Europe Roundup: Sterling at 3-week peak on Brexit deal prospects, dollar eases across the board as U.S. Treasury yields plunge, European shares hit 20-month trough - Thursday, October 11th, 2018

Market Roundup

  • EUR/USD 0.44%, USD/JPY -0.1%, GBP/USD 0.03%, EUR/GBP 0.36%
  • DXY -0.27%, DAX -1.14%, FTSE -1.73%, Brent -1.65%, Gold 0.66%
  • European shares hit 20-month lows as Wall Street rout sparks sell-off
  • IMF's Lagarde warns against trade, currency wars, urges fix to global rules

  • France CPI (EU Norm) Final (y/y), 2.5%, 2.5% forecast, 2.5% previous
  • France CPI (y/y) NSA, 2.2%, 2.2% previous, 2.2% revised
  • Great Britain RICS Housing Survey, -2, 2 forecast, 2 previous
  • Euro zone bailout fund head: no reason to expect Italy to lose market access
  • Too early for ECB to give clearer guidance, policymakers argue
  • BOJ board member warns trade protectionism could hurt Japan's growth
  • Economic Data Ahead

    • (0830 ET/1230 GMT) The U.S. consumer price index likely increased 0.2 percent in September after posting similar gains in August, while in the 12 months through September, the CPI is expected to have risen 2.4 percent, slowing from 2.7 percent rise in the prior month. Excluding food and energy, the core CPI probably rose 0.2 percent, after nudging up 0.1 percent in the previous month.
    • (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have decreased by 1,000 to a seasonally adjusted 206,000 for the week ended Oct. 5, while continuing claims for the week ended Sept. 28 is expected to rise to 1.66 million from a previous reading of 1.65 million.
    • (0830 ET/1230 GMT) The Statistics Canada releases its New Housing Price Index (NHPI) for the month of August. The index rose 0.1 percent in July.
    • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending October 5.
    • (1100 ET/1500 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending October 5.

    FX Beat

    DXY: The dollar index slumped following a plunge of nearly 7 basis points in the benchmark 10-year Treasury yields and on President Donald Trump’s criticism of the Fed’s interest rate hikes. The greenback against a basket of currencies trades 0.3 percent down at 95.17, having touched a low of 95.13 earlier, its lowest since October 1. FxWirePro's Hourly Dollar Strength Index stood at -113.25 (Highly Bearish) by 1000 GMT.

    EUR/USD: The euro rallied to a 1-week peak after the chief of the Eurozone bailout fund ESM Klaus Regling in a panel discussion at the International Monetary Fund meeting stated that there is no immediate risk of Italy losing market access or being downgraded below investment grade as the Italian economy has underlying strengths. The European currency traded 0.5 percent up at 1.1573, having touched a low of 1.1432 on Tuesday, its lowest since August 20. FxWirePro's Hourly Euro Strength Index stood at 54.22 (Bullish) by 1000 GMT. Immediate resistance is located at 1.1593 (October 3 High), a break above targets 1.1624 (October 1 High). On the downside, support is seen at 1.1450, a break below could drag it till 1.1415.

    USD/JPY: The dollar plunged to an over 3-week low after International Monetary Fund Managing Director Christine Lagarde warned countries against engaging in trade and currency wars that dented global growth. The major was trading 0.1 percent down at 112.13, having hit a low of 111.97 earlier, its lowest since September 18. FxWirePro's Hourly Yen Strength Index stood at 88.61 (Slightly Bullish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. consumer price index and unemployment benefit claims. Immediate resistance is located at 112.58 (September 20 High), a break above targets 112.98 (September 25 High). On the downside, support is seen at 111.75 (September 14 Low), a break below could take it lower 111.35 (September 5 Low).

    GBP/USD: Sterling surged to a 3-week peak above the 1.3200 handle as signs the European Union and Britain may soon agree on a Brexit deal, and prospects of resolving the Ireland border issue boosted investor sentiment. The major traded 0.2 percent up at 1.3210, having hit a high of 1.3244 earlier; it’s highest since September 21. FxWirePro's Hourly Sterling Strength Index stood at 69.01 (Bullish) 1000 GMT. Immediate resistance is located at 1.3276 (September 21 High), a break above could take it near 1.3300. On the downside, support is seen at 1.3111 (5-DMA), a break below targets 1.3062 (September 24 Low). Against the euro, the pound was trading 0.3 down at 87.59 pence, having hit a high of 87.23 on Wednesday, it’s highest since June 21.

