News

Europe Roundup: Sterling eases on Brexit concerns, dollar gains against yen on U.S.-China trade deal hopes, European shares surge – Wednesday, October 9th, 2019

Market Roundup

  • DUP would oppose EU Brexit offer over Northern Ireland veto
     
  • World Bank cuts Russian economic growth forecast to 1% in 2019
     
  • Gold steadies ahead of U.S. Fed minutes

Economic Data Ahead

  • (1000 ET/1400 GMT) The U.S. Labor Department releases Job Openings and Labor Turnover Survey (JOLTS) report for the month of August. The report is expected to show job openings eased to 7.191 million from 7.217 million in July.
     
  • (1000 ET/1400 GMT) The U.S. Census Bureau is likely to report that wholesale inventories rose 0.4 percent in August after posting similar gains in the prior month.
     
  • (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending October 4.
     

Key Events Ahead

  • (1100 ET/1500 GMT) Federal Reserve Chairman Jerome H. Powell's speech
     
  • (1400 ET/1800 GMT) The Federal Open Market Committee issues minutes of its latest policy meeting,

FX Beat

DXY: The dollar index eased as Federal Reserve Chair Jerome Powell refrained from committing to more rate cuts even after data showed an unexpected drop in U.S. producer inflation. The greenback against a basket of currencies traded 0.1 percent down at 99.02, having touched a low of 98.64 on Thursday, its highest since September 25.

EUR/USD: The euro surged as the greenback weakened after the U.S. Treasury yield curve steepened. The European currency traded 0.2 percent up at 1.0981, having touched a high of 1.1006 on Monday, its highest since September 25. Immediate resistance is located at 1.1019 (61.8% retracement of 1.1109 and 1.0879), a break above targets 1.1059 (78.6% retracement). On the downside, support is seen at 1.0937 (September 25 Low), a break below could drag it below 1.0904.

USD/JPY: The dollar rose after a Bloomberg report said China was still open to agreeing a partial trade deal with the United States. Bloomberg said China would accept a limited deal as long as no more tariffs are imposed. In return, Beijing would offer non-core concessions like purchases of agricultural products. The major was trading 0.3 percent up at 107.38, having hit a low of 106.48 on Thursday, its lowest since September 24. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. JOLTS Job openings data, wholesale inventories and Fed Chair Powell's speech. Immediate resistance is located at 107.46 (10-DMA), a break above targets 107.95 (September 26 High). On the downside, support is seen at 107.08 (October 9 Low), a break below could take it near at 106.62 (September 6 Low).

GBP/USD: Sterling declined on reports that British Prime Minister Boris Johnson faces rebellion in his cabinet if he leads the country to a no-deal Brexit. Prime Minister Boris Johnson has consistently said the United Kingdom will leave the EU on October 31 with or without a deal. The major traded 0.05 percent down at 1.2213, having hit a low of 1.2195 on Tuesday, it’s lowest since September 4. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2292 (5-DMA), a break above could take it near 1.2371 (21-DMA). On the downside, support is seen at 1.2154 (August 28 Low), a break below targets 1.2108 (August 22 Low). Against the euro, the pound was trading 0.2 percent down at 89.87 pence, having hit a low of 89.99 on Tuesday, it’s lowest since Sept. 9.

USD/CHF: The Swiss franc eased after rising to a 1-week peak in the prior session on growing uncertainty over U.S.-China trade talks and Britain’s exit from the European Union. The major trades 0.1 percent up at 0.9941, having touched a low of 0.9904 earlier, it’s lowest since September 30. On the higher side, near-term resistance is around 0.9987 and any break above will take the pair to next level till 1.0027. The near-term support is around 0.9897, and any close below that level will drag it till0.9865.

Equities Recap

European shares rose as risk sentiment improved following upbeat corporate earnings and as investors awaited FOMC meeting minutes and trade talks between the U.S.-China.

The pan-European STOXX 600 index rallied 0.4 percent at 380.28 points, while the FTSEurofirst 300 surged 0.5 percent to 1,497.27 points.

Britain's FTSE 100 trades 0.5 percent up at 7,179.37 points, while mid-cap FTSE 250 gained 0.1 to 19,211.61 points.

Germany's DAX rose 0.9 percent at 12,088.92 points; France's CAC 40 trades 0.7 percent higher at 5,495.67 points.

Commodities Recap

Crude oil prices surged, boosted by unrest in OPEC members Iraq and Ecuador, while fading hopes for progress in U.S.-China trade talks limited upside. International benchmark Brent crude was trading 1.2 percent up at $58.83 per barrel by 1027 GMT, having hit a low of $57.13 on Thursday, its lowest since August 7. U.S. West Texas Intermediate was trading 1.1 percent higher at $53.16 a barrel, after falling as low as $50.97 on Thursday, its lowest since August 7.

Gold prices declined ahead of minutes from the U.S. Federal Reserve’s September meeting, which could shed light on future interest rate cuts. Spot gold eased 0.2 percent to $1,501.93 per ounce by 1029 GMT, having touched a low of $1,486.72 on Tuesday, its lowest since October 2. U.S. gold futures gained 0.3 percent to $1,508.10 per ounce.

Treasuries Recap

The U.S. Treasuries plummeted during the afternoon session despite a speech by Federal Open Market Committee (FOMC) Chair Jerome Powell, delivered late yesterday, where he concluded to expand the size of the balance sheet very soon. However, investors will eye anther speech from him today, besides, the JOLTs job openings data for the month of August, scheduled to be released today by 14:00GMT and the FOMC’s October meeting minutes, due at 18:00GMT for further direction in the debt markets. The yield on the benchmark 10-year Treasury yield surged nearly 2 basis points to 1.556 percent, the super-long 30-year bond yield also gained 1-1/2 basis points to 2.057 percent and the yield on the short-term 2-year traded a tad above 1 basis point up at 1.437 percent.

The German bunds plunged during European session as investors await the country’s trade balance data for the month of August, scheduled to be released on October 10 by 06:00GMT and the consumer price inflation (CPI) for the month of September, due for release on the following day by 06:00GMT for further direction in the debt market. The German 10-year bond yield, which move inversely to its price, jumped 3 basis points to -0.566 percent, the yield on 30-year note surged 4 basis points to -0.071 percent and the yield on short-term 2-year traded nearly 1 basis point higher at -0.757 percent.

The Japanese government bonds closed flat ahead of the country’s producer price index (PPI) for the month of September, scheduled to be released on October 9 by 23:50GMT and the super-long 30-year auction, due to be released on the following day by 03:35GMT, amid ongoing geopolitical tensions and worries over global economic slowdown. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, hovered around -0.208 percent, the yield on the long-term 30-year remained flat at 0.375 percent and the yield on short-term 2-year too held steady near -0.319 percent.

The Australian government bonds jumped tracking a similar movement in the United States’ Treasuries after Chairman of the Federal Reserve, Jerome Powell, announced an increase in the size of the central bank’s balance sheet soon. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1 basis point to 0.885 percent, the yield on the long-term 30-year bond also suffered 1 basis point to 1.486 percent and the yield on short-term 2-year remained tad down at 0.638 percent.


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