Europe roundup: Sterling at 2-week peak on Brexit deal hopes, greenback rallies as FED divided on rate cut, European shares plunge - Thursday, August 22nd, 2019
Source: FxWire Pro - Media Round Ups / 22 Aug 2019 13:27:25 Europe/London
- Fed was divided on the rate cut, wanted to avoid appearing on the path for more cuts
- Eurozone business growth recovers, but outlook darkens
- UK retail sales plunge in August fastest pace since 2008: CBI
- Eurozone banks to get more time to cover bad loans as ECB eases rules
- Italy's president wants a quick deal on forging a new government
Economic Data Ahead
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have decreased by 4,000 to a seasonally adjusted 216,000 for the week ended Aug. 16, while continuing claims for the week ended Aug. 9 is expected to decline to 1.700 million from a previous reading of 1.726 million.
- (0830 ET/1230 GMT) Statistics Canada will release its wholesale trade figures for the month of June. The indicator is expected to have increased by 0.3 percent, after unexpectedly slumping 1.8 percent in May.
- (0945 ET/1345 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of August. The index is likely edged up to 50.5 after posted a final reading of 50.4 in the previous month.
- (0945 ET/1345 GMT) Markit Economics will release preliminary U.S. composite PMI for the month of August. The index posted a final reading of 52.6 in the prior month.
- (0945 ET/1345 GMT) Financial firm Markit Economics is likely to report that preliminary U.S. service PMI business activity index eased to 52.8 in August after printing a final reading of 53.0 in July.
- (1000 ET/1400 GMT) The European Commission releases Eurozone's preliminary Consumer Confidence reading for the month of August. The index posted a final reading of -6.6 in the prior month.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending August 16.
- (1100 ET/1500 GMT) Federal Reserve Bank of Kansas City issues manufacturing activity index for the month of August. The indicator stood at -6 in the previous month.
Key Events Ahead
- (1130 ET/1530 GMT) U.S. Treasury 4-week Bill Auction
DXY: The dollar index rose, extending previous session gains, as the minutes of the Fed’s July meeting showed splits among policymakers over whether to cut interest rates last month, though there was some unity in wanting to signal it was not on a preset path to looser policy. The greenback against a basket of currencies traded up at 98.30, having touched a high of 98.42 on Tuesday, its highest since August 1.
EUR/USD: The euro plunged to a 3-week low after data showed euro zone’s service industry expanded but factory activity contracted for the seventh month in a row, although at a slower rate than the previous month. The European currency traded 0.1 percent down at 1.1076, having touched a low of 1.1063 earlier, its lowest since August 1. Immediate resistance is located at 1.1104 (23.6% retracement of 1.1230 and 1.1063), a break above targets 1.1128 (38.2% retracement). On the downside, support is seen at 1.1060 (July 31 Low), a break below could drag it below 1.1026 (August 1 Low).
USD/JPY: The dollar eased, reversing most of its previous session gains, ahead of the Fed’s annual Jackson Hole meeting of central bankers, which should provide more clues to the Fed’s stance. The major was trading 0.1 percent down at 106.46, having hit a low of 105.05 last week, its lowest since Jan 3. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims and Markit prelim PMI's. Immediate resistance is located at 106.94 (21-DMA), a break above targets 107.56 (August 2 High). On the downside, support is seen at 105.89 (August 8 Low), a break below could take it lower at 105.29 (Aug. 9 Low).
GBP/USD: Sterling surged to a 2-week peak as British Prime Minister Boris Johnson will try to convince France to reopen Brexit negotiations less than a day after President Emmanuel Macron ruled out any further talks on the transition deal. The major traded 0.2 percent up at 1.2146, having hit a high of 1.2181 earlier, it’s highest since August 8. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2210 (38.2% retracement of 1.2522 and 1.2079), a break above could take it near 1.2331 (61.8% retracement). On the downside, support is seen at 1.2073 (August 16 Low), a break below targets 1.2041 (August 13, Low). Against the euro, the pound was trading 0.2 percent up at 91.21 pence, having hit a high of 90.90 on Friday, it’s highest since July 31.
