Europe Roundup: Sterling hits 2-week high despite downbeat economic data, euro rallies above 1.2000 as dollar eases on U.S. policy outlook concerns, European shares slump – Tuesday, August 29th, 2017

Europe Roundup: Sterling hits 2-week high despite downbeat economic data, euro rallies above 1.2000 as dollar eases on U.S. policy outlook concerns, European shares slump – Tuesday, August 29th, 2017

Market Roundup

  • EUR/USD 0.53%, USD/JPY -0.6%, GBP/USD 0.28%, EUR/GBP 0.26%

     
  • DXY -0.46%, DAX -1.71%, FTSE -1.27%, Brent -0.66%, Gold 0.77%

     
  • Germany Gfk Consumer Sentiment Sep 10.9 vs 10.8, 10.8 forecast

     
  • Great Britain Nationwide house price mm Aug -0.1% vs 0.3%, revised 0.2 %, 0.1% forecast

     
  • Great Britain Nationwide house price yy Aug 2.1% vs 2.9%, 2.5% forecast

     
  • North Korea’s “reckless” missile launch over Japan sharply escalates tension

     
  • No EU-UK trade talks until divorce issues settled – EU’s Juncker

     
  • Oil prices gyrate as market grapples with U.S. hurricane damage

     
  • Gold hits 9-1/2-month high as North Korea tensions escalate

Economic Data Ahead

  • (0830 ET/1230 GMT) The Statistics Canada releases its Raw Material Price Index for the month of July. The index posted a decline of 3.7 percent in June.

     
  • (0830 ET/1230 GMT) The Statistics Canada will report its industrial producer prices for the month of July. The indicator fell 1.0 percent in the prior month.

     
  • (0900 ET/1300 GMT) The S&P/Case-Shiller is expected to report that U.S. home price index of 20 metropolitan areas rose at an annualized rate of 5.7 percent in June, after posting similar gains in the previous month.

     
  • (0900 ET/1300 GMT) Brazil’s statistics agency IBGE releases its Producer prices index for the month of July. The indicator fell 0.21 percent in June.

     
  • (1000 ET/1400 GMT) The U.S. Conference Board is likely to show a decline in its consumer confidence index for the month of August to 120.3 from a final reading of 121.1 in July.

     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

     
  • (1845 ET/2245 GMT) The Statistics New Zealand releases building permits seasonally adjusted data for the month of July. The index posted a fall of 1.0 percent in June.

     
  • (1901 ET/2301 GMT) The British Retail Consortium (BRC) will report its Shop Price Index for the month of August. The index posted a decline of 0.4 percent in the previous month.

     
  • (1850 ET/2350 GMT) Japan’s Ministry of Economy, Trade and Industry releases retail trade data for the month of July. The indicator is likely to post an annualized rise of 1.1 percent after advancing 2.2 percent in the prior month.

Key Events Ahead

  • (0945 ET/1345 GMT) Fed Trade operation 30-year Fannie Mae / Freddie Mac (max $1.9 bn)

     
  • (1100 ET/1500 GMT) Federal Reserve Bank of Chicago President Charles Evans gives opening remarks before the Large-Bank Directors Conference hosted by the Federal Reserve Bank of Chicago, in Chicago, Illinois.

FX Beat

DXY: The dollar slumped across the board as escalating tensions in the Korean peninsula and rising uncertainty over the U.S. President Donald Trump’s promised pro-growth economic agenda weighed heavily on dollar bulls sentiment. The greenback against a basket of currencies traded 0.5 percent down at 91.77, having touched a low of 91.62 earlier, it’s lowest since Jan 2015. FxWirePro’s Hourly Dollar Strength Index stood at -88.21 (Highly Bearish) by 1000 GMT.

