Tuesday , April 24 2018
Home » Blogs » FX/RATES DAYBOOK EUROPE: USD Drops for Seventh Day; U.K. IP


(Bloomberg) — The dollar falls for a seventh day, set for its longest losing streak since 2011, as traders braced for Hurricane Irma and amid ongoing tensions with North Korea ahead of Saturday’s foundation day. Aussie dollar rallies to strongest since 2015 while euro extends gains a day after European Central Bank President Mario Draghi refrained from mentioning specific action to curb the currency. TODAY

  • German July Trade Balance and Current Account Balance
  • U.K. July Industrial Production
  • Spanish July Industrial Output
  • French July Industrial Production and Manufacturing Production


  • U.S.
    • Bloomberg dollar index fell as much as 0.8%; EUR/USD briefly rose to 1.2059 before paring gains; USD/JPY came close to testing 108.00 level then bounced to 108.50 range
    • UST 10Y yield touched YTD low of 2.032% as Hurricane Irma fears rattled markets, before rebounding to ~2.042%
    • European bonds surged Thursday as ECB rate pricing shifted dovishly after Draghi offered little new policy insight. Market appeared to have been caught wrong-footed following Wednesday’s set-up for a more hawkish ECB outcome, which had seen bunds slide, Euribors cheapen and large downside bought in options
    • One of the consensus trades recommended by strategists was front-end shorts/steepeners, and the aggressive post-ECB bull-flattening in front-end pointed to stops out of these position
    • Flows were mixed as bonds pushed higher, with short covering and new longs seen in bund futures; still, despite sharp gains in peripherals, flows in cash market were relatively quiet, according to traders
    • USD/JPY remains heavy after dropping to just above 108 in NY session
      • Interbank option desks are holding large over-the-counter USD/JPY barriers with strike price at 108.00 and expiring today, according to Asia-based FX traders
    • AUD/USD rallies 0.7% to 0.8103; hits 0.8116, highest since May 2015
    • NZD/USD surged over 1% to 0.7307
    • 10-year Treasury yield little changed at 2.04% after dropping 7bps Thursday


  • President Donald Trump said it’s not “inevitable” that the U.S. will wind up in a war with North Korea over its continued development of nuclear weapons, but that military action remains an option
  • Hurricane Irma continued on a collision course with Miami after devastating a chain of Caribbean islands, triggering the largest evacuation in Miami-Dade County history and threatening to become the most expensive storm in U.S. history. The storm is heading for a direct hit on Florida Sunday, according to the U.S. National Hurricane Center
  • The White House is considering at least a half-dozen candidates to be the next head of the Federal Reserve, including economists, executives with banking experience and other business people, according to three people familiar with the matter. The breadth of the search goes against the narrative that has taken hold in Washington and on Wall Street that the Fed chair nomination is a two-horse race between National Economic Council Director Gary Cohn and current Fed Chair Janet Yellen, whose term expires in February
  • The weaker pound is failing to boost U.K. growth, according to the British Chambers of Commerce. The business group downgraded its medium- term outlook for the economy in a report on Friday, citing a weaker-than-expected contribution from trade and subdued consumer spending
  • Bob Diamond, the architect of Barclays Plc’s investment bank for over a decade in London, said the British capital will be hurt more than people expect from Brexit, with lawyers likely to join bankers in moving away
    • “People are beginning to understand Brexit is going to be far more profound and long-lasting than they thought,” Diamond said in a phone interview Thursday from New York. “I’d be very surprised if support services and legal services don’t move.”


  • Draghi’s Soft Currency Talk Suggests He’s Holding Back the Magic
    • “The strategy of this soft intervention is to prevent further speculative upward pressure on the euro,” said Lena Komileva, an economist at G Plus Economics. “Draghi didn’t seem overly concerned.”
  • Sell Eurodollars, as Stage Is Set for ‘Mild Selloff’: Citi
    • Agreement to suspend U.S. debt ceiling until December means “the stage is set for a mild selloff in rates,” with the new deadline “acting as a barrier against any large selloffs,” Citi strategist Jason Williams says in note


  • China Aug Trade Balance 286.5b yuan, vs est. 335.7b yuan
  • China Aug Imports Rise 14.4% YoY, in Yuan Terms, vs est. 11.7%
  • Japan 2Q Annualized GDP Rises 2.5%, vs est. 2.9%
  • Japan July Current Account 2,320.0b yen, vs est. 2,030b yen
  • Australia July Home-Loan Approvals +2.9% MoM, vs est. +1.0%


