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Europe Roundup: Sterling gains as BoE's Carney backs PM May's Brexit deal, greenback steadies despite Fed's cautious comments, European shares tumble - Tuesday, November 20th, 2018

Posted at 20 November 2018 / Categories Market Roundups

Market Roundup

• United Kingdom Nov 2018 CBI trends - orders increase to 10 balance (forecast -7 balance) vs previous -6 balance
   
• BoE’s Carney says starting position of UK economy is very different to how it was at time of referendum
   
• BoE’s Carney says no-deal Brexit would be a very unusual situation
   
• BoE’s Carney says thinks pm May's statement on Cabinet's withdrawal agreement
  discussion was appropriate
   
• BoE’s Carney says expectation of market is that sterling will continue to be volatile for next month
   
• BoE’s Carney says quietly confident that BOE has all the measures it could have in place for financial stability
   
• BoE’s Cunliffe says household confidence has held up more, but is not pointing to strong consumption growth
   
• BoE’s Saunders - MPC might well face different trade-off between prospects for inflation and spare capacity than after EU referendum in event of no-deal Brexit
   
• BoE’s Carney - BOE Brexit analysis will focus on BoE’s policy horizon timeframe rather than long-term forecasts
   
• BoE’s Haldane - we are seeing greater Brexit impact on behaviour of companies, could make for weaker Q4
   
• BoE’s Saunders say agrees with BoE’s broad outlook for interest rates, conditioned on Brexit assumptions
   
• BoE’s Cunliffe says the forward-looking indicators are in very large measure reflecting Brexit uncertainties
   
• Bank of England chief economist Haldane says there are already signs of a no-deal Brexit risk impacting business investment
   
• BoE’s Cunliffe says output surveys point to subdued activity in the near term
   
• BoE’s Cunliffe says strong q3 growth probably reflects a recovery of weakness earlier in the year and does not contain much information about the future
   
• BoE’s Carney - says BOE will incorporate political declaration into Brexit analysis as far as possible
   

Economic Data Ahead

• (0830 ET/1330 GMT) The U.S. Department of Commerce is expected to report that housing starts increased to a rate of 1.225 million units in October from 1.201 million units in September.
   
• (0830 ET/1330 GMT) The U.S. building permits are likely to have decreased to a 1.267 million-unit pace in October from a 1.270 million-unit pace in September.
   
• (1630 ET/2030 GMT) API reports its weekly crude oil stock.
   

Key Events Ahead

• (0830 ET/1330 GMT) Federal Reserve Bank of Philadelphia issues Non-manufacturing Business Outlook Survey for November.
   
• (1000 ET/1500 GMT) Bundesbank President Jens Weidmann speaks at a conference on the future of the insurance and pension funds in Frankfurt, Germany.
   
• (1130 ET/1630 GMT) ECB Chair of the Supervisory Board Daniele Nouy participates in a conversation with Guntram B. Wolff, director at Bruegel, in Brussels, Belgium.
   
• (1300 ET/1800 GMT) Bank of Canada Senior Deputy Governor Carolyn Wilkins gives a speech
   
• (1715 ET/2215 GMT) Bank of Canada Deputy Governor Timothy Lane participates in a panel at Internet Society Canada Chapter, Toronto.
   

FX Beat

DXY: The dollar index surged after falling to a near 2-week low earlier in the day on Federal Reserve's cautious comments about the U.S. economy. The greenback against a basket of currencies trades 0.1 percent up at 96.27, having touched a low of 96.04, its lowest since Nov 8. FxWirePro's Hourly Dollar Strength Index stood at 12.01 (Neutral) by 1000 GMT.

EUR/USD: The euro retreated from a near 2-week peak touched earlier in the session, amid an ongoing confrontation with the European Union over Italy's budget plans. The European currency traded 0.2 percent down at 1.1434, having touched a high of 1.1472, its highest since Nov. 7. FxWirePro's Hourly Euro Strength Index stood at 48.23 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1499 (November 7 High), a break above targets 1.1534 (October 19 High). On the downside, support is seen at 1.1391 (November 6 Low), a break below could drag it till 1.1351 (November 8 Low).

USD/JPY: The dollar slumped to a near 3-week low, weighed down by cautious comments by Federal Reserve officials about the global economic outlook, weak U.S. economic data and a selloff on Wall Street. The major was trading 0.1 percent down at 112.45, having hit a low of 112.31, its lowest since October 30. FxWirePro's Hourly Yen Strength Index stood at 59.94 (Bullish) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. building permits and housing starts. Immediate resistance is located at 113.00 (November 1 High), a break above targets 113.50 (November 6 High). On the downside, support is seen at 112.14 (October 19 Low), a break below could take it lower 111.82 (October 25 Low).