EUR/USD: The euro rallied to a fresh 2-1/2 year high above the 1.2000 handle, as investors turned bullish about its outlook after the European Central Bank President refrained from talking about the single currency’s recent strength at the Jackson Hole Symposium last week. Moreover, bearish sentiment around the greenback following an innocuous speech by Yellen last week provided additional support to the major. The European currency traded 0.5 percent up at 1.2040, having touched a high of 1.2070 earlier, its highest since Dec. 2014. FxWirePro’s Hourly Euro Strength Index stood at 12.09 (Neutral) by 1000 GMT. Immediate resistance is located at 1.2070 (Session High), a break above targets 1.2100. On the downside, support is seen at 1.1913 (61.8% retracement 1.1661 and 1.2070), a break below could drag it near 1.1865 (50.0% retracement 1.1661 and 1.2070).

USD/JPY: The dollar fell below the 109.00 handle, hitting a 4-month low as a missile launch from North Korea earlier that flew over northern Japan triggered a fresh bout risk aversion across the global markets. Moreover, U.S. President Donald Trump threat on Aug. 22 to shut down the government if Congress does not fund his U.S.-Mexico border wall continued to undermine the pair. The major was trading 0.6 percent down at 108.55, having hit a low of 108.27 earlier, its lowest since Apr. 17. FxWirePro’s Hourly Yen Strength Index stood at -32.62 (Neutral) by 1000 GMT. Immediate resistance is located at 1098.86 (78.6% retracement of 110.96 and 108.27), a break above targets 109.32 (61.8% retracement of 110.96 and 108.27). On the downside, support is seen at 108.00, a break below could take it near 107.77 (Nov 15 Low).

GBP/USD: Sterling rallied to a 2-week high against the dollar as Federal Reserve Chair Janet Yellen’s failure to provide insights on the monetary policy outlook last Friday and escalating tensions in the Korean peninsula added to the greenback’s weakness. However, the upside remained capped below the 1.3000 handle after data showed British house price growth eased to a three-month low in August. The major traded 0.2 percent up at 1.2960, having hit a high of 1.2978 earlier, its highest since August 14. FxWirePro’s Hourly Sterling Strength Index stood at 85.22 (Slightly Bullish) by 1000 GMT. Immediate resistance is located at 1.3000, a break above could take it near 1.3053 (August 8 High). On the downside, support is seen at 1.2900, a break below targets 1.2845 (5-DMA). Against the euro, the pound was trading 0.4 percent down at 92.95 pence, having hit a 10-1/2 month low of 93.06 pence earlier in the session.

USD/CHF: The Swiss franc advanced by more than 1 percent to a 2-year high as North Korea’s fresh ballistic missile test send investors seeking safety into safe-haven assets. The major trades 1.2 percent down at 0.9436, having touched a low of 0.9429 earlier, it’s lowest since Aug. 2015. FxWirePro’s Hourly Swiss Franc Strength Index stood at 128.08 (Highly Bullish) by 1000 GMT. The pair is facing near term support at 0.9400 and any close below will drag the pair till 0.9383 (Aug, 26 2015 Low). On the higher side, upside capped at 0.9488 (78.6% retracement of 0.9699 and 0.9429) and any break above will take the pair till 0.9534/0.9634.

AUD/USD: The Australian dollar rose to a near 4-week high as the US dollar Index slumped on concerns over Hurricane Harvey’s economic implications and escalating tensions over North Korea.The Aussie trades 0.2 percent up at 0.7977, having hit a high of 0.7980 earlier, it’s strongest since Aug. 2. FxWirePro’s Hourly Aussie Strength Index stood at -61.09 (Bearish) by 1000 GMT. Immediate support is seen at 0.7900), a break below targets 0.7866 (August 24 Low). On the upside, resistance is located at 0.8000, a break above could take it near 0.8042 (August 1 High).

Equities Recap

European shares declined, while safe-haven assets rallied after North Korea fired a missile over northern Japan, triggering worries of fresh tension between Washington and Pyongyang.

The pan-European STOXX 600 index tumbled 1.5 percent to 366.66 points, while the FTSEurofirst 300 index slumped 1.5 percent to 1,441.14 points.

