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Europe Roundup: Sterling rebounds on possible Brexit delay report, euro slumps on downbeat German factory orders, European shares halt 6-day rally - Wednesday. February 6th, 2019

Posted at 06 February 2019 / Categories Market Roundups

Market Roundup

• Germany Dec 2018 industrial orders mm decrease to -1.6 % (forecast 0.3 %) vs previous -1 %
   
• Sterling stuck near two-week low after possible Brexit delay report
   
• UK Opposition Labour party foreign affairs spokeswoman says there needs to be new election in Venezuela
   
• UK Labour opposition Deputy leader Watson says wants dedicated regulator for tech firms
   

Economic Data Ahead

• (0830 ET/1330 GMT) The United States releases trade balance figures for the month of November. The economy's trade deficit is expected to have narrowed to $54.0 billion from 55.5 billion in October.
   
• (0830 ET/1330 GMT) The U.S. Labor Department will release preliminary labor costs report for the fourth quarter. The indicator is expected to nudge up 1.7 percent from 0.9 percent in the previous quarter.  
   
• (0830 ET/1330 GMT) The U.S. Labor Department is likely to report that preliminary non-farm productivity rose 1.7 percent in the fourth quarter after posting a gain of 2.3 percent in the previous quarter.
   
• (0830 ET/1330 GMT) The United States releases goods trade balance data for the month of November. The economy recorded a goods trade deficit of $76.8 billion in the previous month
   
• (0830 ET/1330 GMT) The Statistics Canada is likely to report that building permits dropped 1.0 percent in December, after rising 2.6 percent in the previous month.
   
• (1000 ET/1500 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of January. The index posted a reading of 59.7 in the prior month.
   
• (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending February 1.
   

Key Events Ahead

• (0850 ET/1350 GMT) Bank of Canada's Timothy Lane delivers speech on "Canadian Approach to Foreign Reserve Management” at the Peterson Institute for International Economics- Washington
   
• (1805 ET/2305 GMT) Federal Reserve Vice Chairman for Supervision Randal Quarles speaks at Council for Economic Education Vantage Point Reception - New York
   
• (1900 ET/0000 GMT) Federal Reserve Chairman Jerome Powell is expected to state opening remarks and answer questions before event, "Conversation with the Chairman: Teacher Town Hall Meeting," hosted by the Federal Reserve Bank of Richmond's Charlotte branch.
   

FX Beat

DXY: The dollar index rallied to a near 2-week peak on news that senior U.S. and Chinese officials are poised to commence another round of trade talks in Beijing next week to reach a deal that will protect American intellectual property and avoid a March 2 increase in U.S. tariffs on Chinese goods.  The greenback against a basket of currencies trades 0.1 percent up at 96.19, having touched a high of 96.24 earlier, its highest since January 25. FxWirePro's Hourly Dollar Strength Index stood at 91.21 (Slightly Bullish) by 1000 GMT.

EUR/USD: The euro slumped to a 1-1/2 week low after data showed weaker demand from abroad unexpectedly dragged down German industrial orders in December, indicating that factories in Germany are shifting into lower gear due to a slowing world economy. The European currency traded 0.1 percent down at 1.1397, having touched a high of 1.1514 on Thursday, its highest since Jan. 11. FxWirePro's Hourly Euro Strength Index stood at -21.15 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1474 (December 21 High), a break above targets 1.1540 (January 11 High). On the downside, support is seen at 1.1370 (Jan. 17 Low), a break below could drag it till 1.1353 (Jan. 18 Low).

USD/JPY: The dollar tumbled after rising for three consecutive sessions, as U.S. President Donald Trump's State of the Union speech failed to surprise investors, with markets more focused on the near-term monetary policy outlook. The major was trading 0.3 percent down at 109.67, having hit a high of 110.16 on Monday, its highest since December 31. FxWirePro's Hourly Yen Strength Index stood at 15.80 (Neutral) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. trade balance data. Immediate resistance is located at 110.47 (Dec. 31 High), a break above targets 111.19 (Dec. 24 High). On the downside, support is seen at 109.16 (Jan. 28 Low), a break below could take it lower at 108.80 (Jan. 30 Low).

