Europe roundup: Sterling eases as UK’s trade deficit widens, Dollar hits 6-day low against Yen after BOJ tapering talk, European shares slump – Wednesday, January 10th, 2018
- EUR/USD 0.45%, USD/JPY -1.09%, GBP/USD flat, EUR/GBP 0.45%
- DXY -0.48%, DAX -0.95%, FTSE -0.18%, Brent 0.39%, Gold 0.64%
- China officials recommend slowing or halting U.S. bond purchases –Bbg
- Great Britain Manufacturing Output MM Nov, 0.4%, 0.3% forecast, 0.3% previous
- Great Britain Manufacturing Output YY Nov, 3.5%, 2.8% forecast, 4.7% previous
- Great Britain Goods Trade Balance GBP Nov, -12.23B, 10.70B forecast, -11.68B previous
- Great Britain Industrial Output YY Nov, 2.5%, 1.8% forecast, 3.6% previous
- Great Britain Construction O/P Volume YY Nov, 0.4%, -1.1% forecast, 1.3% previous
- France Industrial Output MM Nov, -0.5%, -0.5% forecast, 1.9% previous
- German yields at highest since Oct ECB meeting as supply cranks up
- Steep rise in German construction bodes well for 2017 growth
- EU needs united approach on foreign investment to gain China’s respect-Macron
- US oil prices hit highest since 2014, but analysts warn of overheated market
- Gold inches down on higher US Treasury yields
Economic Data Ahead
- (0830 ET/1330 GMT) The U.S. Labor Department publishes import and export prices index for the month of December. The import prices are likely to have gained 0.5 percent after rising 0.7 percent in November, while exports are expected to have risen 0.3 percent after increasing 0.5 percent in the prior month.
- (0830 ET/1330 GMT) The Statistics Canada is likely to report that building permits dropped 0.3 percent in November, compared with a 3.5 percent increase in October.
- (1000 ET/1500 GMT) The U.S. Census Bureau is likely to report that wholesale inventories rose 0.7 percent in November after posting a similar gain in the prior month.
- (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending January 5.
- (1850 ET/2350 GMT) Japan releases Foreign Exchange Reserves report for the month of December.
Key Events Ahead
- (0900 ET/1400 GMT) Chicago Fed chief Charles Evans participates in a moderated discussion on current economic conditions and monetary policy before the Lake Forest-Lake Bluff Rotary Club 2018 Economic Breakfast, in Lake Forest, Illinois.
- (0910 ET/1410 GMT) Dallas Federal Reserve President Robert Kaplan participates in a moderated discussion on Weitzman Annual Retail Forecast, in Dallas.
- (1015 ET/1515 GMT) Dallas Fed President Robert Kaplan will participate in a moderated discussion at the Urban Land Institute Emerging Trends Breakfast.
- (1145 ET/1645 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.455 bn)
- (1330 ET/1830 GMT) Federal Reserve Bank of St. Louis President James Bullard gives a presentation on the U.S. economy and monetary policy, in St. Louis.
DXY: The dollar index tumbled from a near 2-week peak hit in the previous session as other central banks’ moved towards normalizing monetary policy. The greenback against a basket of currencies traded 0.5 percent down at 92.09, having touched a high of 92.64 in the previous session, its highest since Dec. 29.
EUR/USD: The euro consolidated near a 2-week low as the ongoing upsurge in the U.S. Treasury bond yields underpinned the dollar demand. The 10-year bond yield rose to a 10-month high, as market participants seemed convinced that the Fed would continue with its gradual monetary policy tightening cycle through 2018. The European currency traded flat at 1.1935, having touched a low of 1.1916 the day before, its lowest since Dec. 28. Immediate resistance is located at 1.1992 (10-DMA), a break above targets 1.2052. On the downside, support is seen at 1.1916 (Previous Session Low), a break below could drag it lower 1.1898 (21-DMA).
USD/JPY: The dollar slumped to a 6-week low below the 112.00 handle against the yen after the Bank of Japan’s move to trim Japanese government bond purchases on Tuesday triggered speculation that it could begin tapering its massive, ultra-easy monetary stimulus. The major was trading 1.01 percent down at 111.41, having hit a low of 111.30 earlier, its lowest since Nov. 28. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. import and export price index, Fed’s Evan, Kaplan and Bullard speeches for further momentum. Immediate resistance is located at 112.11 (23.6% retracement of 111.72 and 113.38), a break above targets 112.35 (38.2% retracement of 111.72 and 113.38). On the downside, support is seen at 111.37 (Nov 29 Low), a break below could take it near 111.06 (Nov. 23 Low).
GBP/USD: Sterling tumbled to a 1-1/2 week low below the 1.3500 handle after data showed Britain’s goods trade deficit with the rest of the world widened to a five-month high of 12.231 billion pounds in November, while the total trade deficit, including services, also hit a five-month high of 2.804 billion pounds. The major traded 0.4 percent down at 1.3486, having hit a low of 1.3481 earlier; it’s lowest since Dec. 29. Immediate resistance is located at 1.3517 (10-DMA), a break above could take it near 1.3555. On the downside, support is seen at 1.3440 (21-DMA), a break below targets 1.3400. Against the euro, the pound was trading 0.4 percent down at 88.51 pence, having hit a high of 88.08 pence the day before, it’s highest since Dec. 19.
