Market Roundup
• USD down as US. Treasury yields fall, Yen gains on global political uncertainty.
• German Finance Minister spokeswoman denies Bloomberg report Germany had pushed for G20 to back tighter monetary policy.
• BoE’s Cunliffe sees risks for UK economy evenly balanced – BBC.
• France’s Le Pen would lead in presidential election 1st round, but lose to centrist macron in runoff- opinion polls.
• Political jitters lift gold, dent euro; and French/Italy debt spreads widen vs Germany.
• Greece default concerns return to haunt market, IMF says Greek banks need EUR 10 bln capital buffer.
• Support for Scottish independence rises (now 49%) after PM May goes for 'clean break Brexit'.
• India’s RBI signals end to rate cuts as inflation risks rise, changing stance to 'neutral' from accommodative.
• US crude stocks surge, gasoline draws down unexpectedly – EIA.
• GBP steadies around USD1.25 as BoE hints on growth and rates hold focus.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand Building Consents Dec -9.20%-previous
• 23:50 Japan Foreign Bond Investment w/e -1359.3b- previous
• 23:50 Japan Foreign Invest JP Stock w/e -143.9b- previous
• 23:50 Japan Machinery Orders MM* Dec forecast 3.1%, -5.10%- previous
• 23:50 Japan Machinery Orders YY* Dec forecast 4.6%, 10.40%- previous
• 00:00 Australia HIA New Hm Sales m/m Dec 6.10%- previous
Looking Ahead - Events, Other Releases (GMT)
• 00:10 New Zealand RBNZ's Wheeler at Parliament Select Committee
Currency Summaries
EUR/USD is likely to find support at 1.0641 levels and currently trading at 1.0689 levels. The pair has made session high at 1.0713 and hit lows at 1.0641 levels. Euro inched higher against the dollar on Wednesday as greenback was weighted down after decline in U.S. Treasury yields and investors priced out a March rate hike by the Federal Reserve amid uncertainty about President Donald Trump's economic policies. Concerns about the impact on the world economy of Trump's protectionism and immigration policy also undermined the greenback, along with the new administration's hints that it would prefer a weaker dollar. However, euros fortunes over the last few days have been largely tied to developments in France's looming presidential elections. Investors are concerned about the strong showing in the French presidential race of far-right candidate Marine Le Pen, who has promised to take France out of the euro zone and to hold a referendum on European Union membership. Opinion polls show Centrist Emmanuel Macron slightly ahead of conservative Francois Fillon in the first round, but behind far-right National Front leader Marine Le Pen, who has vowed to pull France out of the euro zone and hold a vote on its membership in the European Union. The euro was down 0.3 percent against the yen at 119.69 yen, but rose 0.2 percent versus the dollar to $1.0702.
GBP/USD is supported in the range of 1.2461 levels and currently trading at 1.2533 levels. It reached session high at 1.2549 and dropped to session low at 1.2506 levels. Sterling firmed against the dollar on Wednesday as warnings about the economic impact of Brexit failed to reverse the positive effect of suggestions that Britain's economy could sustain interest rate rises. A Bank of England survey on Wednesday indicated that employers this year plan to offer the least generous pay deals since 2012, while deputy governor Jon Cunliffe said business investment was likely to remain very weak in the near term. However, not everyone at the BoE is convinced that Britain's economy will start to run out of steam. Kristin Forbes the most sceptical of the bank's policymakers about the need for its huge stimulus programme said on Tuesday that August's rate cut might need to be reversed soon if growth remained solid and inflation picked up. At its meeting last week, the BoE voted unanimously by 9-0 to keep rates on hold at a record low of 0.25 percent, but raised its 2017 growth forecasts further. The pound was flat against the euro but up 0.2 percent at $1.2540 against dollar, having bounced back strongly from a two-week low of $1.2347 hit on Tuesday.
USD/CAD is supported at 1.3100 levels and is trading at 1.3137 levels. It has made session high at 1.3175 and lows at 1.3134 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices rebounded and domestic housing starts climbed, while a the greenback lost some ground against a basket of major currencies. The seasonally adjusted annualized rate of housing starts rose to a higher-than-expected 207,408 units in January, data from the national housing agency showed, suggesting groundbreaking on new homes was off to a strong start in 2017. On Tuesday, the loonie had hit a two-week low at C$1.3213 to the greenback, pressured by a drop in Canadian export volumes in December and lower oil prices. Oil, one of Canada's major exports, rose slightly on Wednesday as investors covered short positions after a rise in U.S. crude inventories was not as massive as many had feared. Canada's employment report for January is due on Friday. The job market is expected to be unchanged after 2016's strong second half, leaving the unemployment rate steady at 6.9 percent. The Canadian dollar was trading at C$1.3142, or 76.07 U.S. cents, stronger than Tuesday's close of C$1.3167, or 75.95 U.S. cents.
AUD/USD is supported around 0.7582 levels and currently trading at 0.7640 levels. It hit session high at 0.7665 and made session lows at 0.7622 levels. The Australian dollar declined against the greenback on Wednesday for its third straight day as the currency pair failed to breach a key chart resistance level and European political woes kept the investors cautious. The Aussie was last down 0.1 percent at $0.7643, drifting away from a three-month peak of $0.7696.It failed at critical resistance of 77 U.S. cents for four sessions in a row, as investors remained cautious on political uncertainty in Europe amid a slew of elections this year. The Aussie seen as a liquid proxy for China plays was also knocked by data showing China's forex reserves unexpectedly fell below the closely watched $3 trillion level in January, raising concerns about its ability to defend its currency. Oil prices gained slightly as investors covered short positions after a rise in U.S. crude inventories was not as massive as many had feared, while gasoline futures jumped nearly 4 percent after a surprise decline in fuel inventories.
Equities Recap
European shares edged ahead on Wednesday, helped by good earning updates, but bank stocks hit a five-week low on growing concerns over the region's crowded election agenda this year.
UK's benchmark FTSE 100 closed up by 0.1 percent, FTSEurofirst 300 ended the day up by 0.14percent, Germany's Dax ended flat, France’s CAC finished the day up by 0.3 percent.
The S&P 500 ended slightly higher on Wednesday as investors digested mixed earnings reports, while the Dow Jones Industrial Average slipped as bank stocks weighed.
Dow Jones closed down by 0.19 percent, S&P 500 ended up 0.06 percent, Nasdaq finished the day up by 0.13 percent.
Treasuries Recap
U.S. Treasury yields fell to their lowest levels in multiple weeks on Wednesday with 5-year note yields hitting their lowest since Dec. 8 as a flight to safety and technical positioning encouraged investors to buy U.S.government debt.
The 10-year note was last up 9/32 in price to yield 2.358 percent.
Gold rose to a three-month peak on Wednesday, as political risks posed by-elections in Europe and worries over U.S. President Donald Trump's policies stoked safe-haven demand.
Spot gold rose 0.5 percent at $1,239.27 an ounce by 2:45 p.m. EST (1945 GMT), after rising to its highest since Nov. 11 at $1,244.67. U.S. gold futures settled up 0.3 percent at $1,239.50.
Oil prices rose slightly on Wednesday as investors covered short positions after a rise in U.S. crude inventories was not as massive as many had feared, while gasoline futures jumped 4 percent after a surprise decline in inventories of the fuel.
Brent crude futures settled at $55.12 per barrel, up 7 cents or 0.13 percent.U.S. West Texas Intermediate (WTI) crude rose 17 cents, or 0.33 percent, to settle at $52.34 a barrel.
