Market Roundup
- Fed's Yellen: expects wage growth will increase somewhat, will shrink BS when short-term rates are higher.
- Fed's Yellen: should look at negative rates in spirit of prudent planning, Fed not likely to reverse course on rates despite risks.
- Fed's Yellen says global turmoil bears "close watching".
- Dollar hits 15-month low against yen after Yellen testimony.
- Sterling pares gains against dollar after Yellen's comments.
- JP Morgan: central bank can cut rates well below zero, low inflation/growth may push BOE/Fed to NIRP.
- Shares gain on Yellen comments, reduced bank fears.
- Bank stock recovery spurs EGBs higher, peripheral spreads tighten.
Looking Ahead - Economic Data (GMT)
- 23:50 Japan Foreign Bond Investment * w/e -85.4b-previous
- 23:50 Japan Foreign Invest JP Stock* w/e -364.1b- previous
- 21:30 New Zealand Manufacturing PMI* Jan 56.7- previous
Looking Ahead - Events, Other Releases (GMT)
- No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1130 levels and currently trading at 1.1293 levels. The pair has made session high at 1.1294 and hit lows at 1.1160 levels. The U.S. dollar edged higher against euro on Wednesday as comments by Federal Reserve Chair Janet Yellen cooled investor worries about the U.S. economy's ability to absorb a gradual rise in interest rates. Yellen told members of Congress that she does not expect the central bank to reverse the rate-increase program it began in December but highlighted the risk continued global financial volatility posed to the U.S. economy. Increasing speculation of U.S. interest rates hikes would make the dollar most preferred currency for investors. But the decline in crude oil prices has made the investors wary of the likelihood the Fed may be on the sidelines in March. The euro dropped 0.5 percent to a session low of $1.1161 following the release of Yellen's report. It was last down 0.3 percent to 1.1257.
GBP/USD is supported in the range of 1.4440 and currently trading at 1.4542 levels. It reached session high at 1.4582and hit low at 1.443 levels. British pound declined against US dollar on Wednesday after U.S. Federal Reserve Chair Janet Yellen suggested that interest rate hikes in march remain a on the table. Yelled said there are good reasons to believe the United States will stay on a path of moderate growth that will allow the Fed to pursue gradual adjustments to monetary policy. Earlier in the European session pound shrugged off a poor batch of British industrial output data, advancing higher around $1.4576 before retreating in afternoon to trade at $1.4455, down 0.1 percent on the day. The pound rose 0.8 percent to trade at 77.45 pence per euro, having dropped to a more than one-year low earlier this week amid a wave of global concern over banks and other financial firms which has hammered stock markets.
USD/CAD is supported at 1.3780 levels and is trading at 1.3920 levels. It has made session high at 1.3999 and lows at 1.3782 levels. The Canadian dollar slipped sharply lower against US dollar on Wednesday as a rebound in crude oil reversed course and U.S. Federal Reserve Chair Yellen fueled optimism for further interest rate hikes in March. Yellen said, global risks remain to US economy, but said she expects moderate growth that will allow the U.S. central bank to pursue gradual adjustments to monetary policy. Oil reversed lower after posting its third-biggest daily fall since 2008 on Tuesday. U.S. crude prices were down 0.29 percent to $27.86 a barrel. The currency's strongest level of the session was C$1.3820, while its weakest was C$1.3921.
AUD/USD is supported around 0.7042 levels and currently trading at 0.7109 levels. It hit session high at 0.7114 and made session lows at 0.7065 levels. The Australian dollar eased against US dollar on Wednesday as concerns about the health of global banks and sliding commodity prices sent investors to safe haven assets. The yen, a favoured currency at times of volatility, gained broadly as Japanese stocks fell and worries mounted about the debt of European banks. The Aussie declined 1 percent to 80.53 yen, and has now lost more than five yen in one week. The next major bear target was 79.17, a level last seen mid-2012. The Aussie fared a little better on the U.S. dollar but still eased to $0.7048, not far from a low of $0.6973 touched on Tuesday. Breaking that level could open the way to retracement of a seven-year trough of $0. Chinese financial markets shut this week for the Lunar New Year, the next focus is on Federal Reserve Chair Janet Yellen's testimony later American session.
Equities Recap
European shares edged up from a seven-day losing streak on Wednesday as the stocks were helped by some solid corporate earnings and a recovery in Deutsche Bank from 30-year lows.
UK's benchmark FTSE 100 closed up by 0.65 percent, the pan-European FTSEurofirst 300 ended the day up by 1.42 percent, Germany's Dax closed up at 1.66 percent, and France's CAC finished the day up by 1.65 percent.
US stocks closed mixed on Wednesday as oil prices rebound reversed course and investors digested comments from Federal Reserve Chair Janet Yellen testimony before Congress on the strength of US economy.
Dow Jones closed down by 0.63 percent, S&P 500 ended the day down by 0.04 percent, Nasdaq finished the day up by 0.34 percent.
Treasuries Recap
U.S. Treasury yields ended lower on Wednesday after the government sold $23 billion in 10-year notes to solid demand, showing that the dramatic drop in yields this year has not reduced investor appetite for the safe-haven bonds.
Benchmark 10-year notes gained 7/32 in price to yield 1.71 percent, down from 1.73 percent late on Tuesday.
The yield curve between two-year and 10-year notes, which is viewed by some as an indicator of possible recession, also reached its flattest level since December 2007, falling to 99.40 basis points.
Commodities Recap
Gold prices stabilized below a 7-1/2-month high on Wednesday after U.S. Federal Reserve Chair Janet Yellen said that only "gradual" adjustments to monetary policy were likely and stressed that global headwinds could hurt U.S. growth.
Spot gold recovered earlier losses to rise 0.4 percent to $1,192.96 an ounce at 3:01 p.m. EST (2001 GMT), not far from Monday's 7-1/2-week high at $1,200.60.
U.S. gold futures for April delivery settled down 0.3 percent at $1,194.60 an ounce.
Oil prices seesawed in choppy trade on Wednesday, with U.S. crude slipping and Brent posting gains as worries about a global supply glut offset data showing a surprise drop in U.S. crude stockpiles.
U.S. crude settled down 49 cents, or 1.8 percent, at $27.45 a barrel. It rallied more than $1 earlier before falling to near 12-year lows on the EIA data.
U.K.-based Brent closed up 52 cents, or 1.7 percent, at $30.84 a barrel. It was Brent's first rise since Feb. 2 and came after an 8 percent drop in the previous session.
