Europe Roundup: Sterling gains on better-than-expected UK job data, euro plunges as German investor morale deteriorates, European shares slump- Tuesday, August 13th, 2019

Market Roundup

  • Scottish court to hear no-deal Brexit suspension case next month
  • UK wage growth rose to an 11-year high
  • German investor morale slumps as economic outlook darkens

Economic Data Ahead

  • (0830 ET/1230 GMT) The U.S. consumer price index likely increased 0.3 percent in July from 0.1 percent in June. While in the 12 months through July, the CPI is expected to have risen 1.7 percent.  Excluding food and energy, the core CPI probably rose 0.2 percent, after posting a 0.3 percent gain in the previous month.
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

 Key Events Ahead

  • No Significant Event Scheduled

FX Beat

DXY: The dollar consolidated within narrow ranges as investors refrained from taking big positions, ahead of the Federal Reserve’s annual symposium next week. The greenback against a basket of currencies traded 0.05 percent up at 97.39, having touched a low of 97.03 on Friday, its lowest since July 19.

EUR/USD: The euro eased, halting a 2-day rally as the sentiment among German investors plummeted far more than expected in August, as trade disputes and higher chances of a no-deal Brexit worsened Germany’s outlook. The European currency traded 0.05 percent down at 1.1210, having touched a high of 1.1249 last week, its highest since July 19. Immediate resistance is located at 1.1241 (August 7 High), a break above targets 1.1282 (July 19 High). On the downside, support is seen at 1.1164 (38.2% retracement of 1.1026 and 1.1249), a break below could drag it below 1.1138 (50% retracement).

USD/JPY: The dollar plunged to a 7-month low as investors unnerved by the U.S.-China trade war, protests in Hong Kong and a crash in Argentina’s peso currency boosted the Japanese yen's safe-haven appeal. The major was trading 0.1 percent down at 105.21, having hit a low of 105.05 earlier, its lowest since Jan 3. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. consumer price index. Immediate resistance is located at 106.05 (23.6% retracement of 109.31 and 105.05), a break above targets 106.67 (38.2% retracement). On the downside, support is seen at 105.00, a break below could take it lower at 104.65 (Jan. 3 Low).

GBP/USD: Sterling rose, extending previous sessions rebound, after Britain’s labour market showed unexpected strength in the second quarter, contrasting last week’s data that showed the economy contracted over the same period as the country prepared for Brexit. The major traded 0.1 percent up at 1.2088, having hit a low of 1.2014 the day before, it’s lowest since Jan. 2017. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2135 (23.6% retracement of 1.2522 and 1.2079), a break above could take it near 1.2210 (38.2% retracement). On the downside, support is seen at 1.1986 (Jan 16, 2017, Low, a break below targets 1.1904 (Oct 7, 2016, Low). Against the euro, the pound was trading flat at 92.82 pence, having hit a low of 93.24 earlier, it’s lowest since October 2009.

USD/CHF: The Swiss franc plunged to a near 2-year low as investors flocked to safe-haven assets amid an escalating trade war between China and the United States and worries about a global economic slowdown. The major trades 0.2 percent down at 0.9674, having touched a low of 0.9673 earlier, it’s lowest since September 2018. On the higher side, near-term resistance is around 0.9759 (23.6% retracement of 0.9975 and 0.9703) and any break above will take the pair to next level till 0.9800 (38.2% retracement). The near-term support is around 0.9650 (Sept. 6 Low), and any close below that level will drag it till 0.9600.

Equities Recap

European shares slumped as negative news from around the globe including Italy and Argentina’s political uncertainty and persistent unrest in Hong Kong dented investor sentiment

The pan-European STOXX 600 index declined 0.6 percent at 368.37 points, while the FTSEurofirst 300 tumbled 0.5 percent to 1,450.38 points.

Britain's FTSE 100 trades 0.6 percent down at 7,186.58 points, while mid-cap FTSE 250 fell 0.4 to 18,833.41 points.

Germany's DAX eased 0.8 percent at 11,591.91 points; France's CAC 40 trades 0.4 percent lower at 5,288.44 points.

Commodities Recap

Crude oil prices gained amid expectations for major producers to further curtail output, although lingering concerns over global demand and rising U.S. production limited upside. International benchmark Brent crude was trading 0.05 percent higher at $58.87 per barrel by 1055 GMT, having hit a low of $55.86 on Wednesday, its lowest since January. U.S. West Texas Intermediate was trading 0.1 percent up at $54.80 a barrel, after falling as low as $50.51 on Wednesday, its lowest since the January.

Gold prices rallied to their highest in more than 6-years, as concerns around protests in Hong Kong and an Argentine currency crash amid fears of global economic slowdown, prompted investors to rush into safe-haven assets. Spot gold rose 1.1 percent to $1,527.57 per ounce by 1058 GMT,  having touched a high of $1,534.89 earlier, its highest since April 2013. U.S. gold futures rose 1 percent to $1,533 an ounce.

Treasuries Recap

The U.S. Treasuries remained mixed during the afternoon session ahead of the country’s consumer price inflation (CPI) data for the month of July, scheduled to be released today by 12:30GMT. The yield on the benchmark 10-year Treasury yield hovered around 1.642 percent, the super-long 30-year bond yields suffered 1-1/2 basis points to 2.114 percent and the yield on the short-term 2-year traded 1 basis point higher at 1.589 percent.

The United Kingdom’s gilts surged during European trading hours even as the country’s employment report for the month of June, appealed promising to market investors ahead of the consumer price inflation (CPI) data for July, scheduled to be released on August 14 by 08:30GMT. The yield on the benchmark 10-year gilts, suffered nearly 1-1/2 basis points to 0.476 percent, the 30-year yield slumped 3 basis points to 1.141 percent and the yield on the short-term 2-year traded tad down at 0.436 percent.

 The German bunds jumped during European trading session after the country’s ZEW economic sentiment index for the month of August disappointed market expectations, way lower than the previous reading in July. Investors now shall be eyeing the country’s gross domestic product (GDP) for the second quarter of this year, due on August 14 by 06:00GMT for further direction to the debt market. The German 10-year bond yields, which move inversely to its price, slipped nearly 1-1/2 basis points to -0.607 percent, the yield on 30-year note slumped nearly 4 basis points to -0.132 percent and the yield on short-term 2-year traded 2 basis points down at -0.873 percent.

The Australian government bonds surged during Asian session of the second trading day of the week, tracking a similar movement in the United States Treasuries as investors shifted their interests towards safe-haven assets amid ongoing global economic and political worries. Investors will now eye the country’s labour market report, scheduled to be released on August 15 by 01:30GMT. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped nearly 3 basis points to 0.943 percent, the yield on the long-term 30-year bond plunged 5 basis points to 1.579 percent and the yield on short-term 2-year traded flat at 0.736 percent.

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