Silver futures decline with Fed in focus

Silver prices were lower on Monday, as investors awaited a Federal Reserve meeting starting tomorrow to gauge the timing of stimulus cuts.

On the Comex division of the New York Mercantile Exchange, silver futures for March delivery traded at USD19.47 a troy ounce during European morning trade, down 0.65%. Comex silver prices traded in a range between USD19.44 a troy ounce and USD19.67.

Futures were likely to find support at USD19.28 a troy ounce, the low from December 13 and resistance at USD19.73, the high from December 13.

The March contract ended up 0.78% on Friday to settle at USD19.60 a troy ounce.

Silver traders were turning their attention to the outcome of the Fed’s upcoming policy meeting on Wednesday, with some expecting the central bank to announce a small reduction in the pace of its USD85 billion-a-month asset purchase program.

Recent signs of improvement in the labor market and last week’s agreement on a two-year U.S. budget deal were seen as removing obstacles to the winding back of monetary stimulus.

Silver is down approximately 35% this year, as solid U.S. economic data underlined expectations the Fed will begin curbing stimulus.

Elsewhere on the Comex, gold for February delivery shed 0.6% to trade at USD1,227.40 a troy ounce, while copper for March delivery inched up 0.25% to trade at USD3.320 a pound.

Copper prices found support after data showed that manufacturing activity in the euro zone expanded at the fastest pace since May 2011 in December.

Market research group Markit said that its preliminary manufacturing purchasing managers’ index inched up to a seasonally adjusted 52.7 this month from a final reading of 51.6 in November. Analysts had expected the index to inch up to 51.9 this month.  

The upbeat data came after a report showed that manufacturing activity in Germany improved to a 30-month high this month.

Copper traders shrugged off disappointing manufacturing data out of top consumer China.

Data on Monday showed that the preliminary reading of China’s HSBC manufacturing index ticked down to a three month low of 50.5 in December from a final reading of 50.8 in November. Economists had expected the index to rise to 51.0.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

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French PMIs disappoint – EUR/USD slides

Markit reported its preliminary purchasing managers’ indices for France, Europe’s second largest economy. Manufacturing PMI fell 47.1 points, while in the services sector, the indicator fell to 47.4. Manufacturing PMI was expected to advance from 48.4 to 49.1 points. Services PMI carried expectations of a move from 48 to 48.9 points. The 50 point mark separates contraction from growth.

EUR/USD traded just above 1.3750 before the publication, after steady trading in the Asian session. The pair made a quick drop to 1.3735 before bouncing back.

The release for France will be followed by the German numbers and later by the all-European numbers. There are market moving German surveys this week, but the Fed will probably steal the show with the decision on whether or not to taper.

Support is at 1.3710 and resistance awaits at 1.38.

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Forex - EUR/USD hits session highs after euro zone PMI data

The euro rose to session highs against the dollar on Monday following the release of encouraging data on euro zone private sector activity, but gains were held in check ahead of this week’s Federal Reserve policy meeting.

EUR/USD hit highs of 1.3763, up from session lows of 1.3726 and was last up 0.16% to 1.3762.

The pair was likely to find support at 1.3708, Friday’s low and resistance at 1.3802, the high of December 12.

The euro found support after data showed that the euro zone’s composite output index rose to a three month high of 52.1 in December, from 51.7 in November, indicating that the recovery in the region is on track.

The euro zone’s manufacturing purchasing managers’ index rose to a 31 month high of 52.7 in December, from a final reading of 51.6 in November and above expectations for a reading of 51.9. 

However, the currency bloc’s services PMI ticked down to 51.0 from 51.2 in November, falling short of expectations for an uptick to 51.5.

Germany’s manufacturing PMI rose to a 30-month high of 54.2 in December, up from 52.7 in November and above expectations for a reading of 53.0.

The country’s services PMI ticked down to 54.0 this month from 55.7 in November, compared to expectations for a decline to 55.5.

A separate report showed that France’s manufacturing PMI fell to a seven month low of 47.1 from 48.4 in November, while the services PMI dropped to a six month low of 47.4 from 48.0 last month.

Investors remained cautious ahead of the outcome of the Fed’s upcoming policy meeting on Wednesday, with some expecting the bank to announce a small reduction in the pace of its USD85 billion-a-month asset purchase program.

Recent signs of improvement in the labor market and last week’s agreement on a two-year U.S. budget deal were seen as removing obstacles to the winding back of monetary stimulus. 

But with the inflation outlook remaining subdued the Fed may prefer to hold off on tapering stimulus measures until it sees more indications that the recovery is self-sustaining.

Elsewhere, the euro trimmed losses against the yen, with EUR/JPY last down just 0.02% to 141.80, up from session lows of 141.23.

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Euro zone manufacturing PMI rises to 31-month high of 52.7 in December

Manufacturing activity in the euro zone expanded at the fastest pace since May 2011 in December, preliminary data showed on Monday.

In a report, market research group Markit said that its preliminary manufacturing purchasing managers’ index inched up to a seasonally adjusted 52.7 this month from a final reading of 51.6 in November. Analysts had expected the index to inch up to 51.9 this month.  

On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.

The report also showed that service sector activity in the euro zone declined to a seasonally adjusted 51.0 in December from 51.2 in November, disappointing expectations for an increase to 51.5. 

Commenting on the report, Chris Williamson, Chief Economist at Markit said that “The PMI is signaling a mere 0.2% expansion of GDP in the fourth quarter, suggesting the recovery remains both weak and fragile.”

He added that, “There’s little here to suggest that euro area policymakers need to increase their stimulus, but on the other hand the sluggish nature of the upturn adds to the sense that policy will remain ultra-accommodative for quite some time.”

Following the release of the data, the euro held on to modest gains against the U.S. dollar, with EUR/USD inching up 0.11% to trade at 1.3757.

Meanwhile, European stock markets were mildly higher. The EURO STOXX 50 advanced 0.5%, France’s CAC 40 added 0.3%, London’s FTSE 100 inched up 0.15%, while Germany's DAX tacked on 0.4%.

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