Market Roundup
• US Jan existing homes sales rise 3.3% v 1.1% forecast, -1.6% previous; 10-yr high.
• Fed minutes: voters/non-voters saw downside risks associated w/rise in USD, saw upside risks given the possibility of expansionary fiscal policy.
• Fed minutes: Voters saw modest risk inflation pressures will rise significantly, judged Fed would have ‘ample time’ to respond if inflation emerged.
• Fed’s Powell: March on the table for possible US rate hike, prefers to keep portfolio stable until rates high enough to react to down turn.
• German business morale brightens despite Trump, French vote risks, Ifo index rises unexpectedly to 111.0 points.
• Euro Zone Jan inflation final y/y 1.8% as forecast; m/m -0.8% v -0.8% forecast, 0.5% previous.
• EU tells Italy to reduce fiscal gap or risk being fined.
• UK economy expands 0.7% in Q4, fastest growth in a year; ONS lowers ’16 growth estimate to 1.8% from 2%.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e -297.4b- previous
• 23:50 Japan Foreign Invest JP Stock w/e 175.6b- previous
• 00:30 Australia Capital Expenditure* Q4 f/c -1%, -4.00%- previous
• 00:30 Australia Building Capex* Q4 -5.70%- previous
• 00:30 Australia Plant/Machinery Capex* Q4 -1.90%- previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- Japan- Bank of Japan policy board member, Takahide Kiuchi, to meet with business leaders
Currency Summaries
EUR/USD is likely to find support at 1.0487 levels and currently trading at 1.0564 levels. The pair has made session high at 1.0574 and hit lows at 1.0496 levels. The dollar dipped against euro on Wednesday as greenback which was boosted by hawkish comments from various Fed officials in the previous session, turned lower after the minutes were released. The minutes on the Fed's Jan. 31-Feb. 1 meeting showed many members of the Federal Open Market Committee, the Fed's policy-setting group, expected another rate increase in an upcoming meeting after a quarter-point hike in December but offered little to support the notion it was ready to speed up the pace of rate increases. French politics also weighed on the greenback and lifted the euro from a six-week trough of $1.0494 touched earlier to a session high of $1.0572, or as much as 0.4 percent higher on the day. Veteran French centrist Francois Bayrou said Wednesday he was offering an alliance with independent candidate Emmanuel Macron, a move that could give the former investment banker a much-needed boost to reach the runoff in May's presidential election.
GBP/USD is supported in the range of 1.2385 levels and currently trading at 1.2454 levels. It reached session high at 1.2465 and dropped to session low at 1.2419 levels. Sterling declined against the dollar on Wednesday as sterling came under selling pressure after data showed UK business investment fell in the fourth quarter of 2016 and indicated tougher economic times lie ahead, despite overall growth hitting its fastest pace for a year. Business investment fell 1 percent in the last three months of the year compared with the previous quarter, after two straight quarters of improvement. Household spending growth also slowed and, separately, data showed the services sector expanded in December at the slowest pace for seven months. However, Sterling recovered some losses after minutes of the latest Federal Reserve monetary policy meeting struck a cautious tone on raising interest rates. Sterling after initially declining to hit low at 1.2419 reversed its course to trade flat on the day, hovering around $1.2460 by 21:15 GMT.
USD/CAD is supported at 1.3125 levels and is trading at 1.3165 levels. It has made session high at 1.3202 and lows at 1.3160 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday, pulling back from two-week low after the greenback lost ground against a basket of major currencies as traders reduced expectations that Federal Reserve would raise rates in March after the release of the central bank's latest minutes. Canadian retail sales declined unexpectedly in December, marking the biggest drop in nine months as consumers bought fewer new cars and spent less during the holiday shopping season, putting a damper on expectations for economic growth at the year's end. The 0.5 percent decrease reported by Statistics Canada on Wednesday was worse than economists' expectations for sales to be unchanged. November data was revised slightly higher for a gain of 0.3 percent. U.S. crude prices were down 1.5 percent at $55.84 a barrel on expectations of another surge in U.S. inventories. The Canadian dollar was last trading at C$1.3147 to the greenback, slightly weaker than Tuesday's close of C$1.3138.
AUD/USD is supported around 0.7648 levels and currently trading at 0.7708 levels. It hit session high at 0.7715 and made session lows at 0.7672 levels. The Australian dollar rose against US dollar on Wednesday as the greenback weakened after Federal Reserve meeting minutes disappointed expectations for a hawkish tone. The minutes showed, that voting members were much less urgent to raise rates with many seeing only a modest risk that inflation would increase significantly and that the Fed would likely have ample time to respond if price pressures emerged. The minutes came after Fed Chair Janet Yellen said last week that waiting too long to raise rates again would be "unwise" and gave a strong indication that the central bank remains on track to consider raising rates again by the summer. The Australian dollar was steady at $0.7707, off a low of $0.7650 on Tuesday. It remained within sight of $0.7732, a three-month peak touched recently, with a break above opening the way to the November high of $0.7778.
Equities Recap
European shares were steady at 14-month highs on Wednesday, supported by well-received earnings updates from companies such as Lloyds, Telefonica Deutschland and Scor.
UK's benchmark FTSE 100 closed up by 0.4 percent, FTSEurofirst 300 ended the day up by 0.06 percent, Germany's Dax ended up by 0.3 percent, France’s CAC finished the day up by 0.2 percent.
The S&P 500 ended modestly weaker on Wednesday, holding losses after minutes from the Federal Reserve's last meeting kept alive a potential near-term interest rate hike, while DuPont shares helped the Dow close at an all-time high for a ninth straight session.
Dow Jones closed up by 0.13 percent, S&P 500 ended down 0.13 percent, Nasdaq finished the day down by 0.11 percent.
Treasuries Recap
U.S. long-dated Treasury debt yields edged lower on Wednesday in choppy trading, after minutes of the latest Federal Reserve monetary policy meeting struck a cautious tone on raising interest rates, reducing expectations of a hike next month.
U.S. 10-year notes were last up 2/32 in price to yield 2.421 percent, compared with 2.427 percent on Tuesday. Yields fell as low as 2.391 percent, their lowest level since Feb. 9.
U.S. 30-year bond prices were almost flat, yielding 3.040 percent. Yields earlier dropped to 2.999 percent, their lowest in two weeks.
U.S. two-year note prices were also flat in price, yielding 1.224 percent, compared with 1.23 percent late on Tuesday.
Commodities Recap
Gold turned higher as the dollar shifted lower on Wednesday after minutes from the last U.S. Federal Reserve meeting showed uncertainty among policymakers about the new Trump administration's economic program.
Spot gold was up 0.1 percent at $1,237.48 an ounce by 2:56 p.m. EST (1956 GMT), while U.S. gold futures settled down 0.5 percent at $1,233.30, prior to the release of the minutes.
Oil prices fell 1.5 percent on Wednesday on expectations of another surge in U.S. inventories, retreating from multi-week highs hit in the previous session after OPEC signaled optimism over its deal with other producers to curb output.
Brent crude ended 82 cents, or 1.5 percent, lower at $55.84 a barrel, having touched its highest since Feb. 2 at $57.31 in the previous session.
The U.S. West Texas Intermediate crude April contract, the new front-month future, settled 74 cents, or 1.4 percent, lower at $53.59.