    USD/CHF: The Swiss franc rose to a 1-week peak as investors avoided risky assets due to intensifying U.S.-China trade tensions and rising U.S. interest rates. The major trades 0.3 percent down at 0.9876, having touched a high of 0.9955 on Tuesday, it’s highest since August 20. FxWirePro's Hourly Swiss Franc Strength Index stood at -95.37 (Slightly Bearish) by 1000 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 0.9842 (August 21 Low) and any close below that level will drag it till 0.9800.

    Equities Recap

    European shares tumbled to their lowest in more than 20 months as concerns over signs of slowing global growth triggered a broad selloff.

    The pan-European STOXX 600 index plunged 1.9 percent at 360.05 points, while the FTSEurofirst 300 index eased 1.9 percent to 1,414.70 points.

    Britain's FTSE 100 trades 1.8 percent down at 7,011.26 points, while mid-cap FTSE 250 declined 2.1 percent to 18,841.38 points.

    Germany's DAX fell 1.4 percent at 11,554.71 points; France's CAC 40 trades 1.6 percent lower at 5,121.77 points.

    Commodities Recap

    Crude oil prices slumped by more than 1 percent to a 2-week low as investor sentiment turned bearish after an industry report showed U.S. crude inventories rose more than expected. International benchmark Brent crude was trading 1.2 percent down at $81.43 per barrel by 1035 GMT, having hit a low of $81.25 earlier, its lowest since September 24. U.S. West Texas Intermediate was trading 1.1 percent down at $71.75 a barrel, after falling as low as $71.65, its lowest since September 26.

    Gold prices surged as share markets tumbled and the dollar weakened, however, the prospect of multiple rate hikes by the U.S. Federal Reserve over the next year limited gains. Spot gold was 0.8 percent up at $1,204.56 an ounce at 1038 GMT, having hit a low of $1183.42 on Monday, its lowest since September 28. U.S. gold futures were up 0.7 percent at $1,201.6 an ounce.

    Treasuries Recap

    The U.S. Treasuries climbed following global political and trade tensions amid President Donald Trump’s criticism of the Fed’s interest rate hikes. The yield on the benchmark 10-year Treasuries plunged nearly 7 basis points to 3.157 percent, the super-long 30-year bond yields slumped 6 basis points to 3.34 percent and the yield on the short-term 2-year traded nearly 4 basis points lower at 2.844 percent.

    The United Kingdom’s gilts surged during afternoon session amid a global sell-off flu that caught investors’ risk appetite, leading to a crowd in demand for safe-haven assets. The yield on the benchmark 10-year gilts, jumped nearly 5-1/2 basis points to 1.679 percent, the super-long 30-year bond yields surged 3 basis points to 2.054 percent and the yield on the short-term 2-year traded nearly 2-1/2 basis points lower at 0.886 percent.

    The German bunds jumped during European session following charred global risk sentiments and Italy’s burgeoning banking crisis, sitting on a pile of heavy debts. The German 10-year bond yields, which move inversely to its price, plunged 4-1/2 basis points to 0.505 percent, the yield on 30-year note also slumped 4-1/2 basis points to 1.125 percent and the yield on short-term 2-year traded 1 basis point lower at -0.561 percent.

    The Japanese government bonds surged during late Asian session as investors flocked into safe-haven assets tracking United States Treasuries after President Donald Trump threatened to slap additional tariffs on an additional USD267 billion of Chinese imports if the latter decides to retaliate back sharply. The yield on the benchmark 10-year JGB note, which moves inversely to its price, suffered nearly 1-1/2 basis points to 0.141 percent, the yield on the long-term 30-year note slumped 2 basis points to 0.923 percent and the yield on short-term 2-year traded tad lower at -0.118 percent.

    The Australian government bonds gained across the curve during Asian session after global stocks slide to 3-month low, with the S&P500 stock index tumbling over 3 percent to its biggest one-day fall since February. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell over 3 basis points to 2.730 percent, the yield on the long-term 30-year bond also plunged 3 basis points to 3.207 percent and the yield on short-term 2-year down 1-1/2 basis points to 2.028 percent.


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