Market Roundup
- Oil rises as OPEC+ moves closer toward deeper output cut
- Australian economic growth picks up
- Fed cuts rates to cushion coronavirus impact
Economic Data Ahead
- (0355 ET/0855 GMT) German Markit Services PMI (Feb)
- (0355 ET/0855 GMT) German Markit PMI Composite (Feb)
- (0400 ET/0900 GMT) Italy Gross Domestic Product (YoY) (Q4)
- (0400 ET/0900 GMT) Italy Gross Domestic Product (QoQ) (Q4)
- (0400 ET/0900 GMT) EZ Markit Services PMI (Feb)
- (0400 ET/0900 GMT) EZ Markit PMI Composite (Feb)
- (0430 ET/0930 GMT) UK Markit Services PMI (Feb)
- (0500 ET/1000 GMT) EZ Retail Sales (YoY) (Jan)
- (0500 ET/1000 GMT) EZ Retail Sales (MoM) (Jan)
Key Events Ahead
- No Significant Events Ahead
FX Beat
DXY: The dollar index nudged up after tumbling to a 2-month low on the Federal Reserve’s emergency rate cut. The Fed cut rates by 50 basis points to a target range of 1.00% to 1.25% on Tuesday, to shield the economy from the impact of the coronavirus. Investors now await the release of the U.S. ISM non-manufacturing PMI data and the Fed’s Beige Book of economic condition for further cues on the strength of the economy. The greenback against a basket of currencies traded 0.1 percent up at 97.27, having touched a low of 96.98 on Tuesday, its lowest since Jan. 8.
EUR/USD: The euro declined after rising to a 2-month peak above the 1.1200 handle in the prior session, as eurozone money markets significantly ramped up their bets on a rate cut from the European Central Bank since last week. The European currency traded 0.2 percent down at 1.1150, having touched a high of 1.1213 on Tuesday, its highest since Jan. 2. Investors’ attention will remain on a series of data from the Eurozone economies, EZ Markit PMI's and retail sales, ahead of the U.S.ADP employment change and service PMI from both Markit and ISM. Immediate resistance is located at 1.1205, a break above targets 1.1239. On the downside, support is seen at 1.1118, a break below could drag it below 1.1102.
USD/JPY: The dollar steadied near 5-month low hit earlier in the day after the Fed surprised investors by cutting rates by 50 basis points to a target range of 1.00% to 1.25% on Tuesday, two weeks ahead of a regularly scheduled policy meeting. The rate cut was the U.S. central bank’s first outside of a regularly scheduled policy meeting since 2008. The major was trading 0.4 percent up at 107.47, having hit a low of 106.84, its lowest since October 8. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. ADP employment change and service PMI from both Markit and ISM. Immediate resistance is located at 107.71, a break above targets 107.91. On the downside, support is seen at 106.63, a break below could take it near at 106.48.
GBP/USD: Sterling edged lower, weighed down by uncertainty about trade talks between Britain and the European Union and growing expectations for UK interest rate cuts. Money markets are now fully pricing in a cut of 25 basis points on March 26 when the Bank of England next meets. The major traded 0.05 percent down at 1.2807, having hit a low of 1.2725 on Friday, it’s lowest since Oct. 16. Investors’ attention will remain on the trade negotiations, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2850, a break above could take it near 1.2884 (10-DMA). On the downside, support is seen at 1.2783, a break below targets 1.2725. Against the euro, the pound was trading 0.1 percent up at 87.04 pence, having hit a low of 87.43 on Tuesday, it’s lowest since Oct. 15.
AUD/USD: The Australian dollar surged, extending gains for the third straight session, after data showed Australia’s economy expanded by more than expected last quarter, easing the risk of a recession despite raging bushfires and the coronavirus crisis. The Aussie trades 0.2 percent up at 0.6596, having hit a low of 0.6433 on Friday, it’s lowest since March 2009. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate resistance is located at 0.6638, a break above could take it near 0.6665. On the downside, support is seen at 0.6547 (5-DMA), a break below targets 0.6509.
NZD/USD: The New Zealand dollar consolidated below the 0.6300 handle after New Zealand Treasury noted that the global spread of the coronavirus was increasing the risks of a substantial negative impact that may last for several quarters. Markets have priced in a quarter-point rate cut from the Reserve Bank of New Zealand at its next meeting on March 25. The Kiwi trades 0.1 percent up at 0.6263, having touched a low of 0.6191 on Friday, its lowest level since August 2015. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6303 (38.2% retracement of 0.6487 and 0.6191), a break above could take it near 0.6338 (50% retracement). On the downside, support is seen at 0.6246, a break below could drag it below 0.6219.
Equities Recap
Asian shares edged higher following an emergency rate cut from the U.S. Federal Reserve.
MSCI's broadest index of Asia-Pacific shares outside Japan rallied 0.2 percent.
Tokyo's Nikkei surged 0.1 percent to 21,100.06 points, Australia's S&P/ASX 200 index declined 1.7 percent to 6,325.40 points and South Korea's KOSPI surged 2.2 percent to 2,059.33 points.
Shanghai composite index rose 0.6 percent to 3,011.67 points, while CSI 300 index traded 0.6 percent up at 4,115.05 points.
Hong Kong’s Hang Seng traded 0.1 percent higher at 26,287.38 points. Taiwan shares added 0.6 percent to 11,392.35 points
Commodities Recap
Crude oil prices rose more than 1 percent on expectations that major producers have moved closer to an agreement to enact deeper output cuts aimed at offsetting the slump in demand caused by the coronavirus outbreak. International benchmark Brent crude was trading 1.4 percent higher at $52.54 per barrel by 0537 GMT, having hit a low of $48.92 on Friday, its lowest since July 2017. U.S. West Texas Intermediate was trading 1.6 percent up at $47.81 a barrel, after falling as low as $43.88 on Friday, its lowest since Dec. 2018.
Gold prices surged to a near 1-week peak as the U.S. Federal Reserve slashed its benchmark interest rate to cushion the economic impact from the fast-spreading coronavirus. Spot gold rose 0.1 percent to $1,643.04 per ounce by 0555 GMT, having touched a low of $1563.03 on Friday, its lowest since Feb. 12. U.S. gold futures gained 0.1 percent to $1,645.30.
Treasuries Recap
The Japanese government bond prices gained, with benchmark 10-year JGB futures rising 0.39 point to 154.15. The yield on the benchmark 10-year cash JGB fell 3 basis points to minus 0.145 percent, while the 20-year JGB yield fell 1.5 basis points to 0.170 percent. The 30-year JGB yield fell 1 basis point to 0.305 percent. The two-year JGB yield fell 3.5 basis points to minus 0.285 percent, falling to as low as minus 0.300 percent at one point, its lowest since mid-October. The five-year yield fell 3.5 basis points to minus 0.270 percent, having touched a 4-month low of minus 0.305 percent earlier in the day.
The Australian 3-year bond futures climbed another 7 ticks to reach 99.615, implying an yield of just 0.385 percent. The 10-year contract added 7.5 ticks to 99.2850. The spread between Australian and U.S. 10-year yields has shrunk to just 24 basis points from 68 basis points a month ago.
