Market Roundup
• Fed: keeps rates unchanged (9-1, George lone dissenter), says risks to outlook reduced, will continue to assess international events in determining when to raise rates.
• Fed: expects econ conditions to evolve in way that warrants only gradual increases in rates, sees inflation rising to 2% target over med-term.
• Magnitude 5.4 quake strikes 20 km off east Japan coast –USGS.
• Atlanta Fed’s GDPNow: U.S. economy likely grew 2.3 pct in Q2 vs 2.4% from Jul 19 estimate.
• U.S. durable goods orders data (-4% v -1.1% forecast) points to weak business spending.
• Core capital goods orders rise 0.2% vs 0.3% forecast percent in June.
• U.S. June pending home sales rise 0.2 pct vs 1.4% forecast.
• Italian banking system solid, has tools to tackle bad loans – minister.
• Fitch: Japan growth revised up in 2017 as planned consumption tax hike delayed, recent Yen strength capped revision at 0.1%.
• Fitch: Brexit is likely to amplify divergence in global monetary policy that sparked USD rally in mid-2014.
• U.S. crude stocks rise (+1.67 mn barrels) for the first time since mid May – EIA.
• Mexico announces bid terms for first deep water oil joint venture.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e 1718.1b -previous
• 23:50 Japan Foreign Investment JP Stock w/e 444.6b - previous
• 01:30 Australia Export Prices Q2 -4.70%- previous
• 01:30 Australia Import Prices Q2 -3.00%- previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- Japan- Bank of Japan monetary policy meeting (to July 29)
EUR/USD is likely to find support at 1.1000 levels and currently trading at 1.1057 levels. The pair has made session high at 1.1063 and hit lows at 1.0960 levels. Euro rose sharply against the greenback on Wednesday as buyers stepped in after the Federal Reserve, as expected, left policy rates unchanged and offered no hint it was in a rush to raise them even as it acknowledged fewer near-term risks in its outlook on the U.S. economy. The FOMC gave nod to improvement in the labor market and consumer spending, with little fallout so far from Britain's surprising decision to leave the European Union last month. But policymakers remained concerned about weak business investment and an inflation rate stuck below the Fed's 2 percent target. The dollar initially rallied on the more hawkish tone of the statement, before giving back gains as indications of a possible September rate hike were not seen as very strong. The dollar gained to $1.096 against the euro immediately after the Fed statement, before weakening back to $1.1056. Against the yen, the greenback gained to 105.95 yen, before falling back to 105.43.
GBP/USD is supported in the range of 1.3155 levels and currently trading at 1.3211 levels. It reached session high at 1.3229 and hit low at 1.3099 levels. Sterling initially declined against the dollar on Wednesday, despite better than expected second-quarter UK growth but rebounded sharply after the U.S. Federal Reserve left interest rates unchanged as expected and the dollar pared gains against a basket of major currencies. The dollar, which was buoyed earlier by reports of a larger than previously expected fiscal stimulus plan for Japan that knocked the yen lower, gave back its gains against a basket of currencies. Sterling hit the day's low of $1.3072 after the retail numbers, but rose to hit high at $1.3205 after US rate decision, leaving it more than 3 cents above a 31-year low hit earlier in the month. British finance minister Philip Hammond repeated on Wednesday that he and the BoE would take whatever action was needed to bolster the economy as it entered "a period of adjustment" after the Brexit vote.
USD/CAD is supported at 1.3130 levels and is trading at 1.3178 levels. It has made session high at 1.3251 and hit low at 1.3151 levels. The Canadian dollar ended barely weaker against the U.S. currency on Wednesday, stabilizing after a recent string of declines, as the U.S. Federal Reserve held rates steady and oil prices fell. The Fed said near-term risks to its outlook had diminished, as investors sought to judge whether a rate hike might come in September or December. Oil tumbled 3 percent, hitting three-month lows as U.S. crude and gasoline stocks surged on weak demand during the peak summer driving season. The currency touched its weakest level in nearly four months earlier in the week and has lost about 2 percent in July as oil prices drifted lower. The Canadian economic calendar is light until Friday, when gross domestic product data will be released for May. The economy is forecast to have shrunk 0.4 percent in the month, hurt by wildfires in Alberta.
USD/JPY is supported around 104.36 levels and currently trading at 105.27 levels. It peaked to hit session high at 106.08 and made session lows at 105.11 levels. The safe-haven yen rose against US dollar on Wednesday after the Federal Reserve's statement was seen as increasing the possibility of a September rate hike, but not strongly pointing towards one, and as investors turned attention back to the Japanese central bank meeting on Friday. Fed policymakers kept interest rates unchanged and said they continued to monitor inflation data and global economic and financial developments, but indicated less worry about possible shocks that could push the U.S. economy off course. The yen weakened earlier on Wednesday after Japan's prime minister unveiled a surprisingly large $265 billion stimulus package to reflate the world's third-largest economy. The size of the Japanese package, at more than 28 trillion yen ($265.30 billion), exceeded initial estimates of around 20 trillion yen. It will also add pressure on the BOJ to match the measures with monetary stimulus on Friday.
Equities Recap
European shares rose on Wednesday with the market underpinned by well-received earning updates from companies including Peugeot and LVMH, while Deutsche Bank fell after a poor update.
UK's benchmark FTSE 100 closed up by 0. 4 percent, the pan-European FTSEurofirst 300 ended the day up by 0.32 percent, Germany's Dax ended up by 0.7 percent, France’s CAC finished the day up by 1.1 percent.
Wall Street ended lower on Wednesday after the Federal Reserve left interest rates unchanged but opened the door to a possible rate increase later this year.
Dow Jones closed up by 0.34 percent, S&P 500 ended up by 0.10 percent, Nasdaq finished the day up by 0.61 percent.
Treasuries Recap
U.S. Treasury prices rose on Wednesday after the Federal Reserve, as expected, left policy rates unchanged and offered no hint it was in a rush to raise them even as it acknowledged fewer near-term risks in its outlook on the U.S. economy.
The two-year Treasury yield, which is sensitive to traders' views on Fed policy, fell 3 basis points to 0.734 percent. It reached 0.778 percent on Tuesday, its highest since Britain's vote to leave the European Union on June 23.
Benchmark 10-year Treasury notes were up 12/32 in price for a yield of 1.520 percent, down 4 basis points from late on Tuesday, while the 30-year bond was up 1-1/32 in price to yield 2.234 percent, down nearly 5 basis points.
Commodities Recap
Oil prices tumbled 3 percent on Wednesday, with U.S. crude futures hitting three-month lows, as U.S. crude and gasoline stocks surged on weak demand during the peak summer driving season.
U.S. West Texas Intermediate (WTI) crude futures settled down $1, or 2.3 percent, at $41.92 a barrel.
WTI's session low was $41.68, a level last reached on April 20.
Brent futures fell $1.40, or 3.1 percent, to settle at $43.47 a barrel.
Brent earlier dropped to $43.33, the lowest since May 10.
Gold extended its climb above $1,330 an ounce on Wednesday after the U.S. Federal Reserve left interest rates unchanged as expected and the dollar pared gains against a basket of major currencies.
Spot gold was up 0.9 percent at $1,331.20 an ounce by 2:42 p.m. EDT (1842 GMT). U.S. gold futures for August delivery settled up 0.45 percent at $1,326.70.
