Market Roundup
- US TsySec Mnuchin to IMF Lagarde - Expects frank-candid FX analysis.
- BoJ Gov Kuroda – Ready to ease if needed to hit inflation target but chance of deepening negative rates low for now, to hit CPI target mid-FY’18.
- Japan FinMin Aso – Not thinking of issuing negative rate JGBs.
- Favorable environment encourages corporate bond issues in Japan – Nikkei.
- China Jan new home prices +12.2% y/y, Beijing +24.7%, Shanghai +23.8%, Dec +12.4%, +25.9%, +26.5%.
- US judge dismisses most of Euribor manipulation lawsuit – Reuters.
- BoC DepGov Wilkins - BoC open to more fin-tech experiments – Reuters.
- Mexico CB to launch $20 bln MXN FX hedge program, 1st auction of up to $1 bln on March 6, won’t rule out additional actions – Reuters.
- ESM Regling – Greece should be able to borrow on markets from mid-’18 – SDZ.
- RBA Gov Lowe – Risks in high household debt, using policy to grow not in national interest – Reuters.
- Australia Q4 wage prices +0.5% q/q, +1.9% y/y, as forecast, stuck at record lows.
- Australia Q4 construction work done -0.2% q/q, +0.3% forecast, home building up however, +1.3% q/q, -3.9% in Q3 (prelim -5.7%).
- Australia Jan Westpac/MI leading index 97.59, Dec 97.54, above trend.
- Australia AOFM sells record A$11 bln 2.75% 2025 bond at 3.005% yield.
- Bank China Sydney raises A$800 mln in 3-year FRN launch via ANZ, NAB, UBS – IFR.
- New Zealand Fonterra GDT price index -3.2%, volumes down too at auction.
Economic Data Ahead
- (0200 ET/0700 GMT) Norway Dec labor force survey – unemployment, 4.7% forecast; last 4.7%.
- (0400 ET/0900 GMT) Germany Feb Ifo business climate index, 109.6 forecast; last 109.8.
- (0400 ET/0900 GMT) Germany Feb Ifo current conditions index, 116.7 forecast; last 116.9.
- (0400 ET/0900 GMT) Germany Feb Ifo expectations index, 103.0 forecast; last 103.2.
- (0430 ET/0930 GMT) Great Britain Q4 GDP - 2nd release, +0.6% q/q, +2.2% y/y forecast; prelim +0.6%, +2.2%.
- (0500 ET/1000 GMT) Eurozne Jan inflation – final, -0.8% m/m, +1.8% y/y forecast; flash +0.5%, +1.8%.
- (0500 ET/1000 GMT) Eurozne Jan – ex-food/energy, -1.4% m/m, +0.9% y/y forecast; flash +0.4%, +0.9%.
- (0800 ET/1300 GMT) Belgium Feb leading indicator, +0.8 forecast; last +0.5.
- (1000 ET/1500 GMT) United States Jan exist home sales, 5.54 mln AR/+1.1% m/m forecast; last 5.49 mln/-2.8%.
Key Events Ahead
- N/A UK DMO 0.125% 2065 index-linked syndication via Barclays, Lloyds et al.
- N/A BoE 2017 USD bond syndication via Citi, GS, HSBC and Merrill.
- N/A EFSF 4 and 39-year bond syndication via GS, JPM, Unicredit.
- N/A Spain 2033 Bono syndication via Barclays, BBVA, HSBC, JPM et al.
- (0430 ET/0930 GMT) ECB 3-month LTRO, E3 bln allotment forecast, E3.27 bln maturing.
- (0530 ET/1030 GMT) Germany E1 bln 2.5% 2044 Bund auction.
- (0600 ET/1100 GMT) BoE DepGov Cunliffe London OMFIF City Lecture.
- (0630 ET/1130 GMT) BoE DepGov Shafik answers questions in Twitter QA/20:00 speaks in Oxford.
