Article / 20 February 2017 at 13:04 GMT

Mid-session Europe: Sterling shines with FX markets mainly calm

Saxo Markets
Denmark

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Foreign exchange
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European equities scored modest gains, with investors keeping an eye on a Monday meeting of Eurozone finance ministers, who were expected to discuss a deadlock over debt-wracked Greece’s bailout.

Forex markets were mainly calm, though sterling was the main exception, and GBP was bid across the board .

Funds cut bullish bets on gold last week, while adding silver . Crude oil remained range-bound in a tight interval.

Shares in Anglo-Dutch consumer goods group Unilever shares plunged 7% after Kraft-Heinz withdrew its $143 billion bid.
 

Watchlist
  • EU Flash consumer confidence indicator (1500 GMT)
              
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Forex developments

It's been a relatively quiet day, with US traders away for the Presidents' Day holiday. Rallying sterling has been the main exception, despite weaker retails sales on Friday that dragged GBP lower amid confirmation that Bank of England dovishness is justified. 

GBPUSD is now back from the 1.2480 area which has been the magnate we have highlighted. Cable has been in a downtrend since February 9, with the top of the channel around the 1.2480-90 area for today and then opening up to the 1.2540 area. The next important data for sterling will be UK preliminary fourth-quarter GDP on Wednesday; the data has been stable since the Brexit referendum, and any weakness could add interest for weaker GBP. The 100-day moving average has been decent technical support on the downside at 1.2408 for today. GBPUSD has failed to close below this moving average since January 23, and a close below could trigger new moves.

USDJPY rose in the Asian session on Cleveland Fed president Loretta Mester’s speech in Singapore. Currently finding the 21-day moving average as the lid at 113.25, with low liquidity due to the US holiday. Notable technical support in USDJPY is in the 112.88 area, corresponding to the 61% Fibonacci level from a rally that began on February 7 to highs of February 15. It is important to see the pair closes day above this level, as it did on Friday, to avoid deeper moves .

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After last week’s selling in all majors, the market is slightly better bid in most pairs this morning. The US market is closed today for Presidents' Day, so we still see good selling interest of options in the overnight and 1-week segments.

Brokers are still mainly interested in structuring correct positions (from a protective point of view) heading into the French election. In the medium term, curves seem to be well supported at present levels, while the very short end is still driven by low historic versus implied values. The 1-month covers the March Federal Open Market Committee meeting and is still fairly well bid in most USD crosses, so it is the first tenor given the best selling value without involving any political risk.

No particularly interesting expiry today, nor a lot of important news, so we expect range trading to continue.

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Equities

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European stocks scored modest gains. Investors were keeping an eye on a Monday meeting of Eurozone finance ministers, who were expected to discuss a deadlock over debt-wracked Greece’s bailout.

Shares in Royal Bank of Scotland jumped 6% following news the bank might not sell its Williams & Glyn business. The bank had agreed to the sale during the financial crisis, but it has proved troublesome. 

Rolls-Royce leapt 4% after Goldman Sachs analysts upgraded their rating for the engines maker to "Buy" and put the stock on their “conviction” list.

Steinhoff International Holdings climbed 7%, for the Stoxx 600’s biggest gain, after the Netherlands-listed furniture retailer ended deal talks with South African supermarket operator Shoprite Holdings.

Among decliners, Unilever fell more than 7% after American rival Kraft Heinz on Sunday dropped its $143 billion offer for the Anglo-Dutch consumer-goods giant.

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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.


Asia:      Morning Report APAC: Euro falls on renewed French election concerns

Europe: Morning Markets: Europe looks to Pence for answers



London bus
 The British pound was the lone bright spot in a drab 
FX market on Monday. Image: Shutterstock


— Edited by John Acher

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

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