Europe Roundup: Sterling at 6-week peak as poll show Conservative lead widening, euro tumbles as EZ PPI eases, European shares plunge on trade tariffs – Tuesday, December 3rd, 2019

Market Roundup

  • Eurozone producer prices fall in Oct
  • UK construction downturn eases a little in November: PMI
  • EU ready to respond to U.S. tariff threat on France: Le Maire
  • Oil gains as Saudi pushed for further supply cuts

Economic Data Ahead

  • (0945 ET/1445 GMT) The NAPM-New York releases ISM-New York Index for the month of November. The index stood at 47.7 in the previous month.
  • (1530 ET/2030 GMT) Autodata Corp will report U.S. auto sales figures for the month of November. Vehicle sales stood at 16.6 million units in October.
  • (1630 ET/2130 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (1230 ET/1730 GMT) ECB Executive Board member Benoit Coeure gives a speech

FX Beat

DXY: The dollar index tumbled to a near 2-week low on Monday’s weak manufacturing reading for the U.S. economy. The U.S. ISM's index of national factory activity declined 0.2 points to a below-forecast 48.1 in November, while separate data showed construction spending fell in October. The greenback against a basket of currencies traded 0.1 percent down at 97.81, having touched a low of 97.75 earlier, its lowest since November 21. 

EUR/USD: The euro declined from a 1-1/2 week peak hit in the previous session after the U.S. government said it may impose punitive duties of up to 100 percent on $2.4 billion of imports from France, after concluding that France’s new digital services tax would harm U.S. tech companies. Moreover, data showing a slump in energy prices pulled down the overall producer price index in the eurozone in October further dented the bid tone around the major. The European currency traded 0.05 percent down at 1.1075, having touched a high of 1.1090 on Monday, its highest since November 21. Immediate resistance is located at 1.1097, a break above targets 1.1123. On the downside, support is seen at 1.1052, a break below could drag it below 1.1036 (10-DMA).

USD/JPY: The dollar plunged to a 1-week trough as risk sentiment weakened following news of U.S. tariffs on imports of metals from Argentina and Brazil and the threat of more tariffs on a range of European goods. The major was trading 0.1 percent down at 108.84, having hit a high of 109.72 on Monday, its highest since May 30. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. ISM-NY business conditions. Immediate resistance is located at 109.30 (5-DMA), a break above targets 109.83. On the downside, support is seen at 108.56, a break below could take it near at 108.34.

GBP/USD: Sterling rallied to a 6-week peak after the latest poll showed the ruling Conservative Party widening its lead before next week’s election. The major traded up at 1.2993, having hit a high of 1.2995 earlier, it’s highest since October 22. Investors’ attention will remain on the development surrounding the general elections, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3012, a break above could take it near 1.3040. On the downside, support is seen at 1.2911 (5-DMA), a break below targets 1.2881 (21-DMA). Against the euro, the pound was trading 0.5 percent up at 85.23 pence, having hit a high of 84.99 on Thursday, it’s highest since May 8.

USD/CHF: The Swiss franc advanced to a 2-week high as disappointing manufacturing data and signs of new fronts in U.S. President Donald Trump’s trade war rattled investors sentiment. The major trades at 0.2 percent down at 0.9894, having touched a low of 0.9884 earlier, it’s lowest since November 19. On the higher side, near-term resistance is around 0.9934 (21-DMA). and any break above will take the pair to the next level till 0.9953 (10-DMA). The near-term support is around 0.9868, and any close below that level will drag it till 0.9850.

Equities Recap

European shares slumped as investor risk sentiment weakened after U.S. President Donald Trump opened up new trade war fronts despite signs of economic damage.

The pan-European STOXX 600 index tumbled 0.2 percent at 400.26 points, while the FTSEurofirst 300 declined 0.1 percent to 1,566.61 points.

Britain's FTSE 100 trades 1.1 percent down at 7,203.00 points, while mid-cap FTSE 250 eased 0.7 to 20,557.64 points.

Germany's DAX rose 0.4 percent at 13,015.57 points; France's CAC 40 trades 0.5 percent lower at 5,755.99 points.

Commodities Recap

Crude oil prices rose on rising expectations of deeper output cuts when OPEC and its allies meet this week, although scepticism about a deal limited the upside. International benchmark Brent crude was trading up at $60.03 per barrel by 1048 GMT, having hit a low of $60.34 on Friday, its lowest since November 20. U.S. West Texas Intermediate was trading 0.2 percent up at $56.05 a barrel, after falling as low as $55.01 on Friday, its lowest since November 20.

Gold prices surged to a 1-1/2 week peak as U.S. President Donald Trump’s move to impose tariffs on Brazil and Argentina stoked fresh global trade tensions. Spot gold trading 0.5 percent up at $1,470.13 per ounce by 1052 GMT, having touched a high of $1470.71 earlier, its highest since Nov. 22. U.S. gold futures fell 0.1 percent to $1,468.20.

Treasuries Recap

The German benchmark 10-year Bund yield traded near its highest levels in three weeks at around -0.29 percent, up 45 basis points from record lows hit in early September.

The Japanese government bond prices dropped, with benchmark futures falling to a 7 1/2-month low. The benchmark 10-year JGB futures fell 0.22 point to 152.54, the lowest close since mid-April. The 10-year cash JGB yield rose 2.5 basis points to minus 0.025 percent, hitting its highest level since April. The five-year yield rose 2.5 basis points to minus 0.135 percent, a 7 1/2-month high. The two-year JGB yield rose 1.5 basis points to minus 0.155 percent. The 20-year JGB yield rose 2 basis points to 0.290 percent, compared to its November peak of 0.325 percent, a 5 1/2-month high, while the 30-year JGB yield rose 1.5 basis points to 0.440 percent, versus 0.485 percent touched in mid-November.

The Australian 3-year futures eased 6 ticks to 99.250 and away from last week's top at 99.395. The 10-year contract lost 6.5 ticks to 98.8400, implying a yield of 1.16 percent.

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