Europe Roundup: Sterling Hits 2-Year Low Against Trade-weighted Basket; Dollar Hovers Near 5-1/2-Mth Low Vs Euro

Europe Roundup: Sterling Hits 2-Year Low Against Trade-weighted Basket; Dollar Hovers Near 5-1/2-Mth Low Vs Euro

Market Roundup

• Donald Trump predicts massive recession, economists puzzled – Washington Post, 
• BoJ Tankan corporate price expectations weak, CPI +0.8% exp in year, +1.1% in 3 years 
• Japan coordinating G7 members to emphasize fiscal spending – Sankei 
• Japan interbank lending shrinks to nearly 36-year low due to NIRP – Nikkei 
• Japan trust banks to cut pension funds’ exposure to Japanese stocks – Nikkei 
• RBA seen certain to stand pat in April – Reuters Survey 
• Eurozone Apr Sentix index 5.7 vs 5.5 previous, 6.4 exp 
• Eurozone Feb Producer prices -0.7% m/m vs -1.0% previous, -0.6% exp 
• Eurozone Feb Producer prices -4.2% y/y vs -2.9% previous, -4.0% exp 
• Eurozone Feb Unemployment rate 10.3% vs 10.3% previous,10.3% exp 
• ECB QE2 begins  
• Praet: ECB prepared to do more if necessary to achieve inflation target  
• 43% Brits want to leave EU, 39% want to remain, 18% undecided – Opinium poll for Observer 
• UK firms putting plans on hold ahead of EU vote – Deloitte survey  
• UK Mar Markit/CIPS construction PMI 54.2 vs 54.2 previous, 54.0 exp

Economic Data Ahead

• (1000 ET/1400 GMT) The Fed will release its labor market conditions index for the month of March. The index posted a decline of -2.4 in the prior month. 
• (1000 ET/1400 GMT) The U.S. Commerce Department is likely to report that factory orders declined 1.7 percent in the month of February, reversing January's 1.6 percent gain.  
• (1030 ET/1430 GMT) The Bank of Canada releases Business outlook survey.  
• (1800 ET/2200 GMT) The New Zealand Institute of Economic Research will report its Business Confidence data for the first quarter. The rate was at 15 percent in the previous quarter. 
• (1930 ET/ 2330 GMT) The Australian Industry Group releases its Performance of Services Index for the month of March. The index stood at 51.8 in month of February.    

Key Events Ahead 

• (1000 ET/1400 GMT) The Bank of Canada Governor Stephen Poloz and Deputy Governor Carolyn Wilkins will speak to elementary students about the public consultations to choose a woman to appear on a bank note. 
• (1015 ET/1415 GMT) Boston Fed President Eric Rosengren speaks on "a view on cyber security and financial stability from the CEO" before the Federal Reserve Bank of Boston 2016 cyber security conference.   
• (1900 ET/2300 GMT) Minneapolis Fed President Neel Kashkari participates in a town hall discussion on how to end the threat of too-big-to-fail banks.  

FX Beat

USD:  The dollar was on the defensive after firm U.S. jobs report failed to shift the broadly held view that the Federal Reserve will remain cautious on interest rate hikes this year. The dollar index rose 0.8 percent at 94.68 against a basket of major currencies,

EUR/USD: The euro edged down 0.2 percent to 1.1363, not far from a 5-1/2-month high of 1.1437 hit on Friday. The currency came under pressure as Eurozone producer prices dropped by 0.7 percent month-on-month for a 4.2 percent year-on-year decline in February. The short term trend is slightly weak as long as resistance 1.14380 holds. Any break above 1.14380 will take the pair to next level around 1.1500/1.15486. On the lower side major support is around 1.1320 and break below targets 1.1280/1.1200/1.1155. The short term trend is reversal only below 1.1050.

USD/JPY: The Japanese yen was trading slightly lower at 111.66 against the dollar, after rising to a high of 111.32 earlier in the day. The pair has broken major support 112 and declined till 111.32. The short term trend is slightly bearish as long as resistance 113 holds. On the lower side major support is around 110.60 and break below targets 110/108.85. The major resistance is around 113 and break above targets 113.80/114.25.

GBP/USD: Sterling declined to a more than 2-year low against a trade-weighted basket, amid persistent concerns over a possible British exit from the European Union. Sterling edged up to 1.4261, after sliding to a low of 1.4170 on Friday. The recovery comes as the PMI Construction for the month of March was better than expectation and in line with previous at 54.2. The euro was up 1.2 percent against the pound at 80.20 pence, its highest since November 2014. That put trade-weighted sterling at 84.3, its lowest since December 2013. On the higher side major resistance is around 1.4250 and any indicative break above will take the pair 1.4320/1.4360 in short term. The minor support is around 1.4170 and break below targets 1.4150/1.4100. The short term trend is reversal only below 1.4050.

