Europe Roundup: Sterling at 2-week low amid persisting Brexit fears, euro gains on ECB Villeroy's comments, European shares off 2-month trough- Tuesday, May 14th, 2019

Market Roundup

  • EUR/USD 0.04%, USD/JPY 0.34%, GBP/USD -0.04%, EUR/GBP 0.13%
  • DXY 0.04%, DAX 0.50%, FTSE 0.87%, Brent 0.30%, Gold -0.14%
  • Germany May ZEW Economic Sentiment, -2.1, 5.0 f'cast, 3.1 prev
  • Germany May ZEW Current Conditions, 8.2, 6.0 f'cast, 5.5 prev
  • Germany Apr CPI Final YY, 2.0%, 2.0% f'cast, 2.0% prev
  • Germany Apr HICP Final YY, 2.1%, 2.1% f'cast, 2.1% prev
  • Great Britain Mar ILO Unemployment Rate, 3.8%, 3.9% f'cast, 3.9% prev
  • Great Britain Mar Employment Change, 99k, 135k f'cast, 179k prev
  • Great Britain Mar Avg Wk Earnings 3M YY, 3.2%, 3.4% f'cast, 3.5% prev
  • EZ Mar Industrial Production MM, -0.3%, -0.3% f'cast, -0.2% prev
  • EZ Mar Industrial Production YY, -0.6%, -0.8% f'cast, -0.3% prev
  • China says agreed with U.S. to keep talking over trade war
  • Senior Conservatives tell May to ditch Brexit talks with Labour
  • Fed's Williams says policymakers need to better prepare for lower interest rate world
  • Fed's Williams says tariffs boost U.S. inflation, weigh on growth
  • ECB's Villeroy says monetary policy stance “appears appropriate”

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. Labor Department publishes the import and export prices index for the month of April. The import prices are likely to have gained 0.7 percent after rising 0.6 percent in March, while exports are expected to have edged up 0.5 percent after increasing 0.7 percent in the prior month.
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (0835 ET/1235 GMT) David Rule of BoE speaks at the Association for British Insurers' Prudential Regulation Seminar 2019 in London
  • (1100 ET/1500 GMT) New York FRB issues Q1 2019 Household Debt and Credit Report in New York
  • (1245 ET/1645 GMT) Federal Reserve Bank of Kansas City President Esther George speaks before the Economic Club of Minnesota

FX Beat

DXY: The dollar index steadied after falling to a 3-1/2 week low in the prior session after the Chinese government said that China and the United States have agreed to keep talking about their trade dispute. The greenback against a basket of currencies traded flat at 97.35, having touched a low of 97.03 on Monday, its lowest since May 1. FxWirePro's Hourly Dollar Strength Index stood at -26.49 (Neutral) by 1000 GMT.

EUR/USD: The euro rose, reversing some of its previous session losses after the European Central Bank policymaker Francois Villeroy de Galhau stated that the ECB's latest economic forecasts are still valid and its monetary policy stance appears to be appropriate. The European currency traded 0.1 percent up at 1.1229, having touched a high of 1.1263 on Monday, its highest since May 1. FxWirePro's Hourly Euro Strength Index stood at 136.98 (Highly Bullish) by 1000 GMT. Immediate resistance is located at 1.1262 (April 22 High), a break above targets 1.1304 (April 18 High). On the downside, support is seen at 1.1187 (May 1 Low) a break below could drag it till 1.1140 (April 24 Low).

USD/JPY: The dollar bounced back from a 3-month low recorded in the previous session, as risk sentiment improved after upbeat comments from U.S. President Donald Trump suggested trade talks with Beijing could yet make headway. The major was trading 0.3 percent up at 109.68, having hit a low of 109.01 on Monday, its lowest since Feb. 1. FxWirePro's Hourly Yen Strength Index stood at -32.31 (Neutral) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. import and export price index; and speeches by Fed's William and George. Immediate resistance is located at 110.04 (38.2% retracement of 111.68 and 109.01), a break above targets 110.67 (61.8% retracement). On the downside, support is seen at 109.01 (May 14 Low), a break below could take it lower at 108.49 (Jan. 31 Low).

