Market Roundup
- DXY flat at 98.990, GBP index off 0.35%, EUR up 0.15%.
- EUR/USD struggling for direction. Today's trading range is 1.0851-1.0882 levels.
- USD/JPY also trading in tight range from 118.05 to 118.47 levels.
- US Crude down 3.8%, Brent 2.8% lower-Kremlin view noted.
- GBP/USD trading in between 1.4292-1.4351 levels and on lows into NY.
- SSEC 0.5% lower, DAX off 0.75%, S&P futures off 0.8%.
- UK Jan Nationwide house prices +0.3% m/m vs +0.8% previous, +0.6% expected.
- UK December Mortgage approvals hit a 7month low.
- Germany February GFK Consumer Sentiment unchanged at 9.4, 9.3 expected.
- Germany Govt lowers 2016 GDP forecast to 1.7% from 1.8% previous.
- Kremlin-no specific plans for possible coordinated action on oil.
- China December industrial profits at -4.7% y/y, January-December -2.3%.
Economic Data Ahead
- (1400 ET/1900 GMT) The U.S. Federal Reserve's Federal Open Market Committee two-day meeting on interest rate concludes, followed by the statement.
- (1000 ET/1500 GMT) The new U.S. single-family home sales likely rose 2 percent to a 500,000-unit pace in December, an indication that housing remains on firmer footing even as the economy is slowing.
- (1500 ET/2000 GMT) The Reserve Bank of New Zealand is set to announce its interest rate decision, which is expected to stand pat at 2.5 pct.
- (1645 ET/2145 GMT) The Statistics New Zealand releases its data on trade balance, exports and imports for December.
Key Events Ahead
- No major events scheduled for the day.
FX Recap
USD: The dollar struggled to gain traction as investors were awaiting the outcome of a FOMC meeting for clues whether bets on a single U.S. interest rate rise in 2016 are justified. The dollar index last stood flat at 99.074, nursing a 0.3 percent loss posted on Tuesday.
EUR/USD: The single currency jumped higher during the EU session on Wednesday and the pair was seen at this week's highs, trading somewhat below the $1.09 mark. The euro is consolidating in a narrow range between 1.07800-1.09800 for the past one week. Markets await for FOMC for further direction. It is expected to keep interest rates on hold later today. The financial market mayhem will prevent the Fed from hiking the rates further. Technically the pair is facing resistance around 1.0880 and break above will take it to next level 1.0950/1.0980/1.100 level. On the downside support is around 1.0780 and break below targets 1.0710/1.06700 level. It made intraday high at 1.0881 and low at 1.0850 levels. Overall bullishness can be seen if it closes above 1.1000.
USD/JPY: Traders are starting to turn their attention to the Federal Reserve (Fed) and Bank of Japan (BoJ) monetary policy decisions for further stimulus. However, it eased over the Asian session to maintain only a minor gain of 0.03% to trade at ¥118.36. The pair has reached a level of 118.62 yesterday and started to decline. It was trading around ¥118.30; short term trend is slightly bullish as long as support 117.50 holds. The major support is around 117.50 and break below targets 116.80/116. On the higher side minor resistance is around 118.85 and break above will take it till 119.30/120. Pair made intraday high at 118.47 and low at 118.04 levels.
GBP/USD: The dip in European and Asian stock markets kept Sterling back under pressure ahead of global central bank events that may test its stability above $1.40. It was down quarter of a percent against both the dollar and euro. By 0942 GMT, sterling traded at $1.4318 and 75.88 pence per euro respectively. The pair has broken major resistance 1.4270 (Tenken-Sen) and jumped till 1.43670. On the top side the resistance is at 1.4370 and a break above will take the pair to next resistance 1.4400/1.4500. It will be facing psychological support at 1.4300 (55 day 4H EMA) and break below targets 1.4270/1.4250. Short term weakness is only below 1.4250. Pair made intraday high at 1.4351 and low at 1.4283 levels.
