Market Roundup
• US MBA Mortgage application -3.4%, 4.4% -previous.
• US Pending sales change MM -1.3% vs 0.5% forecast, -0.9% - previous.
• US Redbook YY 1.8%, 2.0% - previous.
• US Chicago PMI 59.4 v 57.0 forecast, 58.3 - previous.
• Fed Beige Book: US economy expanded at a modest or moderate pace but few signs of inflation pressures.
• Fed's Kaplan: weak, 'uneven' recent inflation a concern but price pressures likely building.
• Kaplan: backs gradual, patient policy tightening; supports two more rate hikes this year.
• Kaplan: The crackdown on undocumented immigrants could hit consumer spending, GDP growth.
• Comey to confirm Trump pressured him on Flynn investigation -CNN.
• Trump planning to pull U.S. out of Paris climate deal –source.
• ECB's Weidmann: recovery makes it likely inflation would be higher even if monetary policy accommodation is reduced.
• ECB's Nowotny: one could question whether ECB inflation target is still realistic.
• EZ inflation in May fell below expectations to 1.4% vs 2% ECB target, 1.9% in April – Eurostat.
• Mexico central bank chief: even after recent rate hikes monetary policy is not at restrictive level.
• Canada's economy grew 3.7% annualized in the first quarter.
• British PM May could lose majority in June 8 election - YouGov projection
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand Terms of trade QQ* 3.9% forecast, 5.7% - previous
• 23:30 Australia AIG manufacturing index 59.2 - previous
• 23:50 Japan Business capex (MOF) YY* 3.8% - previous
• 00:30 Japan Nikkei Mfg PMI 52.0 - previous
• 01:30 Australia Capital expenditure QQ* 0.8% forecast, -2.1% - previous
• 01:30 Australia Retail Sales MM* 0.3% forecast, -0.1% - previous
• 01:45 China Caixin Mfg PMI final 50.1 forecast, 50.3 - previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.1170 levels and currently trading at 1.1235 levels. The pair has made session high at 1.1249 and hit lows at 1.1216 levels. Euro rose against the dollar on Wednesday as the dollar was weighed down on growing political tension in Washington. President Donald Trump's administration has been the focus of independent investigations by the Federal Bureau of Investigation and several congressional panels over alleged Russian meddling in the 2016 presidential election and potential collusion by the Trump campaign.U.S. economic data on Wednesday was mixed. Pending home sales fell for a second straight month in April, hindered by a lack of supply, while an index of U.S. Midwest manufacturing activity rose in May. These reports have little bearing on expectations for next month's expected tightening by the Federal Reserve, although the number of hikes this year is still up for debate.The focus will be on Friday's U.S. non-farm payrolls report, which could set the dollar's tone in the short term. The euro was up 0.5 percent at $1.1236, while the dollar index fell 0.3 percent to 96.99.
GBP/USD is supported in the range of 1.2840 levels and currently trading at 1.2881 levels. It reached session high at 1.2916 and dropped to session low at 1.2840 levels. Britain's pound recovered against the dollar on Wednesday after two surveys showed Prime Minister Theresa May's poll lead in double digits, countering signs she might be set to fall short of a majority in next week's election. The pound sank as low as $1.2770 in early European session after a projection by polling firm YouGov pointed for the first time to a hung parliament that might instead see a left-leaning coalition take power. But surveys released later in the day by research firms Kantar and Panelbase showed May's lead over the opposition labour Party respectively at 10 and 15 points, giving the pound some respite. That was still more than 1 percent down from 8-month highs hit last week on a view that that a landslide victory for the Conservatives would strengthen May's hand in Brexit negotiations and smooth Britain's eventual divorce from Europe. The pound up 0.3 percent against the greenback at $1.2880 by 1930 GMT.