USD/CHF: The Swiss franc reversed its previous session gains, trading 0.33 percent lower at 0.9605 against the dollar. The pair has slightly recovered after making a low of 0.9554. The short term trend is slightly bullish as long as support 0.9550 holds. Major support is around 0.9550 and any break below 0.9580 will drag the pair down till 0.9530/0.9475 in short term. On the higher side any trend reversal can happen only above 0.9800. The minor resistance is around 0.9630 and break above targets 0.9680/0.9720 level.

AUD/USD: The Australian dollar eased to 0.7612, after a mixed domestic economic data failed to impress the market. The Aussie slumped more than 0.7 percent to 0.7604, moving away from an 8-month high of $0.7723 hit last week when a bounce in commodity prices strengthened it. Markets now await the Reserve Bank of Australia policy meeting, however investors expect the central bank to keep the cash rate unchanged at a record low 2.0 percent. The pair has slightly retreated after making a high of 0.7728. The short term trend is slightly weak  as long as resistance 0.7725 holds. On the higher side major resistance is around 0.7725 and break above targets 0.7750/0.7800. The minor support is around 0.7600 and break below will drag the pair till 0.7570/0.7530/0.7500.

NZD/USD: The New Zealand dollar extended losses against its U.S. counterpart, hovering towards previous session's low of 0.6835. The kiwi has retreated after last week's rally to a 9-month high of 0.6966. The pair trades around 0.6847 levels after making a high of 0.6903. On the downside, support is located at 0.6796 (10-DMA), while on the upside resistance is seen at 0.6937 (Previous Session High).

Equities Recap

Europe shares rose after early fall as investor sentiments were strengthened by upbeat U.S. labor market data and a rebound in Chinese manufacturing activity.

The pan-European FTSEurofirst 300 share index and  Britain's FTSE 100 index both rose 0.2 percent, Germany's DAX gained 0.9 pct, France's CAC 40 climbed 0.4 pct.

Tokyo's Nikkei edged down 0.25 pct at 16,123.27. MSCI's broadest index of Asia-Pacific shares outside Japan earlier rose 0.1 percent, although many of its components were not traded due to a holiday in China.

The Shanghai, Hong Kong and Taiwan markets were closed on holiday.

Commodities Recap

Oil declined as investors squared some of their bullish bets on another price rise and the chances that top exporters will agree to rein in overproduction appeared to fade. Brent crude futures were at $38.82 a barrel by 0947 GMT, having risen by at least 40 percent since mid-February, while U.S. crude futures were at $36.82 a barrel.

Gold extended losses after upbeat U.S. jobs report signalled strength in the economy and rose speculation the Fed could raise interest rates soon. Spot gold had eased 0.5 percent to $1,215.68 an ounce by 0949, after dropping 0.8 percent on Friday.

Treasuries Recap

The 10-year U.S. treasury yield stood at 1.758 percent versus previous close of 1.791 percent.

Euro zone bond yields were flat or slightly lower. German 10-year Bund yields declined closer to zero as ramped-up bond purchases by the European Central Bank offset investor appetite for riskier assets following solid U.S. data. Bund yields were down 3 basis points at 0.12 percent, the lowest since March 1.

Japanese government bonds rose, strengthened by the Bank of Japan's asset buying operations, as investors awaited the next session's sale of 10-year JGBs. The benchmark 10-year yield was down 2 basis points at minus 0.085 percent. In the superlong zone, the 20-year JGB yield shed 2 basis points to 0.350 percent, while the 30-year JGB yield was down 1 basis point at 0.400 percent after earlier touching a record low of 0.395 percent. June 10-year JGB futures added 0.21 point to end at 151.69.

Gilts opened 10 ticks higher than the close of 121.19 as the market opened risk off due to equity weakness, deteriorated by thin markets due to the holiday in China. Early buyers drew support as 10-year cash yield support from Friday's low at 1.40% gave way but sellers emerged as dealers failed to extend the move to pose a test of Thursday's low of 1.392%.

Australian government bond futures rose, with the 3-year bond contract and 10-year contract both 6 ticks higher at 98.140 and 97.5350 respectively. New Zealand government bond prices edged up, sending yields 2 basis points lower at the short end and 6 bps lower at the long end.

The material has been provided by InstaForex Company - www.instaforex.com