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Home » Blogs » Americas roundup: Euro rises on report ECB shifting debate to rate hikes, Sterling jumps as EU, Britain reach transition agreement, Wall St. ends lower, Gold bounces from 2-week low-march 20th 2018

Americas roundup: Euro rises on report ECB shifting debate to rate hikes, Sterling jumps as EU, Britain reach transition agreement, Wall St. ends lower, Gold bounces from 2-week low-march 20th 2018

Americas roundup: Euro rises on report ECB shifting debate to rate hikes, Sterling jumps as EU, Britain reach transition agreement, Wall St. ends lower, Gold bounces from 2-week low-march 20th 2018

 

Market Roundup

• UK wins Brexit transition deal in return for Irish vow.

• ECB debate shifting to interest rate path from QE – sources.

• Japan central bank head says G20 to reaffirm need for free trade.

• G20 financial leaders seek “free trade” pledge amid U.S. tariffs concern.

• German growth unabated in Q1: Bundesbank.

• After landslide re-election, Russia’s Putin tells West: I don’t want arms race.

• Brazil January economic activity contracts, but less than expected.

Looking Ahead – Economic Data (GMT)

• 19 Mar 19:00 NZ Q1 Westpac Consumer Survey, 107.4 previous

• 19 Mar 21:00 JP Mar Reuters Tankan DI, 29 previous

• 19 Mar 22:30 AU Q4 Home Price Index, 0.0% forecast, -0.2% previous

• 20 Mar 19:45 NZ Feb Ext Migration & Visitors, -0.50% previous

• 20 Mar 19:45 NZ Feb Perm/Long-Term Migration, 6,210 previous

Looking Ahead – Events, Other Releases (GMT)

• N/A Fed’s Federal Open Market Committee starts its two-day meeting on interest rates – Washington, D.C.

• 10:00 Norges Bank’s Egil Matsen speaks at a conference hosted by Finance Norway – Oslo

 

Currency Summaries

EUR/USD is likely to find support at 1.2256 levels and currently trading at 1.2335 levels. The pair has made session high at 1.2358 and hit lows at 1.2306 levels. The euro rose against the greenback on Monday after a report showed that European Central Bank officials were shifting their debate from bond purchases to the expected path of interest rates, reviving bets that the ECB may raise rates sooner than previously thought. The debate among ECB policymakers is increasingly about the steepness of the rate path, as some want future expectations contained given the slow rebound in inflation. In late-afternoon U.S. trading, the euro zone single currency was last up 0.46 percent, at $1.2344. The strength in euro and sterling put downward pressure on the dollar as traders speculated whether the Federal Reserve may signal a faster pace of rate increases in the coming months as the labor market tightens further. The Federal Open Market Committee, the U.S. central bank’s policy-setting group, will meet on Tuesday and Wednesday. Rates futures imply traders have fully priced in a rate increase which would raise the target range to between 1.50 percent and 1.75 percent. The dollar index, which tracks the greenback versus a basket of six other major currencies, fell 0.45 percent to 89.826.

GBP/USD is supported in the range of 1.3909 levels and currently trading at 1.4027 levels. It reached session high at 1.4087 and dropped to session low at 1.3971 levels. Sterling jumped higher against the dollar on Monday as Britain and the European Union agreed to a 21-month post-Brexit transition period and a potential solution to avoid a “hard border” for Northern Ireland. The pound, which had already been rallying on expectations for a transition deal, gained further after British Brexit minister David Davis and EU chief negotiator Michel Barnier announced an agreement. Investors had largely expected Britain to secure an agreement at Thursday’s EU summit, but concern remained that a deadlock over the Irish border would derail a deal. Securing the terms of a transition phase – which will last to the end of 2020 – was vital, because it means London and Brussels can now focus on what sort of trading relationship the two sides will have after Britain leaves the EU next year. Against the dollar the pound rose as much as 1 percent to $1.4088, its strongest since Feb. 16 and the biggest one-day rise since January, before falling back. It was up 0.6 percent at $1.4031 at 1940 GMT. Sterling faces a crucial week, with the BoE announcing an interest rate decision on Thursday after inflation and wages data is published. It is expected to keep rates on hold but to prepare the market for a possible increase in May, a rise it had signalled as contingent on a transition agreement.

