Europe Roundup: Sterling breaks above 1.3000 on Brexit deal hopes, greenback rebounds amid U.S.-China trade deal optimism, Europe shares advance – Monday, October 21st, 2019

Market Roundup

  • Northern Irish DUP lawmaker: we shall not support EU customs union proposal
  • Oil prices fall as global demand concerns increase
  • Gold steadies as markets seek clarity on Brexit

Economic Data Ahead

  • N/A U.S. reports its monthly budget statement for the month of September. The government posted a deficit of $200 billion in the previous month

Key Events Ahead

  • (1140 ET/1540 GMT) Federal Reserve's Board Governor Michelle Bowman's speech

FX Beat

DXY: The dollar index steadied near a 2-1/2 month low as investors awaited further developments in the U.S.-China trade talks and the U.S. Federal Reserve meeting at the end of the month for further cues on monetary policy easing. The greenback against a basket of currencies traded 0.1 percent up at 97.24 having touched a low of 97.14 on Friday, its lowest since August 9.

EUR/USD: The euro rallied to an over 2-month peak after data released earlier showed the European Union’s statistics agency revised up Germany’s budget surplus for 2018. The European currency traded 0.1 percent higher at 1.1170, having touched a high of 1.1179 earlier, its highest since August 14.  Immediate resistance is located at 1.1200, a break above targets 1.1230. On the downside, support is seen at 1.1130, a break below could drag it below 1.1101.

USD/JPY: The dollar bounced back from a near 1-week low, supported by Chinese vice-premier Liu He’s comments on Friday that Beijing will collaborate with the United States to address mutual concerns on the trade war. The major was trading 0.2 percent up at 108.58 having hit a low of 108.29 earlier, its lowest since October 15. Immediate resistance is located at 108.99 (July 31 High), a break above targets 109.31 (August 1 High). On the downside, support is seen at 108.12 (10-DMA), a break below could take it near at 108.03 (October 14).

GBP/USD: Sterling surged to an over 5-month peak above the 1.3000 handle, amid receding risk of a British no-deal exit from the European Union and in the belief that the UK parliament could yet approve a Brexit agreement. The major traded 0.1 percent up at 1.2986, having hit a high of 1.3011 earlier, it’s highest since May 13. Immediate resistance is located at 1.3019, a break above could take it near 1.3040. On the downside, support is seen at 1.2815 (5-DMA), a break below targets 1.2748. Against the euro, the pound was trading 0.05 percent up at 85.96 pence, having hit a high of 85.74 on Thursday, it’s highest since May 8.

USD/CHF: The Swiss franc retreated from a 1-1/2 month peak as risk sentiment improved on hopes that Britain would be able to avoid a disorderly exit from the European Union. The major trades 0.2 percent up at 0.9856, having touched a low of 0.9839 on Friday, it’s lowest since September 5. On the higher side, near-term resistance is around 0.9914 and any break above will take the pair to the next level till 0.9946. The near-term support is around 0.9828, and any close below that level will drag it till 0.9799.

Equities Recap

European shares gained amid hopes for progress towards resolving the U.S.-China trade war and a belief that Britain will avoid a disorderly exit from the European Union.

The pan-European STOXX 600 index advanced 0.4 percent at 393.41 points, while the FTSEurofirst 300 rallied 0.4 percent to 1,540.52 points.

Britain's FTSE 100 trades 0.2 percent up at 7,164.69 points, while mid-cap FTSE 250 surged 0.2 to 20,260.71 points.

Germany's DAX rose 0.7 percent at 12,726.22 points; France's CAC 40 trades 0.2 percent higher at 5,644.91 points.

Commodities Recap

Crude oil prices declined, extending previous session losses amid concerns about slackening global demand. International benchmark Brent crude was trading 0.9 percent at $58.74 per barrel by 1018 GMT, having hit a high of $60.66 earlier in the month, its highest since September 30. U.S. West Texas Intermediate was trading 0.7 percent down at $53.17 a barrel, after rising as high as $54.60 earlier in the month, its highest since September 30.

Gold prices consolidated within narrow ranges as traders awaited more clarity on Brexit and U.S.-China trade ties. Spot gold was trading 0.1 percent up at $1,491.14 per ounce by 1021 GMT, having touched a low of $1,473.88 earlier in the month, its lowest since October 1. U.S. gold futures were little changed at 1,494.20.

Treasuries Recap

The U.S. Treasuries suffered during the afternoon session ahead of the Federal Open Market Committee (FOMC) member Bowman’s speech, scheduled to be delivered today by 15:40GMT amid a quiet start with no top-tier data due today and existing home sales figures for September the most notable release tomorrow. The yield on the benchmark 10-year Treasury yield jumped 2-1/2 basis points to 1.775 percent, the super-long 30-year bond yield surged nearly 3-1/2 basis points to 2.280 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 1.590 percent.

The United Kingdom’s gilts plummeted during European trading hours as hassles over a Brexit deal since long has trouble investor sentiments to the core, so much so that European Union diplomats do not want to further extend the departure deadline beyond October 31. The yield on the benchmark 10-year gilts, jumped 4-1/2 basis points to 0.722 percent, the 30-year yield sky-rocketed 7 basis points to 1.261 percent and the yield on the short-term 2-year gained surged 3 basis points to 0.573 percent.

The German bunds slumped during European session ahead of the country’s manufacturing PMI for the month of October, scheduled to be released on October 24 by 08:30GMT and the European Central Bank’s (ECB) monetary policy meeting, also due to be held on the same day by 11:45GMT. The German 10-year bond yield, which move inversely to its price, jumped 3-1/2 basis points to -0.350 percent, the yield on 30-year note surged 4 basis points to 0.157 percent while the yield on short-term 2-year traded flat at -0.664 percent.

The Australian government bonds remained tad higher during Asian session of the first trading day of the week as investors remained side-lined amid muted hours that witnessed data of little economic significance. However, the disappointment from China’s gross domestic product (GDP) for the third quarter of this year, further weighed on bond yields. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1 basis point to 1.141 percent, the yield on the long-term 30-year bond edged 1 basis point down at 1.728 percent and the yield on short-term 2-year too traded 1 basis point lower at 0.794 percent.   

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