Market Roundup
• Fed suggests interest rate hike could come soon.
• Participants said large-scale and prolonged trade dispute would likely have adverse effects on business sentiment, investment and employment.
• US, China to resume trade talks in Washington amid low expectations.
• US Jul Existing Home Sales, 5.34M, 5.40M forecast, 5.38M previous.
• US Jul Existing Home Sales percent change,-0.7%, 0.6% forecast, -0.6% previous.
• US 17Aug w/e MBA Mortgage Applications Survey Composite Index, 4.2%, -2.0% previous.
• US 17Aug w/e Mortgage Market Index, 349.9, 335.8 previous.
• Trump, White House deny wrongdoing after Cohen plea deal.
• Iran threatens to hit US, Israel after Trump aide warns of "maximum pressure".
• No NAFTA announcement expected for Thursday - Mexican official.
• CA Jun Retail Sales m/m, -0.2%, 0.1% forecast, 2.0% previous, 2.2% revised.
• CA Jun Retail Sales Ex-Autos m/m, -0.1%, -0.1% forecast, 1.4% previous, 1.7% forecast.
Looking Ahead - Economic Data (GMT)
• 22 Aug 23:50 Japan18 Aug w/e, Foreign Bond Investment, 123.9B previous
• 22 Aug 23:50 Japan18 Aug w/e, Foreign Invest JP stock, -107.1B previous
• 23 Aug 00:30 Japan Aug, Nikkei Mfg PMI Flash, 52.3 previous
Looking Ahead - Events, Other Releases (GMT)
• 0900 Bundesbank president Weidmann speaks in Berlin, Germany
• n/a Riksbank Governor Stefan Ingves participates in the 2018 Economic Policy Symposium on Changing Market Structure and Implications for Monetary Policy (to Aug. 25). Jackson Hole, Wyoming
Currency Summaries
EUR/USD is likely to find support at 1.1526 levels and currently trading at 1.1596 levels. The pair has made session high at 1.1621 and hit lows at 1.1578 levels. The euro rose for a sixth consecutive day against dollar on Wednesday as investors rushed to cover their short positions, while the dollar eased after minutes from the Federal Reserve's August policy meeting. U.S. central bankers discussed raising interest rates soon to counter excessive economic strength but also examined how global trade disputes could batter businesses and households, minutes of the Federal Reserve's last policy meeting showed on Wednesday. The Fed has been raising rates gradually since 2015 and policymakers are now concerned the economy is so strong that inflation could rise persistently above the central bank's 2 percent target. The dollar index, which measures the greenback against a basket of six major currencies, was weaker, after earlier falling to 94.93, its lowest since Aug. 2. Easing fears about a currency crisis in Turkey and the Italian budget, weaker dollar, as well as short-covering, sent the euro up for the sixth consecutive day. The euro gained 0.5 percent to a session high of $1.162. That marked a nearly three-cent rebound for the single currency from 14-month lows hit last week on fears of contagion from the Turkish currency crisis and renewed worries about Italian political turbulence.
GBP/USD is supported in the range of 1.2876 levels and currently trading at 1.2912 levels. It reached session high at 1.2933 and dropped to session low at 1.2902 levels. Sterling was little changed against greenback on Wednesday as investors turned their attention back to negotiations for Britain's departure from the European Union. There have been mixed messages this week on whether British and EU officials will meet an informal October deadline to reach an agreement on how they will structure trade ties following their divorce next year. Diplomats in Brussels said they expected a delay in finalizing the terms of Britain's exit and could need to hold an emergency summit in November. But British Brexit minister Dominic Raab said late on Tuesday that he was confident an exit agreement could be reached by an October 18-19 summit of EU leaders. Dollar weakness after U.S. President Donald Trump's said that he was unhappy with the Federal Reserve for raising interest rates also helped the pound earlier this week. Following Raab's comments, sterling hit its highest levels against the greenback in 12 days, at $1.2924. The British currency had plunged to nearly 14-month lows last week as worries the UK will crash out of the EU without a trade deal mounted. The pound was last trading little changed at $1.2915.
