Europe roundup: Sterling eases Amid persisting Brexit concerns,dollar rallies as U.S. treasury yields resume rise, European shares tumble – Tuesday, October 9th, 2018
- EUR/USD -0.4%, USD/JPY -0.12%, GBP/USD -0.41%, EUR/GBP 0.01%
- DXY 0.3%, DAX -0.56%, FTSE -0.36%, Brent 0.88%, Gold -0.06%
- Euro stuck near seven-week low on Italy budget woes
- Italy’s Tria calls for “constructive dialogue” with EU over budget
- IMF cuts world economic growth forecasts on tariff war, emerging market strains
- Germany Trade Balance, EUR, SA, 18.3 bln, 16.4 bln forecast, 15.8 bln previous, 15.9 bln revised
- Great Britain BRC Retail Sales (y/y), -0.20%, 0.20% previous
- Bank of England tells EU to move now to avoid hard Brexit risks for financial services
- China must take strong stimulus measures to support growth – state media
Economic Data Ahead
- (0815 ET/1215 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of September. The indicator is expected to rise at a seasonally adjusted annualized rate of 210,000 after increasing 201,000 in the previous month.
- (1000 ET/1400 GMT) The Investor’s Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of October. The indicator rose to 55.7 in September.
Key Events Ahead
- (1000 ET/1400 GMT) Federal Reserve Bank of Chicago President Charles Evans gives opening remarks before the Opportunity Finance Network (OFN) Conference 2018, in Chicago.
- (1300 ET/1700 GMT) Federal Reserve Bank of Philadelphia President Patrick Harker speaks on “The Importance of Higher Education to the U.S. Economy” before Global Interdependence Center event, “The Roles of Higher Education in Competitiveness and Global Productivity,” in Philadelphia.
- (1400 ET/1800 GMT) Bank of England Governor Mark Carney gives off-record remarks to CISI industry dinner in London.
- (1400 ET/1800 GMT) Bank of Canada Senior Deputy Governor Carolyn Wilkins gives a speech
- (2115 ET/0115 GMT) Federal Reserve Bank of New York President John Williams speaks on “Recent Developments in U.S. Monetary Policy” before the Central Banking Forum co-hosted by the Federal Reserve Bank of New York and the Bank of Indonesia.
DXY: The dollar index rallied to a 1-12 month peak as the yield on the benchmark 10-year Treasuries resumed rise. The greenback against a basket of currencies trades 0.4 percent up at 96.11, having touched a high of 96.12, its highest since August 20. FxWirePro’s Hourly Dollar Strength Index stood at 30.59 (Neutral) by 1100 GMT.
EUR/USD: The euro slumped to a 7-week low after data showed German exports unexpectedly fell in August, indicating that manufacturers’ sentiment in Europe’s largest economy deteriorated in the summer months. The European currency traded 0.4 percent down at 1.1447, having touched a low of 1.1440, its lowest since August 20. FxWirePro’s Hourly Euro Strength Index stood at -86.03 (Slightly Bearish) by 1100 GMT. Immediate resistance is located at 1.1549 (October 5 High), a break above targets 1.1593 (October 3 High). On the downside, support is seen at 1.1430, a break below could drag it till 1.1400.
USD/JPY: The dollar trimmed losses as the U.S. 10-year Treasury yields resumed their steep climb to 7-year highs. The major was trading 0.05 percent down at 113.20, having hit a low of 112.82 on Monday, its lowest since September 27. FxWirePro’s Hourly Yen Strength Index stood at 60.91 (Bullish) by 1100 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. NIFB Business optimism index and IBD/TIPP economic optimism index. Immediate resistance is located at 113.55 (10-DMA), a break above targets 114.10 (October 5 High). On the downside, support is seen at 112.75 (21-DMA), a break below could take it lower 112.40 (September 24 Low).
GBP/USD: Sterling eased, extending previous session losses, amid growing Brexit risk concerns as London and Brussels have so far not agreed on the terms of Britain’s departure from the bloc and their new relationship. The major traded 0.3 percent down at 1.3055, having hit a high of 1.3132 on Monday; it’s highest since September 27. Immediate resistance is located at 1.3173 (September 18 High), a break above could take it near 1.3115 (October 1 High). On the downside, support is seen at 1.3000 (September 28 Low), a break below targets 1.2941 (October 2 Low). Against the euro, the pound was trading 0.1 percent down at 87.65 pence, having hit a high of 87.64, it’s highest since June 22.
