Europe Roundup: Sterling tumbles below 1.3300 handle following downbeat UK CPI, dollar recovers from Fed's Brainard led-

14 September 2016, 09:05
Eko Rediantoro

Market Roundup

  • USD/JPY +0.03%, EUR/USD -0.1%, GBP/USD -0.55%
  • DXY +0.25%, DAX +0.27%, Brent -2.0%, Iron -2.85%
  • Germany Aug final HICP 0.3% y/y vs 0.3% previous, 0.3% expected
  • Germany Aug Final CPI 0.4% y/y vs 0.4% previous, 0.4% expected
  • Germany Aug W/sale prices idx -1.2% y/y vs -1.4% previous
  • Switzerland Aug Producer Prices -0.4% y/y vs -0.8% previous
  • UK RPI idx 264.4 vs 263.4 previous
  • UK Aug CPI +0.6% y/y vs 0.6% previous, 0.7% expected
  • UK Aug Core CPI +1.3% y/y vs 1.3% previous, 1.4% expected
  • UK Aug RPIX 1.9% y/y vs 1.9% previous
  • Germany Sep ZEW Econ Sent 0.5 vs 0.5 previous, 2.5 expected
  • Germany Sep ZEW Curr Cond 55.1 vs 57.6 previous, 56.0 expected
  • EZ Q2 Employment 1.4% y/y vs 1.4% previous

Economic Data Ahead

  • (1400 ET/1800 GMT) The U.S. Treasury Department issues the budget report for the month of August. The report is likely to show a budget deficit of $108 billion as compared with $113 billion in July.
  • N/A The U.S. Census Bureau releases its annual report on poverty, which includes income and health insurance coverage for the year 2015.
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.
  • (1845 ET/2245 GMT) The Statistics New Zealand releases current account data for the second quarter. The economy posted a surplus of $1.306 billion in the previous quarter.

Key Events Ahead

  • N/A U.S. Treasury Secretary Jack Lew participates in moderated conversation before the CNBC Delivering Alpha Conference in New York.
  • (0945 ET/1345 GMT) FedTrade operation 30-year Ginnie Mae (max $1.275 bn).

FX Beat

DXY: The dollar index, against a basket of currencies trades 0.1 percent up at 95.22, pulling away from a low of 94.94 hit in the previous session following Fed policymakers comments.

EUR/USD: The euro edged up despite Eurozone posting mix bag of economic data. Eurozones employment change in the second quarter came in at 0.4 percent in line with prior reading, while ZEW survey showed economic sentiment for September weakened to 5.4 percent against consensus of 6.7 percent, however, still better than previous 4.6 percent. The major trades higher at 1.1248, having touched a low of 1.1216 earlier in the session. On the higher side, any break above 1.12780 will take the pair till 1.1300/1.13270/1.1360. The major support is around 1.1189 (55- day EMA) and any break below targets 1.1138 (200- day MA)/1.1100. Overall trend reversal is only above 1.1360.

USD/JPY: The dollar rose, extending gains above the 102.00 handle. The major touched an intra-day low of 101.42, however, it has retreated from that level amid ongoing broad based US dollar recovery from Fed Brainard-led slump. The Japanese yen trades lower at 102.25, pulling away from a peak of 101.19 hit last week. The short term trend is slightly bearish as long as resistance 103.15 (55- day EMA) holds. The major resistance is around 103.15 (55-day EMA) and break above targets 103.80/104.60. On the lower side major support is around 101.20 and any break below 101.20 will drag the pair till 100.55/100.         

GBP/USD: Sterling tumbled below the 1.3300 handle after data showed Britains annual consumer price inflation rate for August missing expectations. CPI rate remained unchanged at 0.6 percent, as compared with projections for an increase to 0.7 percent. Moreover, producer price figures showed manufacturers input costs rose 7.6 percent compared with a year earlier, recording its biggest jump since December 2011. Sterling trades 0.6 percent lower at 1.3256, hovering towards a low of 1.3235 hit in the previous session. The major should break above 1.3350 for further bullishness. Any break above 1.3350 will take the pair to next level till 1.3400/1.3480. Any close above 1.3480 confirms major bullishness. On the lower side, any break below 1.3235 will drag it down till 1.3160/1.3100. Against the euro, it declined 0.6 percent at 84.76 pence, pulling closer to a 1-week low of 84.95 pence hit last week.

USD/CHF: The Swiss franc edged down, as the greenback recovered from previous session losses. The major trades 0.1 percent up at 0.9722, pulling away from previous session low of 0.9690. However, gains were limited after data released earlier showed that Switzerlands August producer prices edged up at an annualized rate of -0.4 percent, as compared to previous -0.8 percent. On the higher side, any break above 0.9808 will take the pair till 0.9845/0.9880. Any break below 0.9700 will take it to next level till 0.9670. The short term weakness can be seen only below 0.9630

AUD/USD: The Australian dollar slumped as renewed weakness in oil prices and upsurge in the global yields, weakened the bid tone around the Aussie. The major trades lower at 0.7524, having touched an early low of 0.7506. Market ignored positive NAB business confidence numbers and Chinese upbeat data, as attention now turns towards the Australian jobs report due later in the week for fresh incentives. On the higher side, any break above 0.756 (55- day EMA) will take the pair till 0.7625/0.7650. The major support is around 0.7490 and break below will drag the pair till 0.7390 (200- day MA).

