Article / 01 March 2017 at 12:36 GMT

Mid-session Europe: EU stocks up on euro driven down by rate hike odds

Saxo Markets


Foreign exchange


Safe-haven gold is down by nearly $20/oz from its highs close to $1,260 on Tuesday as the markets come to terms with US president Donald Trump's address to Congress overnight. The speech was simultaneously more grounded than anticipated and lighter on policy details than hoped.

In Europe, stocks have gotten a boost off the back of a moderately weaker euro, triggered by the once again increased likelihood of a rate hike at this month's Federal Open Market Committee meeting.

Watchlist (all times GMT)

  • Germany February preliminary CPI (2.1% expected year-over-year) (1300)

  • US January personal income (1330)

  • CA Bank of Canada interest rate decision (1500)

  • US weekly Department of Energy crude oil inventories (1530)

Forex developments

A modest EURUSD drop follows heightened speculation of a March Federal Reserve rate hike. EURUSD is in the 1.0560-1.0526 range after 1.0538-1.0590 in the Asian session.

USDJPY rate-hike speculation helps spot higher, likely to test the 114.00 level again.

Gilt data and the UK manufacturing PMI miss helping weigh on
GBP. GBPUSD is at a five-week low of 1.2322 after sub-1.2350 stops tripped. 
FX Options volatilities

Curves are slightly better bid, particularly in the front end, while the back end is uninspired and basically offered. EUR risk reversals for three-month and out are slightly better offered as well.

Yield curve now implies a 78% chance of rate hike at the March meeting of the Federal Open Markets Committee.
In USDJPY we have seen good interest for 115 strike for days around the FOMC meeting. Some resistance around 113.75/80 level but test of 115.00 is realistic over the coming days.

Euro crosses are trading neutral. Decent strike expiry today at 1.0550 in EURUSD.

Fixed income
fixed income



European stocks were bolstered as the euro pulled back on heightened expectations of a US interest rate increase, while investors assessed president Donald Trump’s address to Congress. The CAC 40 jumped 1.4% while the FTSE 100 moved up 0.7%

A weaker euro helped boost exports of products from European companies. Auto makers Volkswagen and Daimler AG each rising 1.3%. Meanwhile, Deutsche Bank popped up 4%.
Sabadell gained 5% after Iberiabank said it would buy Sabadell United Bank NA from Spain's Banco de Sabadell in a stock-and-cash deal valued at $1.03 billion, to expand in the southern Florida market.

Other top performers were Fnac who moved up 10% after publishing good FY results, accelerated after Darty cost cutting.

On the other side, Covestro fell 7% after Bayer AG cut its stake in the plastics company to 53.3% ahead of its planned acquisition of Monsanto.

Man Group fell 5.6% after the hedge fund manager swung to a pretax loss for 2016 of $272 million, primarily because of exceptional charges.

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Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

Following a more than week-long rally, gold prices tumbled overnight in a reflection of reduced risk sentiment after US president Donald Trump's address to Congress. Photo: Shutterstock

— Edited by Jack Davies

The Global sales Trading desk is a multi-asset team providing customised trading solutions


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