Europe Roundup: Dollar Weighs on Commodities and Shares As fED Tightening Risk Rises, Sterling Index on Course for Worst
- Trump's tariff plan could boomerang, spark trade wars with China, Mexico.
- Japan may resurrect Abenomics with big stimulus package in spring – Barron’s.
- BoJ Gov Kuroda (in Diet): NIRP will impact economy-prices but with time lag.
- PM Abe: Not conducting monetary policy to target currencies.
- Kuroda: NIRP can’t solve all Japan problems with monetary policy.
- Kuroda: No need to continue with QQE once price target achieved.
- BoJ Policy Board March 14-15 Mins: Heated debate on negative rate policy, drawbacks.
- BoJ Minutes: Aiming for surprise effect heightened concerns.
- BoJ Mins: Rolling back NIRP would erode confidence in BoJ.
- BoJ Mins: Balance of risks to Japan, overseas economies tilted to downside.
- Irony of negative rates: Japanese investors flock to Europe and vice versa.
- 62% of Japanese firms think BoJ NIRP bad decision – Reuters Survey.
- 3/4 of Japanese firms want more economic stimulus – Reuters Survey.
- Japanese firms divided on whether govt should press ahead with sales tax hike – Reuters Survey.
- Japan firms could stash cash in safes if rates go negative - Reuters Survey.
- Dutch Central Bank to make E3.8bn provision for QE losses.
- SNB purchased 86.1 bln CHF in foreign currency in 2015 to weaken CHF.
- Swiss Mar ZEW investor sentiment 2.5 vs -5.9 previous.
- Trump says Britain will vote to leave EU over migration concerns.
- EU exit could make Britain safer – former MI6 spy chief.
- BBA survey: Leaving EU would be bad for Britain’s banks.
- 3mth GBP/USD vol rises to 70 month high of 15.2% vs 14.5% at London open.
- 3mth EUR/GBP vol rises to 14.05% 7-yearr high vs 13.6% at London open.
- 3mth GBP options encompass Brexit referendum event risk.
- UK Feb BBA mortgage approvals 45,892 vs 47,509 previous.
- UK Feb Retail sales -0.4% m/m vs 2.3% previous, -0.7% expected.
- UK Feb Retail sales +3.8% y/y vs 5.2% previous, 3.8% expected.
Economic Data Preview
- (0830 ET/1230 GMT) The number of Americans filing for jobless benefits are expected to have gained for the week ended March 19, however below a level associated with a strengthening labor market. The initial claims for state unemployment benefits are likely to have increased 3,000 to a seasonally adjusted 268,000.
- (0830 ET/1230 GMT) The U.S. orders for durable goods are likely to have declined 2.9 percent in February after rebounding strongly 4.9 percent in January.
- (0945 ET/1345 GMT) The Markit Economics releases its Preliminary Services Purchasing Managers Index (PMI) for the month of March. The index stood at 49.7 in the prior month.
- (1100 ET/1500 GMT) The Energy Information Administration reports its Natural Gas Storage for the week ending March 18.
- (1200 ET/1700 GMT) Baker Hughes reports United States Oil Rig Count.
- (1930 ET/2330 GMT) Japan's Statistics Bureau will release its National Consumer Price Index for the month of February. The index stood at 0.0 percent in the previous month.
Key Events Ahead
- (0815 ET/1215 GMT) Federal Reserve Bank of St. Louis President James Bullard speaks on the U.S. economy and monetary policy before the New York Association for Business Economics.
- (0830ET/1230 GMT) CBO to issue updated baseline budget projection.
- (0945 ET/1345 GMT) New York FedTrade 30-year Ginnie Mae, max $1.200bn.
- (1600 ET/2000 GMT) Treasury Assistant Secretary Marisa Lago speaks before the "Financial Regulation for Financial Inclusion: What Should Policymakers Do?" conference hosted by the Center for Global Development in Washington.
The U.S. dollar weighed on commodities and shares after an official from U.S. Fed hinted a chance of more than one hike in interest rates this year. European shares dropped over 1 percent, their biggest drop in over a week, as they fell for a fourth straight session. Britain's FTSE 100 was down 0.8 pct and France's CAC 40 slid 0.8 pct.
Japan's Nikkei lost 0.6 percent, China's CSI300 Index ended down 1.7 pct at 3,181.85 points, while Shanghai Composite Index lost 1.6 pct at 2,960.97 points. HK’s Hang Seng index closed down 1.3 pct at 20,345.61 points.
Oil declined below $40 a barrel, heading for the biggest weekly slide in 2 months, dented by record-high stockpiles in the United States and a stronger dollar. Brent crude futures were down 48 cents at $39.79 a barrel by 1027 GMT, while U.S. crude futures were down 57 cents at $39.22 a barrel, trading further below the important $40 level.
Gold slipped to its lowest in nearly 1-month and was poised for its biggest weekly loss since early November as hawkish comments by the Fed officials stoked a recovery in the dollar. Spot gold edged down 0.5 percent to $1,218.15 by 1029 GMT, adding to more than 2 percent losses from the previous session and was on track for a 3.3-percent weekly loss. U.S. gold slipped 0.9 percent to $1,213.10.