Britain’s FTSE 100 trades 1.3 percent down at 7,306.12 points, while mid-cap FTSE 250 declined 0.9 percent to 19,493.08 points.

Germany’s DAX fell 1.9 percent at 11,890.46 points; France’s CAC 40 trades 1.6 percent lower at 5,001.15 points.

Commodities Recap

Crude oil prices declined, extending previous session losses, as flooding from tropical storm Harvey caused ongoing large-scale U.S. refinery outages. International benchmark Brent crude was trading 0.4 percent down at $51.78 per barrel by 0930 GMT, having hit a high of $51.52 The prior session, its lowest since Aug. 23. U.S. West Texas Intermediate was trading 0.3 percent down at $46.65 a barrel, after falling as low as $46.13 the day before, its weakest since Jul. 24.

Gold prices rallied for a third consecutive session to their highest since November as increasing geopolitical tensions over a new North Korean missile launch underpinned demand for safe-haven assets. Spot gold was trading 0.9 percent up at $1,320.80 per ounce, as of 0935 GMT, after rising to a high of $1,325.89, its highest since Nov. 9. U.S. gold futures for December delivery rose 0.6 percent to $1,323.00 per ounce.

Treasuries Recap

The U.S. Treasuries joined the chorus as investors wait to watch the country’s 7-year auction, scheduled to be held today by 17:00GMT. Also, the Q2 GDP data is awaited on August 30 for further direction in the debt market. The yield on the benchmark 10-year Treasury, slumped 6-1/2 basis points to 2.09 percent, the super-long 30-year bond yields plunged 6 basis points to 2.69 percent and the yield on short-term 2-year note traded 2-1/2 basis points lower at 1.31 percent.

The UK gilts surged on rising global safe-haven demand after North Korea fired a ballistic missile over Japan’s northern Hokkaido island into the sea, prompting warnings to residents to take cover and drawing a sharp reaction from Japanese Prime Minister Shinzo Abe. Also, investors wait to watch the Bank of England member Saunders speak on August 31 by 07:25GMT. The yield on the benchmark 10-year gilts, slumped 5-1/2 basis points to 0.99 percent, the super-long 30-year bond yields plunged over 4 basis points to 1.66 percent and the yield on the short-term 2-year traded 3-1/2 basis points lower at 0.15 percent.

The German government bonds sharply rebounded as investors remained focussed to read the country’s consumer price-led inflation index for the month of August, scheduled to be released on August 30 by 12:00GMT. The German 10-year bond yields, which moves inversely to its price, slumped nearly 4 basis points to 0.32 percent, the yield on 30-year note also plunged over 6 basis points to 1.09 percent and the yield on short-term 2-year hovered tad lower at -0.75 percent.

The Japanese government bonds traded tad higher early Tuesday following higher safe-haven demand after North Korea fired a ballistic missile from its capital Pyongyang that flew over Japan before plunging into the northern Pacific Ocean. According to officials, this was an aggressive test-flight over the territory of a close U.S. ally, sending a clear message of defiance. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell slightly to 0.01 percent, the yield on long-term 30-year also remained tad 1 basis point lower at 0.83 percent and the yield on short-term 2-year hovered around -0.15 percent.

The New Zealand bonds jumped at the time of closing Tuesday as investors poured into safe-haven assets, over hovering worries over global natural as well as political disturbances, caused by the tropical hurricane Harvey in the United States and North Korea’s ballistic missile launch over Japan early today. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 2.88 percent, the yield on 7-year note slumped 4 basis points to 2.72 percent while the yield on short-term 2-year ended 1-1/2 basis points lower at 2.04 percent.

The Australian bonds jumped Tuesday tracking firm developments in the U.S. Treasuries as investors poured into safe-haven assets, following news that Hurricane Harvey is likely to be the most devastating storm to hit the US since Katrina. This will create some additional uncertainty alongside political developments. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 4 basis points to 2.63 percent, the yield on 15-year note also plunged 4 basis points to 2.93 percent and the yield on short-term 2-year traded 3 basis points lower at 1.84 percent.

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