March 21, 2018

Premarket: Stocks recover as bond jitters retreat, euro hits 3-year high

13 January 2018, 05:27 | Cesar Cruz

XE MONEY This GBP EUR Chart let’s you see the pair’s currency rate history

Pound to euro exchange rate

In the USA, the Labor Department reported that weekly jobless claims rose by 11,000 to 261,000 new claims, a three-month high.

The index was on track to shed 0.2 percent for the week, pressured by data on Thursday that showed US producer prices fell for the first time in almost 1-1/2 years in December, which could temper expectations that inflation will accelerate in 2018.

"This bull market is highly related to the fact we are facing good growth, low inflation and soft monetary policy normalisation", said Jeanne Asseraf Bitton, head of cross-asset research at Lyxor Asset Management.

Germany's 10-year Bund yield had briefly hit a fresh five-month high of 0.54 percent after Chancellor Angela Merkel's conservatives and the Social Democrats agreed a blueprint for formal coalition negotiations, news that also buoyed the euro.

The euro jumped in value against the USA dollar after the minutes were released, gaining more than 0.8 per cent at the time of writing to hit highs of $1.2049, moving back towards three-year highs achieved at the start of the year.

The euro's overnight index swap rates have risen sharply this week as traders price in higher chance of a rate hike early next year.

While the currency's rise has reflected growing optimism over the bloc's economic recovery, investors have flagged it as a potential brake on stocks.

On Thursday, the euro rose 0.72 percent against the dollar after minutes of the ECB's December meeting showed that bank policymakers could revisit their communication stance in early 2018.

"Markets will stay nervous until (ECB president) Draghi provides his views on the aggressive repricing and euro appreciation two weeks from now", said Commerzbank strategist Michael Leister.

Threat of CBRN weapons becoming a 'reality', says Rawat
He also raised concern over "disinformation" being spread through social media, and through religious schools and mosques. Asked about Chinese incursions, he said, "We will not allow our territory to be invaded by anyone".

"Gold put in another strong showing after the hawkish European Central Bank minutes weighed on United States dollars sentiment", Stephen Innes with Oanda said on Friday.

December's European Central Bank meeting was largely unsurprising, but the meeting minutes report from that meeting was published on Thursday and hinted that the bank may be looking to change its language on forward guidance soon.

The asset purchase programme, known as quantitative easing, has racked up €2.29 trillion in bonds on the ECB's balance sheet since starting in 2015, with the plan now only set to continue until the end of September.

The SPD are considered heavily pro-Europe, with leader Martin Schulz past year arguing for closer ties and calling for a "United States of Europe". The Baker-Hughes rig count will be released tomorrow along with retail sales data and the latest consumer price index (CPI) in the U.S. France and India will also report CPI on Friday.

And while the U.S. Federal Reserve has been slowly tightening policy over the last two years, traders have been repricing market expectations of when Europe and Japan will follow suit.

The US currency slipped to a six-week low of 111.05 yen on Thursday and last stood at 111.21 yen.

Bitcoin BTC=BTSP was 3.8 percent higher at $13,749.05 on the Luxembourg-based Bitstamp exchange a day after it skidded over 11 percent after the government of South Korea said it was considering a plan to ban cryptocurrency trading.

The energy sector led the gains as oil prices rose to three-year highs while interest rate sensitive-sectors, such as utilities and real estate companies, underperformed.

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