Market Roundup
• US Jan Markit Comp Final PMI, 53.8, 53.8 previous.
• US Jan Markit Svcs PMI Final, 53.3, 53.3 previous.
• US Jan ISM N-Mfg PMI, 59.9, 56.5 forecast, 55.9 previous, 56.0 revised.
• US Jan ISM N-Mfg Bus Act, 59.8, 57.2 forecast, 57.3 previous, 57.8 revised.
• US Jan ISM N-Mfg Employment Index, 61.6, 56.3 previous.
• Fed's Kashkari says needs to see faster wage and price growth.
• House intelligence panel to take up Democratic memo.
• Two U.S. senators unveil bipartisan immigration plan.
• U.S. regulators to back more oversight of virtual currencies.
• Banks in Britain and U.S. ban Bitcoin buying with credit cards.
• ECB's Draghi warns of inflation headwinds from euro volatility.
• Eurozone businesses began year in best shape for over a decade.
• EU's chief negotiator tells Britain: Time has come to make a Brexit choice.
Looking Ahead - Economic Data (GMT)
• 00:30 Australia Dec Retail Sales MM, -0.2% forecast, 1.2% previous
• 00:30 Australia Q4 Retail Trade, 0.8% forecast, 0.1% previous
• 00:30 Australia Dec Trade Balance G&S(A$), 200M forecast, -628M previous
• 03:30 Australia Feb RBA Cash Rate, 1.50% forecast, 1.50% previous
Looking Ahead - Events, Other Releases (GMT)
• N/A ECB holds a conference on improved payment system - Frankfurt
• 09:00 Agustin Carstens, General Manager at the Bank for International Settlements and
Jens Weidmann, President of the Bundesbank speak in Frankfurt - Frankfurt
• 09:00 Conference for the Center for Financial Studies (CFS) and the Bundesbank on "Money in the Digital Age: What Role for Central Banks?" - Frankfurt
• 10:00 Elisabeth Stheeman, external member of the BOE's Financial Policy Committee, answers questions from parliament's Treasury Committee - London
• 13:50 Fed's James Bullard gives presentation on the U.S. economy and monetary policy before the 29th Annual Gatton College of business and Economics Economic Outlook Conference - Kentucky
Currency Summaries
EUR/USD is likely to find support at 1.2331 levels and currently trading at 1.2412 levels. The pair has made session high at 1.2439 and hit lows at 1.2395 levels. Euro declined against the dollar on Monday as dollar rose across the board after the U.S. bond market selloff levelled off after the 10-year yield hit a four-year peak on worries that the Federal Reserve might raise interest rates faster to counter signs of wage pressure. Early on Monday, the benchmark 10-year Treasury yield reached 2.885 percent, its highest since January 2014, after a robust jobs report showed wage growth last month posted its biggest annual gain since June 2009. The yield was last at 2.843 percent, down 1 basis point from late on Friday. On the data front, U.S. services sector activity raced to a near 12-1/2-year high in January, buoyed by robust growth in new orders, the latest sign of strong momentum in the economy at the start of the year. The ISM said its non-manufacturing activity index jumped 3.9 points to 59.9, the highest reading since August 2005. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity. The dollar was up 0.3 percent against a basket of six major currencies at 89.469 after gaining 0.6 percent on Friday. The euro fell 0.4 percent to $1.2410, slightly below a three-year high of $1.2538. The euro briefly pared losses following upbeat comments by European Central Bank President Mario Draghi before the European Parliament. But Draghi said the current surge of the single currency might impair its outlook for price stability.
GBP/USD is supported in the range of 1.3913 levels and currently trading at 1.4132 levels. It reached session high at 1.4040 and dropped to session low at 1.3983 levels. The British pound declined against the greenback on Monday as new surveys indicating a slowing British economy and negative news around Brexit negotiations sapped investor confidence in a busy week for the central bank. Financial data firm IHS Markit said on Monday growth in the world's sixth-biggest economy looked set to slow to 0.3 percent in the first quarter, down from 0.5 percent in the last three months of 2017. Sterling deepened losses on the day and was down 0.7 percent at $1.4014, is lowest since Jan. 30. On a two-day rolling basis, it has fallen 1.7 percent, its biggest drop since early June, 2017.Britain has ruled out any form of customs union with the European Union after Brexit, according to a source in Prime Minister Theresa May's Downing Street office. With those brewing tensions in the background, British and European Union negotiators this week hold their first formal Brexit talks since the interim deal in December unlocked discussions on their future relationship. Investors were wary of chasing the currency lower before a policy decision later this week where a repricing of Bank of England interest rate hike expectations - several banks are now calling for a rise to come in May, and for another to come later in the year may be on the cards.
