News

Europe Roundup: Euro consolidates as EZ GDP slows in Q2; Swiss franc, yen rallies as recession warnings grow, European shares plunge – Wednesday, August 14th, 2019

Market Roundup

  • French jobless rate fell in second-quarter to lowest level since end-2008
     
  • EU imposes duties of up to 18% on Indonesian biodiesel
     
  • UK inflation unexpectedly overshoots BoE target in July
     
  • Eurozone GDP slows in second-quarter
     
  • Growth in Germany shrinks

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Labor Department publishes import and export prices index for the month of July. The import prices are likely to have stayed flat after declining 0.9 percent in June, while exports are also expected to stay flat after decreasing 0.7 percent in the prior month.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending August 9.

Key Events Ahead

  • No Significant Event Scheduled

FX Beat

DXY: The dollar index held firm near an over 1-week peak as market focus shifts to the U.S. Federal Reserve’s annual symposium next week for clues on the future path of interest rates. The greenback against a basket of currencies traded flat at 97.80, having touched a low of 97.03 on Friday, its lowest since July 19.

EUR/USD: The euro consolidated within narrow ranges after data showed the euro zone’s GDP barely grew in the second quarter of 2019, weighed down by a global slowdown driven by trade conflicts and uncertainty over Brexit. The European currency at 1.1185, having touched a high of 1.1249 last week, its highest since July 19. Immediate resistance is located at 1.1241 (August 7 High), a break above targets 1.1282 (July 19 High). On the downside, support is seen at 1.1138 (50% retracement of 1.1026 and 1.1249), a break below could drag it below 1.1111 (61.8% retracement).

USD/JPY: The dollar plunged, reversing some of its previous session gains, as weaker-than-expected economic data tempered the optimism generated by a U.S. decision to delay tariffs on Chinese imports. The major was trading 0.6 percent down at 106.11, having hit a low of 105.05 on Monday, its lowest since Jan 3. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. import and export index. Immediate resistance is located at 107.18 (50.0% retracement of 109.31 and 105.05), a break above targets 107.68 (61.8% retracement). On the downside, support is seen at 106.00 (5-DMA), a break below could take it lower at 105.49 (Aug. 7 Low).

GBP/USD: Sterling steadied after data showed Britain’s inflation rate unexpectedly overshot the Bank of England’s 2 percent target. The economy's annual consumer price inflation rose to a three-month high of 2.1 percent in July from 2.0 percent in June, surpassing expectation for a fall to 1.9 percent. The major traded 0.2 percent up at 1.2100, having hit a low of 1.2014 on Monday, it’s lowest since Jan. 2017. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2135 (23.6% retracement of 1.2522 and 1.2079), a break above could take it near 1.2210 (38.2% retracement). On the downside, support is seen at 1.1986 (Jan 16, 2017, Low, a break below targets 1.1904 (Oct 7, 2016, Low). Against the euro, the pound was trading 0.2 percent up at 92.43 pence, having hit a low of 93.24 on Monday, it’s lowest since October 2009.

USD/CHF: The Swiss franc rebounded from a near 1-week low as weak industrial data from China and a contraction for the export-reliant German economy in the second quarter highlighted the impact of the trade war between the United States and China. The major trades 0.4 percent down at 0.9727, having touched a low of 0.9659 the day before, it’s lowest since September 2018. On the higher side, near-term resistance is around 0.9780 (38.2% retracement of 0.9975 and 0.9659) and any break above will take the pair to next level till 0.9817 (50.0% retracement). The near-term support is around 0.9650 (Sept. 6 Low), and any close below that level will drag it till 0.9600.

Equities Recap

European shares slumped as a shrinking German economy and weak industrial data from China stoked fears of a global slowdown.

The pan-European STOXX 600 index declined 1.1 percent at 368.33 points, while the FTSEurofirst 300 tumbled 1.1 percent to 1,450.30 points.

Britain's FTSE 100 trades 1.1 percent down at 7,174.82 points, while mid-cap FTSE 250 fell 0.9 to 18,837.77 points.

Germany's DAX eased 1.6 percent at 11,563.36 points; France's CAC 40 trades 1.5 percent lower at 5,285.83 points.

Commodities Recap

Crude oil prices declined on disappointing economic data from China and Europe and a rise in U.S. crude inventories.  International benchmark Brent crude was trading 0.8 percent lower at $60.44 per barrel by 1052 GMT, having hit a high of $61.48 on Tuesday, its highest since August 5. U.S. West Texas Intermediate was trading 1.1 percent down at $56.03 a barrel, after rising as high as $57.43 on Tuesday, its highest since August 1.

Gold prices steadied after declining from an over 6-year peak in the previous session on news that the United States delayed tariffs on some Chinese imports, easing trade concerns, although political uncertainties and lingering global growth concerns limited downside. Spot gold was trading 0.6 percent up at $1,509.29 per ounce by 1055 GMT, having touched a high of $1,534.89 on Tuesday, its highest since April 2013. U.S. gold futures were down 0.2 percent at $1,510.80 an ounce.

Treasuries Recap

The yield on the U.S. benchmark 10-year Treasury yield has lost nearly 9 basis point from yesterday’s close 1.705% and is currently trading around 1.618%.The 30-year bond yield declined nearly 11 basis points from high 2.171% made yesterday. The short-term 2-year traded lower at 1.616 percent.

The yield on the UK benchmark 10-year gilts, lost 3 basis points to 0.464% percent, the 30-year yield dipped 7.4 basis points to 1.07 percent after better than expected UK CPI .The yield on the short-term 2-year jumped nearly 2.5 basis points to 0.471 percent.

The German 10-year bond yield, which moves inversely to its price, slipped 3.7 basis points to -0. 646 percent , the yield on 30-year note has declined to -0.183% percent and the yield on short-term 2-year traded tad down at –0.88 percent.


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