.1 percent at 12,209.74 points; France's CAC 40 trades 0.4 percent lower at 5,564.95 points.

Commodities Recap

Crude oil prices rose to their highest levels in almost six weeks on optimism that OPEC and other producing countries may agree to extend output cuts to support prices.  International benchmark Brent crude was trading 0.3 percent higher at $62.87 per barrel by 1030 GMT, having hit a high of $63.11 earlier, its highest since August 1. U.S. West Texas Intermediate was trading 0.3 percent up at $58.16 a barrel, after rising as high as $58.36 earlier, its highest since July 31.

Gold prices declined for a fourth straight session as risk appetite improved on hopes for global stimulus and expectations of progress in the U.S.-China trade talks. Spot gold was trading 0.3 percent down at $1,493.85 per ounce by 1032 GMT, having touched a low of $1,486.34 earlier, its lowest since August 13. U.S. gold futures fell 0.5 percent to $1,503.30 per ounce.

Treasuries Recap

The benchmark U.S. Treasury yields rose to three-week highs.

The German 30-year benchmark bond yield briefly broke into positive territory for the first time in more than a month. The 30-year yield rose as much as 4 basis points to 0.01 percent, its highest level since early August,

The Japanese government bond prices slipped across the board, amid an improvement in risk appetite. The five-year JGB yield rose 3 basis points to minus 0.320 percent. The benchmark 10-year yield climbed 3.5 bps to minus 0.225 percent, pulling away from a three-year low of minus 0.295 percent set on Friday. The 30-year yield was 5.5 bps higher at 0.275 percent.

The benchmark 10-year Australian government bond futures fell 6.25 ticks to 98.90, approaching a five-week low.

  • Market Data

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