USD/CHF: The Swiss franc rebounded after falling to a near 2-week low earlier in the session, as the greenback weakened against a basket of currencies. The major trades 0.6 percent down at 0.9766, having touched a high of 0.9845 earlier, it’s highest since Dec. 28. On the higher side, near-term resistance is around 0.9845 (Session High) and any break above will take the pair to next level till 0.9865/0.9900/0.9970 (Dec 8th, 2017 high)/1.000. The near-term support is around 0.9740 (Jan 8 Low) and any close below that level will drag it to next level till 0.9635/ 0.9600.
AUD/USD: The Australian dollar rebounded after falling for three consecutive sessions, as oil prices climbed to the highest since 2014 and following a rise in China’s consumer price-led inflation index for the month of December. The Aussie trades 0.5 percent up at 0.7864, having hit a high of 0.7874 on Friday; it’s highest since Oct. 20. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7800, a break below targets 0.7765 (Dec. 28 Low). On the upside, resistance is located at 0.7880, a break above could take it near 0.7940.
European shares declined, weighed down by weakness in the pharmaceuticals and utility sectors, while the U.S. oil prices hit their highest since 2014.
The pan-European STOXX 600 index slumped 0.1 percent to 399.72 points, while the FTSEurofirst 300 index edged down 0.1 percent to 1,572.39 points.
Britain’s FTSE 100 trades 0.3 percent higher at 7,752.14 points, while mid-cap FTSE 250 eased 0.3 percent to 20,813.82 points.
Germany’s DAX declined 0.3 percent at 13,347.49 points; France’s CAC 40 trades 0.05 percent up at 5,526.05 points.
Crude oil prices hit their highest since 2014 on the back of ongoing production cuts led by OPEC as well as healthy demand. International benchmark Brent crude was trading 0.3 percent down at $68.97 per barrel by 0951 GMT, having hit a high of $69.24 earlier, its highest since May 2015. U.S. West Texas Intermediate was trading 0.2 percent down at $63.32 a barrel, after rising as high as $63.55 earlier, its highest since 2014.
Gold prices rebounded after falling to a 6-day low earlier in the day following a surge in U.S. Treasury yields and an ongoing rally in equities. Spot gold rose 0.2 percent at $1,314.79 an ounce by 0953 GMT, having declined 0.6 percent on Tuesday, in its biggest one-day drop in a month. U.S. gold futures were down 0.2 percent at $1,310.80 an ounce.
The U.S. Treasuries plunged ahead of the 10-year auction, scheduled to be held today at 18:00GMT. Also, FOMC members Evans and Bullard are scheduled to make their keynote speeches later in the day for further direction in the debt market. The yield on the benchmark 10-year Treasuries jumped nearly 4-1/2 basis points to 2.58 percent, the super-long 30-year bond yields surged 4-1/2 basis points to 2.93 percent and the yield on the short-term 2-year traded nearly 2 basis points higher at 1.98 percent.
The UK gilts traded tad higher during European session as investors have largely shrugged-off the higher-than-expected manufacturing production for the month of November. The yield on the benchmark 10-year gilts, traded tad higher at 1.28 percent, the super-long 30-year bond yields hovered around 1.82 percent and the yield on the short-term 2-year traded nearly flat at 0.54 percent.
The German bunds remained mixed in subdued trade as investors wait to watch the European Central Bank’s (ECB) account of the monetary policy meeting, scheduled to be released on January 11 by 12:30GMT. The German 10-year bond yields, which move inversely to its price, rose 1 basis point to 0.46 percent, the yield on 30-year note also climbed 1 basis point to 1.32 percent and the yield on short-term 2-year traded nearly 1 basis point lower at -0.61 percent.
The New Zealand government bonds slumped at the time of closing, tracking softness in the U.S. Treasuries amid a rise in China’s consumer price-led inflation index for the month of December. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, rallied 4 basis points to 2.87 percent, the yield on 20-year surged 4-1/2 basis points to 3.35 percent and the yield on short-term 2-year ended 2-1/2 basis points higher at 2.00 percent.
The Japanese government bonds slumped following board weakness in the U.S. Treasuries. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose nearly 2 basis points to 0.08 percent, the yield on the long-term 30-year note surged nearly 1-1/2 basis points to 0.84 percent and the yield on short-term 2-year climbed nearly 1 basis point to -0.12 percent.
The Australian government bonds slumped following board weakness in the U.S. Treasuries. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 6 basis points to 2.703 percent, the yield on the long-term 30-year note jumped 5-1/2 basis points to 3.404 percent and the yield on short-term 2-year climbed 2-1/2 basis points to 2.035 percent.
Source: FXWire Media Round Ups