NZD/USD: The New Zealand dollar declined, reversing most of its previous session gains. The major touched an early high of 0.7364, however, it failed to extend gains due to persisting risk-off trade amid weaker oil and volatile stock markets. The Kiwi trades lower at 0.7321, hovering towards a low of 0.7306 hit in earlier in the session. Immediate resistance is located at 0.7368 (5-DMA), break above targets 0.7400. On the downside, support is seen at 0.7300, break below could drag it till 0.7277.

Equities Recap

European shares traded in a volatile market, while the dollar recovered from the drop led by Federal Reserve officials remarks, which reduced prospects of near-term U.S. interest rates hike.

The pan-European STOXX 600 index increased 0.23 percent at 343.03 points, while the FTSEurofirst 300 index added 0.3 percent at 1,350.61 points.

Britains FTSE 100 trades 0.22 percent up at 6,715.54 points, while mid-cap FTSE 250 gained 0.33 percent at 17,788.48 points.

Germanys DAX rose 0.60 percent at 10,492.97 points; Frances CAC 40 trades 0.3 percent higher at 4,452.47 points.

MSCIs broadest index of Asia-Pacific shares outside Japan lost 0.2 percent, reversing earlier gains, though the drop was far less than Mondays 2.4 percent.

Tokyos Nikkei advanced 0.34 percent at 16,729.04 points, Australias S&P/ASX 200 index fell 0.17 percent at 5,210.80 points and South Koreas KOSPI added 0.4 percent at 1,999.36 points.

Shanghai composite index climbed 0.1 percent at 3,023.51 points, while CSI300 index tumbled 0.1 percent at 3,260.33 points. Hong Kongs Hang Seng index slumped 0.30 pct at 23,215.76 points.

Commodities Recap

Crude oil prices tumbled, falling back near previous sessions 1-week low, after industry report showed a sharp slowdown in global oil demand growth, combined with increasing inventories and growing supply, suggesting that the crude market will be oversupplied at least through the initial months of 2017. Global benchmark Brent crude oil tumbled 1.64 percent to $47.35 a barrel by 1116 GMT, having dropped to a low of $46.88 in the previous session. U.S. West Texas Intermediate futures fell 1.8 percent to $45.20 a barrel.

Gold edged down, as the dollar recovered from after declining the previous session following comments by a top Federal Reserve official that strengthened the view that U.S. interest rates are unlikely to rise this month. Spot gold declined about 0.1 percent at $1,325.32 an ounce at 1122 GMT, having touched an early high of $1331.89 an ounce. U.S. gold futures were up 0.5 percent at $1,332.20 an ounce.

Treasuries Recap

The US Treasuries saw upward pressure across much of the curve as the probability of a September rate hike from the Fed has dropped to about 15 percent from previous 30 percent after Governor Lael Brainard maintained a dovish tone in her yesterdays speech. The yield on the benchmark 10-year Treasury note fell 2 basis points to 1.653 percent, the yield on 5-year bond dipped more than 1 basis point to 1.190 percent and the yield on short-term 2-year note slid nearly 1 basis point to 0.766 percent.

The Eurozone periphery bonds gained as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil. The French 10-year bond yields fell 3 basis points to 0.243 percent, Irish 10-year bonds yield also dipped 4-1/2 basis points to 0.483 percent, Italian equivalent ticked 2 basis points lower to 1.263 percent, Netherlands 10-year bonds yield tumbled 3 basis points to 0.113 percent and the Spanish 10-year bonds yield slid more than 2 basis points to 1.063 percent.

The UK gilts strengthened after recent data showed that the country’s inflation remained unchanged in August, pressurizing the Bank of England for further monetary easing. The yield on the benchmark 10-year gilts fell 3-1/2 basis points to 0.831 percent, the super-long 40-year bond yield dipped 4 basis points to 1.357 percent and the yield on short-term 2-year bond slid 2 basis points to 0.153 percent.

The German bunds gained after recent data showed that the country’s inflation remained subdued in August. The yield on the benchmark 10-year bond fell 2 basis points to 0.022 percent, the yield on longterm 30-year note dipped 2-1/2 basis points to 0.603 percent and the yield on short-term 2-year bond remained steady at -0.628 percent.

The long-term Japanese bond gained as investors speculate that the Bank of Japan will lower its key interest rate further into negative territory. The benchmark 10-year bond yield fell nearly 1 basis point to -0.015 percent, the super-long 30-year JGB yield dipped 2-1/2 basis points to 0.520 percent and the 20-year JGB yield slid 2 basis points to 0.445 percent.

The New Zealand government bonds closed modestly lower after recent data showed that the country’s food prices, which account for about 19 percent of the consumer price index (CPI), posted the biggest monthly jump in three years. The yield on the benchmark 10-year bond rose 1/2 basis point to 2.485 percent, the yield on 7-year note also ended 1/2 basis point higher at 2.160 percent and the yield on short-term 2-year note climbed 1/2 basis point to 1.960 percent.

The Australian government bonds trade nearly flat, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 2.11 percent mark and the yield on short-term 2-year remained steady at 1.60 percent

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