GBP/USD: Sterling plunged to a 2-week trough, amid persisting concerns over Britain's departure from the European Union and fears about a challenge to Prime Minister Theresa May's leadership. Investors appear to have ignored upbeat UK labour data that showed the economy's unemployment rate fell to its lowest level since the mid-1970s as a pre-Brexit hiring surge continued, while employment grew by 99,000. The major traded 0.1 percent down at 1.2943, having hit a low of 1.2923; it’s lowest since Apr. 29. FxWirePro's Hourly Sterling Strength Index stood at -90.38 (Slightly Bearish) 1000 GMT. Immediate resistance is located at 1.3049 (Apr. 30 High), a break above could take it near 1.3102 (May 1 High). On the downside, support is seen at 1.2904 (Apr. 29 Low), a break below targets 1.2865 (Apr. 25 Low). Against the euro, the pound was trading 0.2 percent down at 86.76 pence, having hit a low of 86.91, it’s lowest since Mar. 21.

USD/CHF: The Swiss franc retreated from a 4-week peak as broader sentiment stabilized after Trump said he expected U.S.-China trade negotiations to be successful. The major trades 0.1 percent up at 1.0077, having touched a low of 1.0049 the day before; it’s lowest since Apr. 16. FxWirePro's Hourly Swiss Franc Strength Index stood at 85.22 (Slightly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 1.0159 (Apr. 18 High) and any break above will take the pair to next level till 1.0196 (May 6 High). The near-term support is around 1.0032 (Apr. 16 Low), and any close below that level will drag it till 1.0000.

Equities Recap

European shares rebounded from a 2-month low hit in the prior session, as comments overnight from Washington and Beijing helped soothe investor worries about a deepening trade row.

The pan-European STOXX 600 index surged 0.7 percent at 375.14 points, while the FTSEurofirst 300 index rallied 0.7 percent to 1,475.20 points.

Britain's FTSE 100 trades 0.9 percent up at 7,226.49 points, while mid-cap FTSE 250 gained 1.05 to 19,327.02 points.

Germany's DAX rose 0.5 percent at 11,936.29 points; France's CAC 40 trades 1.1 percent higher at 5,319.01 points.

Commodities Recap

Crude oil prices rallied by more than 1 percent as tensions in the Gulf appeared to stop short of a military showdown and both sides in the U.S.-China trade talks sounded conciliatory notes. International benchmark Brent crude was trading 1.4 percent higher at $70.88 per barrel by 1042 GMT, having hit a high of $72.56 on Monday, its highest since Apr, 30. U.S. West Texas Intermediate was trading 1.1 percent up at $61.43 a barrel, after rising as high as $63.32 on Monday, its highest since the May 2.

Gold prices eased after rising to 1-month highs as the dollar rebounded against the yen amid improving risk-sentiment. Spot gold was trading 0.2 percent down at $1,297.35 by 1045 GMT, having touched a high of $1,303.21, its highest since Apr. 11. U.S. gold futures were down 0.2 percent at $1,299.40.

Treasuries Recap

The U.S. Treasury yields revived strength during the afternoon session, ahead of a host of speeches by members of the Federal Open Market Committee (FOMC) scheduled for later in the day – members George and Daly will deliver their speeches at 16:45GMT and 22:00GMT respectively. The yield on the benchmark 10-year Treasury yield rose 1-1/2 basis points to 2.419 percent, the super-long 30-year bond yields edged nearly 2 basis points higher to 2.856 percent and the yield on the short-term 2-year traded nearly 1 basis point higher at 2.201 percent.

The German bunds fell during European trading session after investors have largely shrugged-off the lower-than-expected ZEW economic sentiment for the month of May, while markets will be keeping a close eye on the country’s gross domestic product (GDP), scheduled to be released on May 15 by 06:00GMT for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, rose nearly 1-1/2 basis points to -0.062 percent, the yield on 30-year note also edged 1-1/2 basis points higher to 0.583 percent while the yield on short-term 2-year traded flat at -0.637 percent

The Australian government bonds gained across the curve during Asian session after the trade war between the United States and China worsened. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped about 2 basis points to 1.704 percent, the yield on the long-term 30-year bond slipped 1/2 basis points to 2.335 percent and the yield on short-term 2-year also traded 1-1/2 basis points lower at 1.290 percent.

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