USD/CHF: The pair has made a high of 1.01980 and slightly declined from that level. It was trading around 1.01469; short term trend is bullish as long as support 1.0500 holds. Any break above 1.0200 will take it till 1.02501.0300 is possible. On the lower side minor support is around 1.0080 and break below will drag the pair till 1.0050/0.9990. Short term bullish invalidation is only below 0.9990. The Swiss franc was 0.1 percent up against the euro at 1.0390 francs, having the previous day hit its weakest since the cap on the currency was lifted a year ago.
AUD/USD: The Australian dollar hit a 3-week high after one measure of domestic inflation came in slightly higher than expected, and as less jittery global markets gave a small boost to appetite for riskier currencies. A higher than expected inflation data will minimize the chance of RBA to cut interest rates. The Aussie rose to as high as $0.7052 before easing back to $0.7027, still leaving it up 0.3 percent on the day. Resistance was found around $0.7050, a level that has proved difficult to breach in recent weeks. A break would target $0.7080. Short term trend is slightly bullish as long as support 0.6920 holds. On the higher side major resistance is around 0.7060 and break above targets 0.7115/0.7170. The minor support is around 0.6920 and break below will drag the pair till 0.6820.
NZD/USD: The New Zealand dollar was flat at $0.6497 ahead of the RBNZ decision, with most analysts expecting interest rates to be left on hold for now. It consolidated recent gains as investors awaited the outcome of FOMC meeting. It was briefly troubled by news Fitch had lowered its outlook on New Zealand's credit rating to stable from positive.
Equities Recap
European shares pushed down as weak earnings and oil slump weigh on markets ahead of FOMC meeting today. The pan-European FTSEurofirst 300 fell just over 0.5 percent in early trading. UK's FTSE was down 0.1 pct, Germany's DAX fell 0.4 pct and France's CAC lost 0.2 pct.
Tokyo's Nikkei closed up 2.7 percent, Shanghai Composite Index ended down 0.5 pct at 2,735.56 points while China's CSI300 Index fell 0.3 pct at 2,930.35 points. HK's Hang Seng Index finished up 1.0 pct at 19,052.45 points.
Commodities Recap
Oil futures dropped after a surprise rise in U.S. inventories wiped out the optimism over the potential for the world's largest exporters to cut output enough to stem a 19-month-long price slide. Brent crude fell 55 cents to $31.25 a barrel by 0924 GMT. U.S. crude futures fell 94 cents to $30.51 a barrel.
Gold was trading near a 12-week peak supported by a softer dollar as investors await the outcome of the FOMC meeting. Spot gold was flat at $1,119.46 an ounce by 0630 GMT, U.S. gold for February delivery was little changed at $1,120 per ounce.
Treasuries Recap
Bond markets were keenly waiting for Fed's post-meeting statement, due at 1900 GMT. Markets are now expecting only one more rate hike this year rather than the four Janet Yellen and her colleagues were suggesting in December.
The benchmark 10-year U.S.Treasury note yield dropped about 2 basis points overnight to 1.9941. The more interest-rate-sensitive 2-year yield hovered at 0.8567.
UK Gilts opened 18 ticks higher than the settlement of 119.27, as predicted, as Gilts played catch up to a late rally into the close from the eurozone. Buyers drew further support from the below forecast January Nationwide House Prices which came in below forecast.
In Europe, yields were a touch lower as small rises in French consumer and industry confidence and Italian retail sales did little to alter expectations that the ECB is on track to cut its interest rates again. Italian 10-year bond yields fell 3 bps to 3-week low of 1.48 percent.
New Zealand government bonds gained, sending yields 2.5 bps lower at the long end of the curve. Australian government bond futures were mixed, with the 3-year bond contract down 4 ticks at 98.060. The 10-year contract was half a tick higher at 97.3100, while the 20-year contract was 2 ticks firmer at 96.8300.