USD/CAD is supported at 1.2960 levels and is trading at 1.2991 levels. It has made session high at 1.3041 and lows at 1.2985 levels. The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Wednesday, as higher oil prices and signs of progress in negotiations to revamp the NAFTA trade pact offset domestic data for June showing a drop in retail sales. Canadian retail trade fell 0.2 percent in June, short of the 0.1 percent gain that economists had predicted, as sales at gasoline stations and motor vehicle and parts dealers fell, Statistics Canada said. But the dip in sales, which compared with an upwardly revised 2.2 percent increase in the prior month, had little impact on money market expectations for a Bank of Canada interest rate increase as soon as next month. Chances of a September hike, which were boosted on Friday by hotter-than-expected inflation data, remained at more than 40 percent, the overnight index swaps market showed. The price of oil, one of Canada's major exports, surged after U.S. government data showed a larger-than-expected draw in domestic crude inventories and as Washington's sanctions on Iran signaled tightening supplies. The Canadian dollar was last trading 0.3 percent higher at C$1.2991 to the greenback. The currency touched its strongest level since Aug. 7 at C$1.2988.
AUD/USD is supported around 0.7315 levels and currently trading at 0.7348 levels. It hit session high at 0.7368 and made session lows at 0.331 levels. The Australian dollar strengthened against the US dollar on Wednesday as U.S. dollar continued its slide as political pressure on President Donald Trump increased. Trump suffered twin setbacks on Tuesday with two former advisers facing possible prison sentences - and one of them saying Trump told him to commit a crime - possibly hurting his Republican Party’s November midterm election prospects and widening a criminal investigation that has overshadowed his presidency. This dampened investor appetite for riskier investments across asset classes. The dollar also dipped briefly, before recovering, on the release of minutes from the Fed's last meeting. U.S. central bankers discussed raising interest rates soon to counter excessive economic strength but also examined how global trade disputes could batter businesses and households. The U.S.-China trade talks were set to begin later on Wednesday in Washington. Expectations were generally low given they do not involve high-level officials. The Australian dollar was last trading at $0.7351, well above the recent 18-month trough of $0.7203.
Equities Recap
European shares dipped on Wednesday as poor corporate earnings in the pharmaceutical sector weighed on sentiment already soured by trade tensions, with Washington preparing tariffs on another $16 billion of Chinese goods.
The UK's benchmark FTSE 100 closed up by 0.2 percent, FTSEurofirst 300 ended the day up by 0.04 percent, Germany's Dax ended flat, and France’s CAC finished the up by 0.3 percent.
U.S. stocks were mixed on Wednesday, with the Nasdaq gaining on the strength of tech stocks while the S&P 500 was little changed as it marked its longest bull-market run.
Dow Jones closed down by 0.34 percent, S&P 500 ended down 0.02 percent, Nasdaq finished the day up by 0.41 percent.
Treasuries Recap
Futures traders priced in a slightly higher chance that the Federal Reserve will increase interest rates two more times this year, after minutes from its latest meeting showed that U.S. central bankers discussed raising interest rates soon to counter excessive economic strength.
Benchmark 10-year notes were little changed after the minutes to yield 2.823 percent, after earlier falling to 2.808 percent, the lowest since July 6.
The yield curve between 2-year and 10-year notes flattened to 22 basis points, the flattest since 2007.
Commodities Recap
Gold prices steadied on Wednesday, as the dollar eased after minutes from the Federal Reserve's August policy meeting reiterated an interest rate hike could come soon, but geopolitical risks are apparent.
Spot gold was flat at $1,195.95 an ounce by 2:25 p.m. EDT (1825 GMT), after earlier hitting $1,201.51, its highest since Aug. 13. U.S. gold futures for December delivery settled up $3.30, or 0.3 percent, at $1,203.30 per ounce.
Oil prices rose 3 percent on Wednesday, with Brent crude futures hitting a three-week high, after U.S. government data showed a larger-than-expected draw in crude inventories and as Washington's sanctions on Iran signaled tightening supplies.
Brent crude futures rose $2.15, or 3 percent, to settle at $74.78 a barrel. The global benchmark reached $75.00 during the session, the highest since July 31.
U.S. West Texas Intermediate (WTI) crude futures rose $2.02 to settle at $67.86 a barrel, a 3.1 percent gain.
