Europe Roundup: Sterling gains amid Brexit deal hopes, euro rallies as EZ unemployment rate falls, European shares advance – Wednesday, January 9th, 2019

Market Roundup

  • EUR/USD 0.09%, USD/JPY 0.16%, GBP/USD 0.02%, EUR/GBP 0.01%
  • DXY -0.06%, DAX 0.73%, FTSE 0.76%, Brent 1.75%, Gold -0.37%
  • U.S.-China trade talks conclude as hopes of a deal build
  • As Brexit debate begins, PM fails to win over Northern Irish kingmakers
  • EZ Nov Unemployment Rate, 7.9%, 8.1% f'cast, 8.1% prev, 8.0% rvsd
  • Germany Nov Trade Balance SA (EUR), 19.0 bln, 18.0 bln f'cast, 17.3 bln prev, 17.9 bln rvsd
  • Germany Nov Exports MM SA, -0.4%, -0.3% f'cast, 0.7% prev, 0.9% rvsd
  • Germany Nov Imports MM SA, -1.6%, 0.0% f'cast, 1.3% prev, 0.8% rvsd
  • France Dec Consumer Confidence, 87, 90 f'cast, 92 prev, 91 rvsd
  • Italy Nov Unemployment Rate, 10.5%, 10.6% prev
  • BoJ mulls unpleasant policy options if Fed puts rate hikes on hold
  • UK productivity growth falls to two-year low for Q3 2018
  • Sterling to jump 4 pct if Parliament approves PM May's Brexit deal – JPAM
  • EU banking watchdog says new cryptoasset rules may be needed

Economic Data Ahead

  • (0815 ET/1315 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of December. The indicator is expected to decline at a seasonally adjusted annualized rate to 205,000 units after increasing 216,000 units in the previous month.
  • (1100 ET/1600 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending January 4.

Key Events Ahead

  • (0820 ET/1320 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic speaks before the Chattanooga Chamber of Commerce 2019 Economic Outlook Breakfast.
  • (0900 ET/1400 GMT) Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions and monetary policy at the Discover Financial Services Company meeting.
  • (1000 ET/1500 GMT) Bank of Canada will meet to announce its benchmark interest rate, where it is expected to hold interest rates at 1.75 percent.
  • (1030 ET/1530 GMT) Bank of England Governor Mark Carney gives a speech
  • (1115 ET/1615 GMT) Bank of Canada Governor Stephen Poloz and Bank of Canada Senior Deputy Governor Carolyn Wilkins will hold a press conference.
  • (1130 ET/1630 GMT) Federal Reserve Bank of Boston President Eric Rosengren speaks on the economic outlook before the Boston Economic Club.
  • (1400 ET/1900 GMT) The Federal Open Market Committee will release the minutes from its December 18-19 policy meeting.

FX Beat

DXY: The dollar index eased, amid optimism over U.S.-China trade negotiations. The greenback against a basket of currencies trades 0.05 percent down at 95.88, having touched a low of 95.64 on Monday, its lowest since Oct. 22. FxWirePro's Hourly Dollar Strength Index stood at -61.50 (Bearish) by 1100 GMT.

EUR/USD: The euro gained after data showed unemployment in the euro zone unexpectedly fell in November to its lowest rate in more than ten years. The 19-country currency bloc's unemployment dropped to 7.9 percent in November, the lowest level since October 2008, and below forecasts of an 8.1 percent rate. The European currency traded 0.1 percent up at 1.1451, having touched a high of 1.1484 on Tuesday, its highest since Jan. 2. FxWirePro's Hourly Euro Strength Index stood at -0.54 (Neutral) by 1100 GMT. Immediate resistance is located at 1.1485 (December 20 High), a break above targets 1.1527 (October 18High). On the downside, support is seen at 1.1393 (November 19 Low), a break below could drag it till 1.1360 (December 7 Low).

USD/JPY: The dollar surged, amid optimism that the United States and China may be inching towards a trade deal, easing concerns an all-out trade war could hit a slowing global economy. The major was trading 0.2 percent up at 108.90, having hit a low of 104.65 last week, its lowest since March 26. FxWirePro's Hourly Yen Strength Index stood at -58.28 (Bearish) by 1100 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the latest FOMC policy meeting minutes and speeches from Fed officials. Immediate resistance is located at 109.46 (April 26 High), a break above targets 109.73 (June 1 High). On the downside, support is seen at 108.02 (January 7 Low), a break below could take it lower 107.65 (April 23 Low).

