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Home / Blogs / Europe roundup: Sterling firm above 1.3900, Dollar eases across the board on U.S. government shutdown, European shares advance – Monday, January 22nd, 2018

Europe roundup: Sterling firm above 1.3900, Dollar eases across the board on U.S. government shutdown, European shares advance – Monday, January 22nd, 2018

Europe roundup: Sterling firm above 1.3900, Dollar eases across the board on U.S. government shutdown, European shares advance – Monday, January 22nd, 2018

Market Roundup

  • EUR/USD 0.37%, USD/JPY -0.06%, GBP/USD 0.43%, EUR/GBP -0.07%
  • DXY -0.17%, DAX flat, FTSE 0.06%, Brent 0.01%, Gold 0.18%
  • U.S. government workers awake to shutdown, Senate vote looms
  • UK economy will cope with Brexit hit as global economy grows-O’Neill
  • In Tokyo meeting, officials seek to forge ahead with TPP even as Canada wavers
  • German economy ends 2017 in “excellent” form: BuBa
  • Germany’s SPD wants Merkel to sweeten coalition deal
  • Catalonia’s ex-leader Puigdemont named candidate to lead region
  • Oil rises as Saudi Arabia says producers will cooperate beyond 2018
  • Gold inches down as dollar recovers after U.S. government shutdown

Economic Data Preview

 No major economic data releases

Key Events

  •  No significant events scheduled

FX Beat

DXY: The dollar index slumped after the U.S. government was forced to shut down amid a dispute between President Donald Trump and Democrats over immigration. The greenback against a basket of currencies traded 0.3 percent down at 90.45, having touched a low of 90.11 on Thursday, its lowest since January 2015.

EUR/USD: The euro rose on expectations the European Central Bank will maintain its current monetary policy at a meeting this week and not signal a dovish tilt. The European currency traded 0.3 percent up at 1.2248, having touched a high of 1.2322 on Wednesday, its highest since Dec. 2014. Immediate resistance is located at 1.2300, a break above targets 1.2370. On the downside, support is seen at 1.2168 (61.8% retracement of 1.1916 and 1.2322), a break below could drag it lower 1.2120 (50.0% retracement).

USD/JPY: The dollar declined against the yen as the U.S. government shutdown took effect at midnight on Friday after Democrats and Republicans failed to agree on a last-minute deal to fund government operations. The major was trading down at 110.76, having hit a low of 110.19 on Wednesday, its lowest since Sept 15. Immediate resistance is located at 111.41 (38.2% retracement of 110.19 and 113.38), a break above targets 111.78 (50.0% retracement). On the downside, support is seen at 110.32 (Jan. 15 Low), a break below could take it lower 110.00.

GBP/USD: Sterling rose above the 1.3900 handle after data published on Friday showed speculators increased their net-long positions on the British currency. The major traded 0.5 percent up at 1.3922, having hit a high of 1.3945 on Friday, it’s highest since June 2016. Immediate resistance is located at 1.3945, a break above could take it near 1.4000. On the downside, support is seen at 1.3804 (Jan 18 Low), a break below targets 1.3757 (61.8% retracement of 1.3458 and 1.3941). Against the euro, the pound was trading 0.2 percent up at 87.97 pence, having hit a high of 87.96 pence earlier, it’s highest since Dec. 18.

USD/CHF: The Swiss franc steadied after rising to a 4-month high in the previous session as the greenback against a basket of currencies consolidated near its lowest since January 2015. The major trades 0.3 percent down at 0.9611, having touched a low of 0.9535 the day before, it’s lowest since Sept. 11. On the higher side, near-term resistance is around 0.9659 (61.8% retracement of 0.9845 and 0.9535) and any break above will take the pair to next level till 0.9692 (10-DMA). The near-term support is around 0.9530 and any close below that level will drag it to next level till 0.9470.

Equities Recap

European shares advanced amid progress towards an end to political deadlock in Germany, while the greenback slumped following the shutdown of the U.S. government.

 

The pan-European STOXX 600 index gained 0.2 percent to 401.66 points, while the FTSEurofirst 300 index edged up 0.2 percent to 1,579.34 points.

Britain’s FTSE 100 trades 0.05 percent lower at 7,730.20 points, while mid-cap FTSE 250 gained 0.1 percent to 20,661.47 points.

Germany’s DAX rose 0.9 percent at 13,452.01 points; France’s CAC 40 trades 0.2 percent down at 5,538.34points.

Commodities Recap

Crude oil prices declined on the back of rising Libyan output and concerns that a rally that had sent prices to their highest since December 2014 had run out of steam. International benchmark Brent crude was trading 0.2 percent down at $68.59 per barrel, having hit a low of $68.26 the prior session, its lowest since Jan. 9. U.S. West Texas Intermediate was trading 0.4 percent down at $63.28 a barrel, after easing as low as $62.87 on Friday, its lowest since Jan. 9.

Gold prices rose as the dollar hovered near three-year lows following a U.S. government shutdown, although bullishness in the wider financial markets capped the safe-haven metal’s gains. Spot gold was 0.2 percent up at $1,333.98 an ounce, having recorded its first weekly decline in six weeks.

Treasuries Recap

The U.S. Treasuries slid as investors have largely digested the impasse of the government shutdown that extended into its third day and this is only deemed to be a temporary phenomenon with no major impact on the financial markets. The yield on the benchmark 10-year Treasuries rose 1 basis point to 2.65 percent, the super-long 30-year bond yields also surged a tad over basis point to 2.92 percent and the yield on the short-term 2-year traded nearly 1 basis point higher at 2.06 percent.

The UK gilts plummeted during early European session as investors await the country’s employment report for the month of November, due to be released on January 24 by 09:30GMT and the fourth-quarter gross domestic product (GDP), due on January 26 by the same time.The yield on the benchmark 10-year gilts, jumped 2 basis points to 1.35 percent, the super-long 30-year bond yields climbed 1-1/2 basis points to 1.86 percent and the yield on the short-term 2-year too traded nearly 1-1/2 basis points higher at 0.58 percent.

The German bunds remained on the downside, tracking similar movement in the U.S. Treasuries after investors had largely ignored the impact of a government shutdown, following no decision over the country’s tax reform. Also the debt market received softer demand, on optimism over a coaltion government between the Social Democrats and Chancellor Angela Merkel’s Conservative Party. The German 10-year bond yields, which move inversely to its price, rose 1 basis point to 0.57 percent, the yield on 30-year note also climbed 1 basis point to 1.33 percent and the yield on short-term 2-year traded 1/2 basis point higher at -0.59 percent.

The New Zealand government bonds closed sideways at the start of the week as investors remained side-lined in any major trading activity amid a muted session that witnessed data of little economic significance. Investors are now focusing on the country’s consumer inflation data for the fourth quarter of this year, schedule to be released on January 24 for further direction in the debt market. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1/2 basis point to 3.00 percent, the yield on 20-year hovered around 3.46 percent and the yield on short-term 2-year ended flat at 2.05 percent.

The Japanese government bonds remained little changed as investors await the Bank of Japan’s (BoJ) first monetary policy decision of 2018. Also, markets are looking forward to the central bank’s quarterly economic outlook release following along with the policy decision. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 0.078 percent, the yield on the long-term 30-year note fell 1/2 basis point to 0.828 percent and the yield on short-term 2-year remained steady at -0.134 percent.

Source: FXWire Media Round Ups

 

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