- (1300 ET/1800 GMT) Fed Gov Powell (centrist) speaks at Forecaster’s Club of New York.
- (1400 ET/1900 GMT) FOMC January meeting minutes.
- (1830 ET/2330 GMT) Dallas Fed Kaplan (voter, centrist) speaks in Dallas.
FX Beat
DXY: The dollar eased across the board as the U.S. treasury yields eased following Cleveland Fed President Mester’s cautious comments on the interest rate hike outlook. The greenback against a basket of currencies traded 0.1 percent down at 101.33, having hit a high of 101.60 the day before, it’s strongest since Feb. 15. FxWirePro's Hourly Dollar Strength Index stood at 30.93 (Neutral) by 0500 GMT.
EUR/USD: The euro steadied after tumbling to a 6-week low in the previous session as concerns about the anti-European Union rhetoric from French presidential candidate Marine Le Pen ahead of the first round of French elections on April 23 weighed on the major. The European currency traded 0.15 percent up at 1.0545, having hit a low of 1.0525 on Tuesday, it’s lowest since Jan. 11. FxWirePro's Hourly Euro Strength Index stood at -105.81 (Highly Bearish) by 0400 GMT. Investors’ will closely watch Eurozone consumer price index, ahead of the U.S. existing home sales and FOMC minutes for further momentum on the pair. Immediate resistance is located at 1.0570, a break above targets 1.0593 (23.6 % retracement of 1.0828 and 1.0521). On the downside, support is seen at 1.0521 (Feb. 15 Low), a break below could drag it near 1.0500.
USD/JPY: The dollar eased, reversing some of its previous session gains after the U.S. treasury yields came under pressure following Cleveland Fed President Mester’s cautious comments on the rate hike outlook. However, the major found some support after the BOJ Governor Kuroda said that the central bank is prepared to ease further if required to hit 2 percent price target. The pair trades 0.22 percent higher at 113.41, having hit high of 113.77 on Tuesday. FxWirePro's Hourly Yen Strength Index stood at -28.89 (Neutral) by 0400 GMT. Investors’ will continue to track overall market sentiment, ahead of the U.S. existing home sales data, Fed official Powell's speech and FOMC minutes due later in the day. Immediate resistance is located at 113.96 (Jan 31 High), a break above targets 114.50 (Feb 2 High). On the downside, support is seen at 113.20, a break below could take it near 112.77.
GBP/USD: Sterling rose above the 1.2500 handle as the dollar weakened across the board in response to Cleveland Fed President Mester’s cautious take on the U.S. interest rates outlook. Investors attention will remain on the UK’s second estimate Q4 GDP data, which is expected to rise 2.2 percent, in line with previous reading. Sterling trades 0.35 percent higher at 1.2498, having hit a high of 1.2507 earlier, its strongest since Feb. 17. FxWirePro's Hourly Sterling Strength Index stood at 77.57 (Bullish) by 0400 GMT. Investors focus will also remain on the U.S. existing home sales figures, MPC member Cunliffe and Fed official Powell speech, ahead of the FOMC minutes due later today. Immediate resistance is located at 1.2526 (50.0 % retracement of 1.2706 and 1.2346), a break above could take it near 1.2582 (Feb 9 High). On the downside, support is seen at 1.2433 (23.6 % retrace), a break below targets 1.2346 (Feb 7. Low). Against the euro, the pound trades flat at 84.35 pence, having hit a 2-month high of 84.32 on Tuesday.
AUD/USD: The Australian dollar rose as the greenback eased after Cleveland Fed’s Mester sounded slightly cautious on U.S. interest rates. However, it failed to take out the 0.7700 handle as monetary policy divergence between the Fed and the RBA continued to weigh on market sentiment. The Aussie gained 0.3 percent to 0.7696, drifting towards to a high of 0.7731 hit on Thursday, its highest since Nov. 10. FxWirePro's Hourly Aussie Strength Index stood at -24.53 (Neutral) by 0500 GMT. Markets will continue to digest dovish Fed comments, ahead of U.S. economic data and FOMC latest policy meeting minutes. Immediate support is seen at 0.7650, a break below could drag it near 0.7630 (21-DMA). On the upside, resistance is located at 0.7700, a break above targets 0.7732.