The 10-year U.S. Treasury yield was back down at 1.87 percent in European trading from a high of 1.95 percent on Wednesday.
Euro zone government bond yields declined following a drop in oil prices that pinned long-term inflation expectations near 3-week lows. German 10-year Bund yields dropped 2 basis points to 0.178 percent, the lowest in two weeks. The Italian 10-year yields were trading at 1.27 percent, while Spanish yields were at 1.44 percent and Portuguese yields at 2.77 percent. The10-year Bund futures were up 20 ticks from their open and 40+ ticks from Wednesday's settle. Peripheral spreads are wider, by 2.7bp for 10-year BTPs to Bunds, and 3.4bp for 10-year Bonos.
Japanese government bond prices declined, with the superlong zone underperforming after the BoJ bought fewer than expected longer bonds in its purchase operations. The benchmark 10-year JGB yield added 2 basis points to minus 0.090 percent, while the yield on the 20-year JGB added 7 basis points to 0.415 percent. The 30-year JGB yield added 10 basis points to 0.540 percent, moving away from a record low of 0.415 percent on Tuesday. June 10-year JGB futures were flat at 151.86.
UK Gilts opened 10 ticks higher than the settlement of 120.82 as weak equities and pre Easter caution underpinned core fixed income space. Thin trading conditions allowed buyers to extend gains and stops were triggered as key support levels gave way on 10-year cash yields. Recent lows down at 1.42% have been breached from the open of 1.432% and 50% of February lows and March highs is now the next target at 1.406%. June Gilts are slightly lower after retail sales data at121.09.
Australia 3-year bond futures rose 4 ticks to 98.020, while the 10-year contract added on 6.5 ticks to 97.4150. New Zealand government bond prices edged up, sending yields 2.5 basis points lower along the curve.
USD: The dollar was on its track to record its best run in almost a year on Thursday, pressuring commodities and shares after another official from U.S. Fed hinted up the chance of more than one hike in U.S interest rates this year. Against a basket of currencies it was trading at 96.167, up 0.13 pct. The greenback was trading at 112.68 yen.
USD/JPY: The pair has retreated after making a high of 113 and was currently trading around 112.69. The short term trend is slightly weak as long as resistance 113.20 holds. On the lower side major support is around 112 and break below targets 111.35/110.65. The major resistance is around 113.20 and break above targets 113.60/114.25.
EUR/USD: The euro hit an 8-day low of $1.1149, having lost 0.9 percent so far this week, with attacks in Brussels on Tuesday bruising sentiment. It was trading around 1.11731 and the intraday trend is slightly bullish as long as support 1.1150 holds. On the lower side any break below 1.1150 will drag the pair down till 1.1100/1.1050. Any break above 1.1260 will confirm minor bullishness for the intraday, a jump till 1.1300/1.1350 is possible. The minor resistance is around 1.1200 and the short term bearish invalidation only above 1.13500.
GBP/USD: The Sterling slid to $1.4064 on concerns this week's attacks in Brussels could aid the campaign to leave the European Union in June's "Brexit" vote. It was on course for its worst week against a basket of currencies in six years on Thursday. It also weakened to its lowest against the euro since December 2014. It has broken minor resistance 1.4100 and jumped till 1.4115 at the time of writing. The short term trend is slightly bullish as long as support 1.4050 holds. Any break above 1.4100 will take the pair till 1.4167/1.4200/1.4250. The short term bearish invalidation is only above 1.4250. On the lower side any break below 1.4050 will drag it down till 1.4000/1.3970 level.
USD/CHF: The pair has retreated after making a high of 0.97733 and was trading around 0.97500. The short term trend is slightly weak as long as resistance 0.9780 holds. The major support is around 0.9720 and any break below will drag the pair down till 0.9680/0.9650 level. On the higher side minor resistance is around 0.9780 and any break above targets 0.9855/0.9900. The short term bearish invalidation only above 0.9780. The Swiss National Bank (SNB) purchased 86.1 billion Swiss francs ($88.23 billion) in foreign currency last year to enforce a minimum exchange rate, scrapped in January, and influence exchange rate developments, according to its annual report published on Thursday.
AUD/USD: The Australian dollar was under pressure after suffering its biggest one-day fall in nearly a month as a broadly firmer greenback took a toll on commodity prices. It last stood at $0.7510, down 0.3 percent on the day and pulling further away from an 8-1/2 month high of $0.7681 set on Friday. The short term trend is slightly weak as long as resistance 0.7600 holds. On the higher side major resistance is around 0.7600 and break above targets 0.7725/0.7750. The minor resistance is around 0.7550 and the major support is around 0.7445, a break below will drag the pair till 0.7400/0.73550.
NZD/USD: The New Zealand dollar hovered just above 67 U.S. cents after four days of declines. It found a bit of support when New Zealand's monthly trade surplus came in higher than expected.
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