USD/CHF: The Swiss franc fell to a near 3 week low, as the greenback surged ahead of a speech by U.S. Federal Reserve Chairman Jerome Powell at Jackson Hole. The major trades 0.1 percent up at 0.9838, having touched a high of 0.9839 earlier, it’s highest since August 2. On the higher side, near-term resistance is around 0.9855 (61.8% retracement of 0.9975 and 0.9659) and any break above will take the pair to next level till 0.9980 (78.6% retracement). The near-term support is around 0.9792 (5-DMA), and any close below that level will drag it till 0.9762 (10-DMA).
European shares plunged on signs that U.S. policymakers had not intended to start a cycle of interest rate cuts with last month’s move.
The pan-European STOXX 600 index slumped 0.3 percent at 374.89 points, while the FTSEurofirst 300 plunged 0.3 percent to 1,475.02 points.
Britain's FTSE 100 trades 0.6 percent down at 7,159.05 points, while mid-cap FTSE 250 fell 0.3 to 19,153.92 points.
Germany's DAX declined 0.1 percent at 11,794.15 points; France's CAC 40 trades 0.4 percent lower at 5,416.55 points.
Crude oil prices surged, supported by a drop in U.S. crude inventories and OPEC-led supply cuts, although worries about the global economy limited gains. International benchmark Brent crude was trading 0.4 percent higher at $60.60 per barrel by 1057 GMT, having hit a high of $61.40 on Wednesday, its highest since August 13. U.S. West Texas Intermediate was trading 0.2 percent up at $55.95 a barrel, after rising as high as $57.11 on Wednesday, its highest since August 13.
Gold prices eased as investors locked in profits with focus shifting to a speech by U.S. Federal Reserve Chairman Jerome Powell at Jackson Hole for clarity on the direction of monetary policy. Spot gold was trading 0.4 percent down at $1,496.50 an ounce by 1102 GMT, having touched a low of $1,492.74 on Tuesday, its lowest since August 13. U.S. gold futures dipped 0.5 percent to $1,508 an ounce.
The U.S. Treasuries remained narrowly mixed during the afternoon session ahead of the country’s initial jobless claims and super-long 30-year auction, both scheduled to be released today by 12:30GMT and 17:00GMT respectively. Also, the Jackson Hole Symposium, set to kickstart later today, will provide further direction to the debt market. The yield on the benchmark 10-year Treasury yield hovered around 1.581 percent, the super-long 30-year bond yields surged 1-1/2 basis points to 2.067 percent and the yield on the short-term 2-year slipped nearly 1 basis point to 1.561 percent.
The German bunds suffered during European trading session after the country’s manufacturing PMI for the month of August cheered market investors, edged tad higher from that in July. The German 10-year bond yields, which move inversely to its price, jumped 2 basis points to -0.654 percent, the yield on 30-year note surged 3 basis points to -0.144 percent and the yield on short-term 2-year traded 1 basis point higher at -0.871 percent.
The Japanese government bond yields deteriorated at close of morning session as Asian markets are yet to digest the FOMC July meeting minutes, released overnight amid ongoing global economic disturbances. Wall street edged up, while the U.S. Treasuries suffered, with the 2s10s year yield curve briefly inverting again; hopes still remain high of a trade deal between the U.S. and China. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, slumped 5 basis points to -0.243 percent, the yield on the long-term 30-year hovered around 0.184 percent and the yield on short-term 2-year slipped 1-1/2 basis points to -0.305 percent.
The Australian government bonds gained during Asian session despite a dovish FOMC meeting minutes revealed in the overnight session, while investors are still eyeing a plausible trade deal between the United States and China. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1-1/2 basis points to 0.917 percent, the yield on the long-term 30-year bond edged tad lower at 1.549 percent while the yield on short-term 2-year too traded 1/2 basis point lower at 0.737 percent.© FxWire Pro 2019. All rights reserved. The FxWire Pro content received through this service is the intellectual property of FxWire Pro or its third party suppliers. Republication or redistribution of content provided by FxWire Pro is expressly prohibited without the prior written consent of FxWire Pro, except for personal and non-commercial use. Neither FxWire Pro nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon.
- Fed was divided on the rate cut, wanted to avoid appearing on the path for more cuts