USD/CAD is supported at 1.2411 levels and is trading at 1.2491 levels. It has made session high at 1.2523 and lows at 1.2440 levels. The Canadian dollar slipped to a nearly two-week low against its U.S. counterpart on Monday as a selloff in equity markets continued and oil prices fell .Commodity-linked currencies, such as the Canadian dollar, tend to underperform when stocks fall, due to the signal that it sends on prospects for global economic growth. The price of oil, one of Canada's major exports, fell as rising U.S. output and a weaker physical market added to the pressure from a widespread decline across equities and commodities. The U.S. dollar rose against a basket of major currencies after data on Friday showing a pickup in U.S. wage growth suggested to some investors that the Federal Reserve might have to raise interest rates more quickly than previously thought. Canada’s trade data for December is due on Tuesday and the January employment report is due on Friday. The country is coming off its best year for job growth since 2002 and economists will look to see whether the job market remains strong enough to support further interest rate hikes. The Canadian dollar was trading 0.2 percent lower at C$1.2509 to the greenback. The currency's strongest level of the session was C$1.2398, while it touched its weakest level since Jan. 23 at C$1.2523.
AUD/USD is supported around 0.7880 levels and currently trading at 0.7896 levels. It hit session high at 0.7944 and made session lows at 0.7889 levels. The Australian dollar stumbled to a near two-month low on Monday amid a global selloff in risky assets and bonds as concerns about faster rate hikes in the United States and other developed economies spooked investors. The Australian dollar held at $0.7902 after sliding to as low as $0.7891, a level not seen since Jan. 12. The currency fell every single day of last week to record its worst weekly performance since November 2016.It fell 1.5 percent on Friday alone, its biggest one-day percentage drop since last May. Investors were spooked by a U.S. payrolls report on Friday which showed wages grew at their fastest pace in more than 8-1/2 years, signs that inflation is firming have raised some traders' expectations that the Federal Reserve may hike interest rates four times this year. Fed officials have indicated that three rate hikes are likely. Futures markets reacted by pricing in the risk of three, or even more, rate rises from the Federal Reserve this year. RBA Governor Philip Lowe will give a speech late on Thursday followed by the statement on monetary policy on Friday, which provides a comprehensive assessment of the economy and forward-looking forecasts on employment and inflation.
Equities Recap
European stocks suffered a sharp sell-off on Monday as growing inflation expectations and rising bond yields took their toll on equity markets.
The UK's benchmark FTSE 100 closed down by 1.4 percent, FTSEurofirst 300 ended the day down by 1.46percent, Germany's Dax ended down by 0.7 percent, and France’s CAC finished the down by 1.5 percent.
U.S. stocks plunged in highly volatile trading on Monday, with the Dow industrials falling nearly 1,600 points at its lows - the biggest intraday point drop in history - as a long-awaited pullback from record highs deepened.
Dow Jones closed down by 4.61 percent, S&P 500 ended down 4.10 percent, Nasdaq finished the day up by 3.75 percent.
Treasuries Recap
U.S. Treasury yields fell from four-year highs on Monday after a rapid selloff in equity markets sparked demand for the low risk debt.
Benchmark 10-year note yields surged to 2.885 percent overnight, the highest since January 2014, before falling as low as 2.707 percent as stock selloff hastened.
Commodities Recap
Gold prices steadied on Monday as a slide in stock markets helped the precious metal claw back some lost ground after logging its biggest one-day loss in two months in the previous session.
Spot gold steadied at $1,334.40 an ounce, still well below late January's 17-month high of $1,366.07. U.S. gold futures for April delivery settled down 80 cents, or 0.1 percent, at $1,336.50.
Oil prices were trading lower on Monday as rising U.S. output, a weaker physical market and recent dollar strength added to the pressure from a widespread decline across equities and commodities markets.
Brent crude futures were down $1.12, or 1.6 percent, at $67.46 a barrel at 2 p.m. EST (1900 GMT), while U.S. West Texas Intermediate (WTI) crude was $1.53, or 2.3 percent, lower at $63.92.