USD/CHF: The Swiss franc declined, hovering towards a 7-week low as the greenback surged following a rise in the U.S. Treasury yields. The major trades 0.2 percent up at 0.9940, having touched a high of 0.9955 on Friday, it’s highest since August 20. FxWirePro’s Hourly Swiss Franc Strength Index stood at 5.94 (Neutral) by 1100 GMT. On the higher side, near-term resistance is around 0.9984 (August 6 High) and any break above will take the pair to next level till 1.0010 (July 20 High). The near-term support is around 0.9894 (August 9 Low) and any close below that level will drag it till 0.9842 (August 21 Low).
European shares slumped after the Asian stocks declined to a 17-month low on China’s currency depreciation concerns.
The pan-European STOXX 600 index plunged 0.2 percent at 370.68 points, while the FTSEurofirst 300 index eased 0.2 percent to 1,558.20 points.
Britain’s FTSE 100 trades 0.2 percent lower at 7,220.26 points, while mid-cap FTSE 250 declined 0.3 percent to 19,586.77 points.
Germany’s DAX fell 0.6 percent at 11,881.33 points; France’s CAC 40 trades 0.4 percent lower at 5,218.85 points.
Crude oil prices surged by more than 1-percent on growing evidence of easing crude exports from Iran, before the imposition of new U.S. sanctions and a partial shutdown in the Gulf of Mexico due to a Hurricane. International benchmark Brent crude was trading 1.3 percent up at $84.89 per barrel by 1053 GMT, having hit a low of $82.69 on Monday, its lowest since October 1. U.S. West Texas Intermediate was trading 1.01 percent up at $74.91 a barrel, after falling as low as $73.10 on Monday, its lowest since October 1.
Gold prices declined, as the greenback surged on the back of expectations of more Federal Reserve interest rate hikes in coming years. Spot gold was 0.1 percent up at $1,186.89 an ounce at 1058 GMT, having hit a low of $1183.42 on Monday, its lowest since September 28. U.S. gold futures rose 0.4 percent to $1,193.0 an ounce.
The U.S. Treasuries traded mixed ahead of FOMC member Evans’s speech, scheduled to be held today by 14:00GMT. The yield on the benchmark 10-year Treasuries climbed 1-1/2 basis points to 3.244 percent, the super-long 30-year bond yields jumped 3 basis points to 3.427 percent and the yield on the short-term 2-year traded nearly 1 basis point lower at 2.881 percent.
The United Kingdom’s gilts slumped during the afternoon session as investors await the country’s manufacturing production for the month of August and trade balance data, scheduled to be released on October 10 by 08:30GMT respectively. The yield on the benchmark 10-year gilts, jumped 3 basis points to 1.705 percent, the super-long 30-year bond yields surged 2-1/2 basis points to 2.023 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.897 percent.
The German bunds suffered during European session after the country’s trade balance for the month of August cheered market participants ahead of the 10-year auction, scheduled to be held on October 10 by 09:40GMT. The German 10-year bond yields, which move inversely to its price, rose nearly 1-1/2 basis points to 0.554 percent, the yield on 30-year note jumped nearly 2 basis points to 1.186 percent and the yield on short-term 2-year traded tad higher at -0.560 percent.
The Japanese government bonds slipped during late Asian session ahead of the super-long 30-year auction, scheduled to be held on October 11 by 03:35GMT amid an otherwise muted trading session that witnessed data of little economic significance. The yield on the benchmark 10-year JGB note, which moves inversely to its price, rose 1/2 basis point to 0.155 percent, the yield on the long-term 30-year note also gained 1/2 basis point to 0.947 percent and the yield on short-term 2-year too traded tad higher at -0.114 percent.
The Australian government bonds traded tad lower during Asian session after the country’s business confidence cheered market participants, adding to slight optimism in risk-taking. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 1/2 basis point to 2.785 percent, the yield on the long-term 30-year bond gained nearly 1 basis point to 3.268 percent and the yield on short-term 2-year traded nearly 2-1/2 basis points higher at 2.051 percent.