USD/CAD is supported at 1.3434 levels and is trading at 1.3509 levels. It has made session high at 1.3522 and lows at 1.3451 levels. The Canadian dollar weakened against its U.S. counterpart on Wednesday as fall in oil prices offset data upbeat Canadian GDP data. Canada's gross domestic product grew at an annualized 3.7 percent pace, slightly below economists' expectations for 3.9 percent, though growth in both the third and fourth quarters of 2016 was revised upward. The economy also appeared to have solid momentum heading into the second quarter with growth rising by a better-than-expected 0.5 percent in March. Prices of oil, one of Canada's major exports, fell on Wednesday to a three-week low on news that Libyan output was recovering from an oilfield technical issue, fuelling concerns that Organization of the Petroleum Exporting Countries-led output cuts were being undermined by producers outside the deal. The Canadian dollar was last trading at C$1.3507 to the greenback, down 0.3 percent. The currency traded in a range of C$1.3438 to C$1.3522.
NZD/USD is supported around 0.7413 levels and currently trading at 0.7430 levels. It hit session high at 0.7453 and made session lows at 0.7422 levels. New Zealand dollar climbed to a three-month peak against the dollar on Wednesday after Reserve Bank of New Zealand said global and domestic risks have lessened in its half-yearly Financial Stability Report. The Reserve Bank of New Zealand (RBNZ) said risks at home and abroad to the country's financial system had receded in recent months, but it remained wary of any rise in house prices or global protectionism. The central bank said it would soon release a consultation paper proposing the addition of restrictions on high debt to income loans into its macroprudential arsenal to combat the risk of sharp downturn in house prices. It said it had no immediate plans to use such tools even if they became available. The New Zealand dollar soared to $0.7118, its highest since early March, from $0.7036 the previous day. It was poised to show a gain of 3 percent in May, breaking three months of decline.
Equities Recap
European shares posted their fourth straight month of gains on Wednesday though fresh political worries and the lack of new catalysts following a surprisingly strong earnings season spurred investors to lock in some profits in banks and commodities-related stocks.
UK's benchmark FTSE 100 closed flat, FTSEurofirst 300 ended the day up by 0.02 percent, Germany's Dax ended up by 0.3 percent, and France’s CAC finished the day down by 0.2 percent.
U.S. stocks retreated on Wednesday, pulled lower by weakness in financials after JPMorgan and Bank of America warned of revenue weakness in the current quarter, while a drop in oil prices weighed on energy stocks.
Dow Jones closed down by 0.09 percent, S&P 500 ended down 0.04 percent, Nasdaq finished the day down by 0.06 percent.
Treasuries Recap
Long-dated U.S. Treasury yields touched their lowest in more than five weeks and benchmark yields their lowest in nearly two weeks on month-end buying and U.S. housing data that fanned doubts that the Federal Reserve would raise interest rates again in 2017 beyond June.
U.S. 30-year yields touched 2.866 percent, their lowest since April 21, and benchmark 10-year yields touched their lowest in 13 days of 2.198 percent after the National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, dropped 1.3 percent in April to 109.8.
Along with 10-year yields, yields on Treasuries maturing between three and seven years touched their lowest in 13 days, with three-year yields hitting 1.427 percent. U.S. two-year yields hit their lowest in eight days of 1.278 percent.
Commodities Recap
Gold prices rose on Wednesday as the dollar dipped and simmering geopolitical tensions lent support, though the metal was little changed for the month amid an increased chance of a U.S. interest rate rise next month.
Spot gold rose 0.7 percent to $1,271.14 per ounce by 2:49 p.m. EDT (1849 GMT). It closed 0.3 percent lower on Tuesday after rising to a one-month high of $1,270.47. For the month, bullion is up about 0.2 percent. U.S. gold futures was up 0.6 percent at $1,270.30.
Oil prices sank 3 percent to a three-week low on Wednesday as an increase in Libyan output helped boost monthly OPEC crude production for the first time this year.
Brent crude futures for July fell $1.53, or 3.0 percent, to settle at $50.31 a barrel on their last day as the front-month. It was Brent's lowest close since May 10.
U.S. West Texas Intermediate crude fell $1.34, or 2.7 percent, to settle at $48.32 per barrel, its lowest close since May 12.