GBP/USD: Sterling surged, hovering towards the 1.2900 handle after  Bank of England Governor Mark Carney backed British Prime Minister Theresa May's Brexit deal struck last week with the European Union officials, as it would help smooth the country's departure from the bloc. The major traded 0.1 percent up at 1.2859, having hit a low of 1.2723 on Thursday; it’s lowest since October 31. FxWirePro's Hourly Sterling Strength Index stood at -65.07 (Bearish) 1000 GMT. Immediate resistance is located at 1.2919 (October 25 High), a break above could take it near 1.2994 (October 25 High). On the downside, support is seen at 1.2776 (October 26 Low), a break below targets 1.2723 (November 14 Low). Against the euro, the pound was trading 0.3 percent up at 88.86 pence, having hit a low of 89.32 on Monday, it’s lowest since October 31.

USD/CHF: The Swiss franc rallied to a 1-month peak as a selloff in European stock markets and concerns over Italy's budget sent investor seeking safety in safe-haven assets. The major trades 0.1 percent down at 0.9929, having touched a low of 0.9908 earlier; it’s lowest since Oct. 17. FxWirePro's Hourly Swiss Franc Strength Index stood at 121.29 (Highly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 1.0050 (Nov. 7 High) and any break above will take the pair to next level till 1.0128 (Nov. 13 High). The near-term support is around 0.9897 (October 17 Low). and any close below that level will drag it till 0.9847 (October 15 Low).

Equities Recap

European shares tumbled, weighed down by losses in tech stocks, while sterling steadies following Bank of England Governor Mark Carney's testimony to the Parliament

The pan-European STOXX 600 index slumped 0.6 percent at 353.06 points, while the FTSEurofirst 300 index plunged 0.6 percent to 1,390.47 points.

Britain's FTSE 100 trades 0.6 percent down at 6,957.84 points, while mid-cap FTSE 250 declined 0.5 percent to 18,456.45 points.

Germany's DAX fell 0.8 percent at 11,153.59 points; France's CAC 40 trades 0.7 percent lower at 4,950.20 points.

Commodities Recap

Crude oil prices declined, despite expectations that OPEC will introduce new output curbs. International benchmark Brent crude was trading 0.9 percent down at $66.32 per barrel by 1035 GMT, having hit a high of $68.35 on Friday, its highest since Nov. 13. U.S. West Texas Intermediate was trading 0.7 percent down at $56.93 a barrel, after falling as low as $55.30 on Monday, its lowest since Nov. 14.

Gold prices declined after rising to an over 1-week peak earlier in the day on weak U.S. economic data and a clouded Federal Reserve's interest rate outlook. Spot gold was trading 0.05 percent down at $1,223.63 per ounce at 1040 GMT, having hit a high of $1225.89, its highest since Nov. 8.  U.S. gold futures were flat at $1,224.8 per ounce.

Treasuries Recap

The U.S. Treasuries remained mixed during late afternoon session ahead of today’s October housing starts data, which should show a modest increase in October following a 5.3 percent m/m drop in September. The yield on the benchmark 10-year Treasuries fell nearly 1-1/2 basis points to 3.046 percent, the super-long 30-year bond yields remained 1 basis point lower at 3.304 percent while the yield on the short-term 2-year remained nearly 1 basis point higher at 2.791 percent.

The United Kingdom’s gilts traded tad lower during the afternoon session amid a silent trading day that witnessed data of little economic significance. The yield on the benchmark 10-year gilts, remained 1/2 basis point higher at 1.383 percent, the super-long 30-year bond yield1 rose 1 basis point to 1.952 percent and the yield on the short-term 2-year too traded nearly 1 basis point higher at 0.692 percent.

The German bunds jumped during afternoon session after the country’s producer price index (PPI) for the month of October rose, albeit meeting market expectations. The German 10-year bond yields, which move inversely to its price, slumped nearly 2-1/2 basis points to 0.354 percent, the yield on 30-year note plummeted 2 basis points to 1.031 percent and the yield on short-term 2-year too traded 2 basis points lower at -0.658 percent.

The Australian government bonds slumped across the curve during the Asian session after the Reserve Bank of Australia (RBA) flagged that there could be a more pronounced decline in the unemployment rate in the near-term. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 4 basis points to 2.707 percent, the yield on the long-term 30-year bond jumped 4 basis points to 3.233 percent and the yield on short-term 2-year up 2-1/2 basis points to 2.076 percent.