GBP/USD: Sterling gained, reversing some of its previous session losses, following report that British Prime Minister Theresa May is attempting to win over the Northern Irish DUP party in a crucial vote next week on her Brexit deal. The major traded 0.1 percent up at 1.2724, having hit a low of 1.2373 on Thursday; it’s lowest since April 2017. FxWirePro's Hourly Sterling Strength Index stood at -106.87 (Highly Bearish) 1100 GMT. Immediate resistance is located at 1.2815 (December 31 High), a break above could take it near 1.2884 (November 19 High). On the downside, support is seen at 1.2680 (December 31 Low), a break below targets 1.2615 (December 27 Low). Against the euro, the pound was trading flat at 89.96 pence, having hit a low of 90.92 on Thursday, it’s lowest since August 18.

USD/CHF: The Swiss franc rose, as the greenback eased amid hopes of faster progress in the U.S.-China trade talks. The major trades 0.1 percent down at 0.9803, having touched a high of 0.9920 last week; it’s highest since December 27. FxWirePro's Hourly Swiss Franc Strength Index stood at -11.84 (Neutral) by 1100 GMT. On the higher side, near-term resistance is around 0.9856 (October 1 High) and any break above will take the pair to next level till 0.9906 (January 3 High). The near-term support is around 0.9770, and any close below that level will drag it till 0.9737 (September 28 Low).

Equities Recap

European shares rose, boosted by gains in export-oriented autos and tech sectors, while the sterling gained on report PM May is attempting to win Northern Irish DUP party in Brexit debate

The pan-European STOXX 600 index rallied 0.7 percent at 348.22 points, while the FTSEurofirst 300 index gained 0.8 percent to 1,372.19 points.

Britain's FTSE 100 trades 0.9 percent up at 6,921.98 points, while mid-cap FTSE 250 rose 1.1 to 18,385.24 points.

Germany's DAX rose 0.7 percent at 10,875.99 points; France's CAC 40 trades 0.9 percent higher at 4,820.28 points.

Commodities Recap

Crude oil prices rose by 2 percent to hit an over 3-week peak as the extension of U.S.-China talks in Beijing raised hopes that the world's two largest economies would resolve their trade dispute. International benchmark Brent crude was trading 1.7 percent up at $59.65 per barrel by 1039 GMT, having hit a high of $60.02 earlier, its highest since December 17. U.S. West Texas Intermediate was trading 1.9 percent higher at $50.68 a barrel, after rising as high as $51.07, its highest since the December 17.

Gold prices edged lower as a likely end to a long-drawn U.S.-China trade war boosted risk sentiment. Spot gold was down 0.4 percent at $1,280.36 per ounce by 1044 GMT, having touched a high of $1,298.42 on Friday, its highest level since June 15. U.S. gold futures were 0.2 percent lower at $1,283.8 per ounce.

Treasuries Recap

The Euro zone government bond yields edged up, with the German 10-year Bund yields rising almost 0.24 percent — above more than two-year lows hit last week at around 0.15 percent.

The Japanese government bond yields rose, as the 10-year JGB futures fell 0.07 point to 152.42. The 10-year JGB yield rose 1.5 basis points to 0.025 percent, extending its rebound from two-year lows of minus 0.025 percent hit on Friday. The 20-year JGB yield rose 1.5 basis points to 0.495 percent while the 30-year yield rose 1.5 basis points. The spread between 10- and 30-year yields stood at 71.5 basis points, the tightest in 5 1/2 months.

The Australian government bonds continued to shrink during Asian session, tracking a similar movement in the U.S. Treasuries on hopes of a faster progress in the U.S.-China trade talks, on way to reach an agreement soon. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 1/2 basis point to 2.335 percent, the yield on the long-term 30-year bond also remained tad higher at 2.844 percent and the yield on short-term 2-year too traded 1/2 basis point higher at 1.908 percent.

The New Zealand government bonds were little changed, with 10-year yields holding at 2.42 percent.

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