GBP/USD: Sterling bounced back from a 2-week low touched in the previous session on signs that the March 29 date for Britain to leave the European Union could be delayed. The major traded 0.1 percent up at 1.2957, having hit a low of 1.2924 on Tuesday; it’s lowest since January 22. FxWirePro's Hourly Sterling Strength Index stood at -82.67 (Slightly Bearish) 1000 GMT. Immediate resistance is located at 1.3001 (January 17 High), a break above could take it near 1.3047 (November 13 High). On the downside, support is seen at 1.2924 (February 4 Low), a break below targets 1.2900. Against the euro, the pound was trading 0.2 percent up at 87.91 pence, having hit a low of 88.21 on Tuesday, it’s lowest since Jan. 22.

USD/CHF: The Swiss franc slumped, hovering towards a 2-1/2 month trough hit in the previous session, as the greenback consolidated at a 2-week high against a basket of currencies. The major trades 0.1 percent up at 1.0003, having touched a high of 1.0020 on Tuesday; it’s highest since November 16. FxWirePro's Hourly Swiss Franc Strength Index stood at 19.83 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 1.0048 November 2 High) and any break above will take the pair to next level till 1.0070 (November 8 High). The near-term support is around 0.9961 (January 22Low), and any close below that level will drag it till 0.9889 (December 7 Low).

Equities Recap

European shares eased, halting a 6-day rally, weighed down by losses in banks and auto makers stocks, while sterling rebounded on news of possible Brexit delay report.

The pan-European STOXX 600 index rallied 0.1 percent at 365.40 points, while the FTSEurofirst 300 index declined 0.1 percent to 1,435.19 points.

Britain's FTSE 100 trades 0.1 percent down at 7,169.11 points, while mid-cap FTSE 250 gained 0.4 to 19,066.09 points.

Germany's DAX fell 0.3 percent at 11,332.79 points; France's CAC 40 trades 0.1 percent lower at 5,076.87 points

Commodities Recap

Crude oil prices declined over 1 percent after a report showed a rise in U.S. crude inventories, while concerns about the impact of U.S. sanctions on Venezuela on global supplies eased.  International benchmark Brent crude was trading 1.05 percent down at $61.36 per barrel by 1038 GMT, having hit a high of $63.61 on Monday, its highest since December 7. U.S. West Texas Intermediate was trading 1.1 percent lower at $53.08 a barrel, after rising as high as $55.72 on Monday, its highest since the November 21.

Gold prices eased after U.S. President Donald Trump in his State of the Union speech vowed to build a border wall. Spot gold was trading 0.1 percent down at $1,313.27 per ounce by 1040 GMT, having touched a low of $1,318.89 on Monday, its lowest level since Jan. 29. U.S. gold futures were also steady at $1,318 an ounce.

Treasuries Recap

• The United Kingdom’s gilts traded slightly on the upside during the late afternoon session, tracking a similar movement in the United States Treasuries as market investors keep a close eye on U.S. 3-tier economic data, due for release later in the day, along with FOMC member Quarles’ speech. The yield on the benchmark 10-year gilts, remained tad lower at 1.227 percent, the super-long 30-year bond yields slipped nearly 1-1/2 basis points to 1.724 percent and the yield on the short-term 2-year fell 1/2 basis point to 0.754 percent.
   
• The Japanese government bonds remained tad higher during late Asian session after the Bank of Japan (BoJ) conducted its regular bond-buying operation early today, which weighed on the debt supply in the market, thus weighing on bond yields. The yield on the benchmark 10-year JGB note, which moves inversely to its price, fell 1-1/2 basis points to -0.014 percent, the yield on the long-term 30-year edged 1/2 basis point lower to 0.592 percent while the yield on short-term 2-year plunged 16 basis points to -0.159 percent.
   
• The Australian government bonds gained sharply across the curve during Asian trading session after the Reserve Bank of Australia’s Governor Philip Lowe turned dovish in his speech at the National Press Club of Australia early today, pushing the 10-year yield to a 1-month low. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell about 7 basis points to 2.18 percent (lowest since Jan 4), the yield on the long-term 30-year bond also dipped 6 basis points to 2.72 percent and the yield on short-term 2-year slumped over 8 basis points to 1.78 percent.