  • 8am: (GE) July Trade Balance, est. 21b, prior 22.3b
  • 8am: (GE) July Current Account Balance, est. 20.8b, prior 23.6b
  • 8am: (GE) July Exports SA MoM, est. 1.3%, prior -2.8%
  • 8am: (GE) July Imports SA MoM, est. 2.8%, prior -4.5%
  • 8am: (GE) 2Q Labor Costs SA QoQ, prior 0.5%
  • 8am: (GE) 2Q Labor Costs WDA YoY, prior 2.5%
  • 8:45am: (FR) July Budget Balance YTD, prior -62.3b
  • 8:45am: (FR) July Industrial Production MoM, est. 0.5%, prior -1.1%
  • 8:45am: (FR) July Industrial Production YoY, est. 3.55%, prior 2.6%
  • 8:45am: (FR) July Manufacturing Production MoM, est. 0.55%, prior -0.9%
  • 8:45am: (FR) July Manufacturing Production YoY, est. 4.15%, prior 3.3%
  • 9am: (SP) 2Q INE House Price Index QoQ, prior 2.3%
  • 9am: (SP) 2Q INE House Price Index YoY, prior 5.3%
  • 9am: (SP) July Industrial Output NSA YoY, prior 3.5%
  • 9am: (SP) July Industrial Output SA YoY, est. 2.7%, prior 2.7%
  • 9am: (SP) July Industrial Production MoM, est. 0.2%, prior -0.06%
  • 9:30am: (SW) July Household Consumption (MoM), prior 0.0%
  • 9:30am: (SW) July Household Consumption (YoY), prior 2.4%
  • 10:30am: (UK) July Industrial Production MoM, est. 0.2%, prior 0.5%
  • 10:30am: (UK) July Industrial Production YoY, est. 0.4%, prior 0.3%
  • 10:30am: (UK) July Manufacturing Production MoM, est. 0.3%, prior 0.0%
  • 10:30am: (UK) July Manufacturing Production YoY, est. 1.7%, prior 0.6%
  • 10:30am: (UK) July Construction Output SA MoM, est. -0.2%, prior -0.1%
  • 10:30am: (UK) July Construction Output SA YoY, est. 0.2%, prior 0.9%
  • 10:30am: (UK) July Visible Trade Balance GBP/Mn, est. £12,000 deficit, prior £12,722 deficit
  • 10:30am: (UK) July Trade Balance Non EU GBP/Mn, prior £4,471 deficit
  • 10:30am: (UK) July Trade Balance, est. £3,250 deficit, prior £4,564 deficit
  • 10:30am: (UK) Aug. BoE/TNS Inflation Next 12 Mths, prior 2.8%
  • 2pm: (UK) Aug. NIESR GDP Estimate, prior 0.2%
  • (SP) July Spain Budget Balance YtD, prior -13.2b


  • 4pm: (GE) Former UKIP Head Farage Addresses AfD Event in Berlin


  • 10am: (FI) Bank of Finland’s Liikanen Speaks at Parliament Hearing
  • 11am: (EC) ECB’s Weidmann speaks in Hamburg
  • 1pm: (LV) Latvian Central Banker Ilmars Rimsevics speaks in Riga


  • For corporate bonds, see New Issue Monitor
  • 12pm: U.K. to Sell GBP2.0b 28-Day Bills
  • 12pm: U.K. to Sell GBP2.0b 91-Day Bills
  • 12pm: U.K. to Sell GBP2.0b 182-Day Bills


  • USD/JPY -0.3% to 108.13 (range 108.05-108.49)
  • EUR/USD +0.4% to 1.2065 (range 1.2018-1.2089)
  • AUD/USD +0.7% to 0.8104 (range 0.8043-0.8116)
  • NZD/USD +1.O% to 0.7304 (range 0.7228-0.7325)
  • GBP/USD +0.2% to 1.3129 (range 1.3094-1.3139)
  • USD/CAD -0.4% to 1.2072 (range 1.2065-1.2134)
  • USD/CHF -0.5% to 0.9459 (range 0.9439-0.9509)

TECHNICAL OUTLOOK by Bloomberg strategist David Finnerty

  • USD/JPY – In bear trend
    • Resistance: 109.84, Aug. 25 high 110.67, Aug. 31 high; 111.05, Aug. 4 high
    • Support: 108.05, Sept. 7 low; 107.49, July 21, 2016 high; 106.52, 61.8% Fibonacci retracement of rally from June 24, 2016 low to December 15, 2016 high
  • EUR/USD – Bull trend
    • Resistance: 1.2070, Aug. 29 high; 1.2167, 50% retracement of May 2014 to Jan. 2017 decline; 1.2247, Dec. 8, 2014 low
    • Support: 1.1910, Aug. 2 high; 1.1823, Aug. 31 low; 1.1774, Aug. 25 low
  • EUR/JPY – Hovering above 50-DMA
    • Resistance: 131.71, Aug. 30 high; 132.32, Jan. 29, 2016, high; 134.50, Dec. 3, 2015, high
    • Support: 129.37, Sept. 6 low; 128.05, Aug. 11 low; 127.56, Aug. 18 low

To contact the reporter on this story: Chikafumi Hodo in Tokyo at chodo@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

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