USD/CAD is supported at 1.3009 levels and is trading at 1.3063 levels. It has made session high at 1.3106 and lows at 1.3045 levels. The Canadian dollar firmed against its U.S. counterpart on Monday, rebounding from an earlier near nine-month low, as the greenback pared its recent broader gains ahead of a Federal Reserve interest rate decision this week. The loonie fell more than 2 percent last week as comments from Bank of Canada Governor Stephen Poloz reinforced expectations the central bank can take its time raising rates after hiking three times since last July. Bank of Canada Senior Deputy Governor Carolyn Wilkins will deliver a speech on Thursday, while domestic inflation data for February is due on Friday. The U.S. dollar dipped against a basket of major currencies after four straight weeks of gains as financial markets looked for the Fed to increase rates on Wednesday for the first time this year. The price of oil, one of Canada’s major exports, eased after rallying at the end of last week, but tensions between Saudi Arabia and Iran helped limit losses. The Canadian dollar was trading 0.2 percent higher at C$1.3063 to the greenback, or 76.47 U.S. cents. The currency’s strongest level of the session was C$1.3046, while it touched its weakest since June 28 at C$1.3124.

USD/JPY is supported around 105.59 levels and currently trading at 106.16 levels. It peaked to hit session high at 106.30 and made session lows at 105.65 levels. The Japanese yen was littlechanged against the dollar on Monday as traders avoided making big bets ahead of a U.S. Federal Reserve policy meeting, the first under new chairman Jerome Powell. Investors will be watching whether Jerome Powell adopts a more hawkish tone in his first meeting as Fed. A jump in consumer prices in January increased expectations that inflation was rising, which was seen as increasing the likelihood of four rate hikes this year, though February’s consumer price index last week showed prices cooled in the month. The two-day Federal Open Market Committee (FOMC) meeting begins on Tuesday, with the U.S. Federal Reserve expected to raise interest rates for the first time this year on Wednesday. Investors largely expect the Fed to lift its benchmark overnight lending rate to a range of 1.5 to 1.75 percent at the end of a two-day meeting on Wednesday and also update its assessment of the economy. More importantly, traders will be closely eyeing the Fed’s policy statement in search of clues over the pace of future rate hikes, following signs of Powell’s growing confidence in the U.S. economic recovery.

Equities Recap

European shares fell on Monday ahead of a widely expected U.S. interest rate hike, while earnings and M&A took centre stage with software company Micro Focus sinking and a bid for Hammerson boosting commercial real estate stocks.

UK’s benchmark FTSE 100 closed down by 1.66 percent, the pan-European FTSEurofirst 300 ended the day up by 0.12percent, Germany’s Dax ended down by 1.43 percent, France’s CAC finished the day down by 1.20 percent.

U.S. stocks dropped on Monday as a plunge in shares of Facebook led a sell-off in technology stocks on reports that the social media company’s user information was misused.

Dow Jones closed down by 1.34 percent, S&P 500 ended down by 1.42 percent, Nasdaq finished the day down by1.84 percent.

Treasuries Recap

U.S. Treasury prices gained on Monday as stocks tumbled and as investors waited on the conclusion of the Federal Reserve’s two-day meeting on Wednesday, where the U.S. central bank is widely expected to raise rates for the first time this year.

Benchmark 10-year notes gained 1/32 in price on the day to yield 2.846 percent, after earlier rising as high as 2.879 percent.

Commodities Recap

Gold prices turned positive on weakness in equity markets after touching their lowest in more than two weeks on Monday ahead of a U.S. central bank meeting that could raise interest rates and signal three more increases this year.

Spot gold gained 0.3 percent at $1,317.49 per ounce by 1:33 p.m. EST (1733 GMT), having earlier dropped to $1,307.51, its lowest since March 1.

U.S. gold futures for April delivery settled up $5.50, or 0.4 percent, at $1,317.80 per ounce.

Oil prices slipped on Monday as Wall Street slid more than 1 percent and energy market investors remained wary of growing crude supply, although tensions between Saudi Arabia and Iran gave prices some support.

Brent crude futures dropped 16 cents, or 0.2 percent, to settle at $66.05 a barrel. U.S. West Texas Intermediate (WTI) futures fell 28 cents, or 0.5 percent, to end at $62.06 a barrel.

Source: FXWire Media Round Ups

 

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