Market Roundup
• US Mfg output unchanged at 0.2% misses 0.3% forecast; PPI final demand m/m 0% v 0.3% forecast.
• US Industrial output 0% v 0.2% forecast -0.2% previous, capacity utilization 75.3% v 75.5% forecast.
• Fed’s Bullard: Only a surprise will halt Dec Fed rate hike, Spike in dollar within acceptable range.
• Fed’s Mester: Fed unshaken by US election, focused on hikes; expects a bit more tightening than Fed consensus.
• Moody’s: Moody's says global credit conditions will remain uneven in 2017, despite stabilizing growth.
• ECB’s Dijsselbloem: Brexit talks will take "a lot longer" than two years; many Europeans didn't have Brexit plan.
• EU’s Moscovici: Euro area overall should have looser budget, Govts face euro-skeptic challenges in ‘17 elections.
• Germany’s Schaeuble: granting Greece debt relief would do it a disservice (Passauer Neue Presse).
• BCB’s Goldfajn: Brazil central bank to stick with gradual rate cut plan.
• Ex-BoJ’s Shirai: Yen level could lead to inflation surprise.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand Production Prices - Inputs QQ* Q3 0.90%-previous
• 21:45 New Zealand PPI Output* Q3 0.20%- previous
• 23:50 Japan Foreign Bond Investment w/e 604.9b- previous
• 23:50 Japan Foreign Invest JP Stock w/e -106.4b- previous
• 00:30 Australia Employment* Oct forecast 20.0k, -9.8k- previous
• 00:30 Australia Full-Time Employment* Oct -53.0k- previous
• 00:30 Australia Participation Rate* Oct forecast 64.6%, 64.50%- previous
• 00:30 Australia Unemployment Rate* Oct forecast 5.6%, 5.60%- previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is supported at 1.0578 levels and currently trading at 1.0685 levels. The pair has made session high at 1.0719 and hit lows at 1.0666 levels. Euro initially inched higher against the greenback after downbeat U.S. data, but euro resumed its decline against the greenback on the expectation that increased U.S government spending could trigger higher inflation and force the Federal Reserve to tighten monetary policy more quickly than expected. Weaker-than-forecast data on U.S. producer prices and industrial production on Wednesday pinned Treasury yields near their 10-month peaks and put a cap on the dollar. The dollar index reached 100.57, which was its highest since April 2003 before retreating to 100.42, up 0.2 percent on the day. It has risen 3.5 percent over eight days, which would be the biggest such increase since May 2015. Pressured by traders' conviction on a U.S. rate hike and political worries about Europe, the euro fell below $1.07 for the first time since the start of December 2015. It was down 0.4 percent at $1.0679.
GBP/USD is supported in the range of 1.2375 levels and currently trading at 1.2433 levels. It reached session high at 1.2473 and dropped to session low at 1.2411 levels. Sterling declined against a stronger dollar on Wednesday, having barely reacted to data showing Britain's jobless rate had fallen to the lowest level in 11 years, with investors focusing instead on the risks surrounding Brexit. The latest figures showed Britain's unemployment rate fell in the first three months after the Brexit vote to 4.8 percent, though there were some signs that a slowdown in the labour market could be coming. Sterling traded down 0.2 percent at $1.2435 by 1550 GMT, but up a third of a percent against the euro at 85.825 pence. Politics have dominated on currency markets in recent months and, with Britain's exit from the European Union still shrouded in uncertainty, sterling has become much more sensitive to developments in that process than to economic data.
USD/CAD is likely to find support at 1.3400 levels and is trading at 1.3435 levels. It has made intraday high at 1.3487 band lows at 1.3405 levels. The Canadian dollar strengthened against its firmer U.S. counterpart on Wednesday as higher oil prices and stronger-than-expected gains in domestic manufacturing sales supported the loonie. The 0.3 percent increase for Canadian manufacturing sales in September topped economists' expectations for a gain of 0.1 percent, though the rise was driven largely by the transportation equipment sector and a rise in overall prices. U.S. crude prices were down 0.9 percent at $45.40 a barrel after weekly U.S. crude stocks rose more than expected and as a strong U.S. dollar weighed on commodities. The Canadian dollar was last trading at C$1.3432 to the greenback, or 74.28 U.S. cents, slightly stronger than Tuesday's close of $1.3447, or 74.37 U.S. cents.
USD/JPY is supported around 103.20 levels and currently trading at 103.68 levels. It peaked to hit session high at 103.73 and made session lows at 103.41 levels. The U.S. dollar declined against the yen on Wednesday as demand for the safe-haven currency increased after weak U.S. producer prices data and industrial output data showed US inflation could be growing more slowly than expected. U.S. producer prices and industrial production both flatlined unexpectedly in October as a rise in the cost of goods was offset by declining services costs, and industrial production was weighed down by lower utilities output. The dollar has surged in the past week, tracking Treasury yields higher on the expectation that increased U.S government spending could trigger higher inflation and force the Federal Reserve to tighten monetary policy more quickly than expected. The dollar declined to trade at 108.86 yen after rising to 109.75 yen, its highest since June 1.
Equities Recap
European shares fell on Wednesday, weighed down by a pull-back in banking stocks, while German chemical group Bayer slumped after a costly bond issue.
UK's benchmark FTSE 100 closed down by 0.6 percent, the pan-European FTSEurofirst 300 provisionally closed down by 0.14 percent, Germany's Dax ended down by 0.6 percent, France’s CAC finished the day down by 0.7 percent.
The S&P and the Dow fell on Wednesday as financial stocks ended their seven-day rally, but gains in technology shares kept the Nasdaq in positive territory as investors continued to prepare their portfolios for a Donald Trump presidency.
Dow Jones closed down by 0.29 percent, S&P 500 ended down by 0.16 percent, Nasdaq finished the day up by 0.35 percent.
Treasuries Recap
The U.S. Treasury yield curve flattened on Wednesday with yields on shorter-dated maturities little changed while yields on longer-dated ones fell as U.S. producer prices and industrial output data showed inflation could be growing more slowly than expected.
Benchmark 10-year Treasury notes rose 4/32 in price to yield 2.224 percent.
The 30-year bond rose 26/32 in price to yield 2.931 percent, moving further from its 2016 high of 3.067 percent touched on Monday.
Conversely, 2-year Treasury notes were little moved in price to yield 1.01 percent. Yields on the 2-year note earlier hit 1.03 percent, the highest since Jan. 4.
Commodities Recap
Gold eased on Wednesday as the dollar climbed to a 14-year high against a currency basket, extending a week-long rally driven by a surge in Treasury yields after Donald Trump's election to the U.S. presidency.
Spot gold was down 0.2 percent at $1,225.06 an ounce by 2:05 p.m. EST (1905 GMT), while U.S. gold futures for December delivery settled down 0.05 percent at $1,223.90.
Oil prices eased in volatile trading on Wednesday as the market gave more weight to a bigger-than-expected U.S. crude inventory build than Russia's comments about a possible meeting with Saudi Arabia that renewed hopes for a production freeze deal.
Brent futures fell 32 cents, or 0.7 percent, to settle at $46.63 a barrel, while U.S. crude lost 24 cents, or 0.5 percent, to settle at $45.57 per barrel.