NZD/USD: The New Zealand dollar edged up, halting its 4-day losing streak as the U.S. dollar weakened across the board following dovish Fed comments. On Tuesday, the major slumped to a near 1-month low after data showed prices for dairy dropped 3.2 percent at an auction held early on Wednesday. The Kiwi trades flat at 0.7162, having hit a low of 0.7129 in the previous session, it’s lowest since Jan. 20. FxWirePro's Hourly Kiwi Strength Index was at -73.83 (Slightly Bearish) by 0500 GMT. Markets will continue to track board based investor sentiment, ahead of the FOMC meeting minutes due later in the day. Immediate resistance is located at 0.7186 (23.6 % retracement of 0.7375 and 0.7129), a break above could take it near 0.7223 (38.2 % retracement). On the downside, support is seen at 0.7129 (Previous Session Low), a break below could drag it till 0.7100.
Equities Recap
Asian shares gained following a rally by world stock index to an all-time high as investors cheered upbeat factory activity in Europe and robust earnings on Wall Street.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, while the world stock index rose to an all-time peak overnight.
Tokyo's Nikkei fell 0.01 percent to 19,379.87 points, Australia's S&P/ASX 200 index rose 0.15 percent to 5,799.80 points and South Korea's KOSPI was trading 0.1 percent up at 2,105.76 points.
Shanghai composite index rose 0.08 percent to 3,255.88 points, while CSI300 index was trading 0.06 percent up at 3,484.84 points.
Hong Kong’s Hang Seng was trading 0.75 percent higher at 24,147.93 points. Taiwan shares added 0.2 percent at 9,778.78 points.
Commodities Recap
Crude oil prices rose, having hit near multi-week highs in the previous session after OPEC signaled optimism over its deal with other producers to restrain output that has weighed on markets. International benchmark Brent crude was trading 0.4 percent up at $56.85 per barrel by 0414 GMT, having hit a peak of $57.27 in the previous session, its strongest since Feb. 2. U.S. West Texas Intermediate crude gained 0.5 percent at $54.48 a barrel, after rising as high as $55.08 on Tuesday, its highest since Jan. 3.
Gold prices steadied after falling as much as 1 percent to a 6-day low the session before, with investors waiting for minutes from the Federal Reserve's last meeting for clues on the timing of interest rate hikes. Spot gold was flat at $1,235.34 per ounce at 0421 GMT, having hit its lowest since Feb. 15 at $1,225.93 on Tuesday. U.S. gold futures fell 0.1 percent to $1,237.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.4523 percent higher by 0.023 bps, while 5-year yield was up by 0.026 bps at 1.9433 percent.
The Japanese government bonds firmed after the Bank of Japan made purchase offers under its JGB buying operations that were in line with amounts of previous operations. The 2-year JGB yield fell 2.5 basis points to -0.270 percent, its lowest level since November. The benchmark 10-year JGB yield inched down 0.5 bp to 0.085 percent, while 10-year JGB futures were up 0.21 point at 150.17. Superlong JGBs gained, with the 20-year yield falling 1.5 bp to 0.690 percent and the 30-year JGB yield also shedding 1.5 bp to 0.900 percent.
The Australian government bond futures were also softer, with the 3-year bond contract down 2 ticks at 97.930. The 10-year contract also shed 2 ticks at 97.1500, while the 20-year contract eased 2.5 ticks to 96.5300.
The New Zealand government bonds eased, sending yields 3.5 basis points higher at the long end of the curve.
The Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as improved risk appetite reduced demand for safe-haven assets. The 2-year dipped 1.5 Canadian cents to yield 0.786 percent, and the 10-year declined 7 Canadian cents to yield 1.719 percent.
