Market Roundup
• ECB holds key rates steady, deposit rate -0.4% & refinancing rate 0%; extends QE to Dec ’17 drops purchase amount to 60B from end March ’17 to Dec ’17, expects rates to remain low for extended period.
• ECB may increase program in terms of size, duration if outlook less favorable.
• ECB’s Draghi: APP maturity range lowered to 1 yr, buys below deposit rate to be permitted; ready to act w/all instruments if necessary.
• ECB’s Draghi: vulnerabilities of the banking system in Italy ought to be coped with.
• US jobless claims drop from 5-mos high 268k, meet forecast at 258k; Continuing claims drop 79,000.
• US House approves temporary government funding bill, votes 326-96 to fund govt until Apr 28 ’17.
• Bond yields jump, euro gyrates after ECB trims monthly purchases.
• Sterling jumps 1 percent against the euro after ECB extends bond buying.
• EU must keep the UK as close as possible after Brexit - Germany's Gabriel.
• Mexico inflation highest since ‘14 in Nov at 3.31% (Banxico target 3%) ; rate hike seen after expected Fed hike.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand Election Card Retail Sales Nov 0.6%-previous
• 21:45 New Zealand Election Card Retail Sales YY* Nov 4.2%- previous
• 23:50 Japan Business Survey Index* Q4 2.9- previous
• 00:30 Australia Housing Finance* Oct forecast -1%, 1.6%- previous
• 00:30 Australia Invest Housing Finance* Oct 4.6%- previous
• 01:30 China PPI YY* Nov forecast 2.2%, 1.2%- previous
• 01:30 China CPI YY* Nov forecast 2.2%, 2.1%- previous
• 01:30 China CPI MM* Nov forecast 0.1%, -0.1%- previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- New Zealand RBNZ Gov Wheeler delivers speech on "Some thoughts on New Zealand's Economic Expansion" at the South Island town of Greymouth.
Currency Summaries
EUR/USD is likely to find support at 1.0592 levels and currently trading at 1.0615 levels. The pair has made session high at 1.0679 and hit lows at 1.0597 levels. The euro declined against the dollar on Thursday as the euro was weighted down after the European Central Bank extended asset purchases until the end of next year and ECB President Mario Draghi said cuts to the size of the program should not be viewed as tapering. The ECB said it will reduce its asset buys to 60 billion euros from next April from the current 80 billion euros, and extend purchase by an extra nine months from March. It also reserved the right to increase the size of purchases once again. The euro initially had peaked towards $1.0875 but after the statement, it fell sharply to hit session low at 1.0592, it last traded at $1.0617, down 1.26 percent on the day.The Federal Reserve is widely expected to raise interest rates for the first time this year when it meets next week, though it is also seen as likely to take a cautious tone on the economy. Traders will be watching for any indications of how many rate increases Fed officials expect in 2017, after Donald Trump’s surprise election as U.S. President on Nov. 8 increased expectations of greater fiscal stimulus to boost economic growth.
GBP/USD is supported in the range of 1.2504 levels and currently trading at 1.2592 levels. It reached session high at 1.2631 and dropped to session low at 1.2548 levels. Sterling declined against the dollar on Thursday as sterling came under selling pressure on the back of a decision by the European Central Bank to extend monthly asset purchases until next December albeit at a lower monthly level. The ECB said it would continue buying bonds until at least December - three months longer than the six-month extension most investors had been expecting. And although it would from April reduce the size of its monthly purchases to 60 billion euros, from 80 billion now, that still means that overall, more money would be pumped into the economy than forecast. Against a stronger dollar, sterling was down half a percent at $1.2566. It was up, though, half a percent on a trade-weighted basis, recovering from its worst daily performance in two months after weak industrial data and a parliamentary vote to stick to the British prime minister's Brexit timetable weighed on the currency.
USD/CAD is supported at 1.3150 levels and is trading at 1.3191 levels. It has made session high at 1.3242 and lows at 1.3180 levels. The Canadian dollar strengthened against its U.S. counterpart on Thursday as higher oil prices, although some gains for the loonie were pared after dollar strengthened following European Central Bank's monetary policy decisions. The U.S. dollar rose against a basket of major currencies as the ECB announced it would trim asset buys from April next year, but also broaden the maturity range for eligible securities and permit purchases of bonds yielding below the ECB's deposit rate. The price of oil, one of Canada's major exports, recovered above $50 a barrel, bouncing back from the week's lows. U.S. crude prices were up 1.17 percent at $50.35 a barrel. Recent stronger-than-expected economic data and higher oil prices after last week's output cut agreement by members of the Organization of the Petroleum Exporting Countries have helped support the Canadian dollar. The Canadian dollar was last trading at C$1.3192 to the greenback, or 75.64 U.S. cents, stronger than Wednesday's close of C$1.3237, or 75.55 U.S. cents.
AUD/USD is supported around 0.7413 levels and currently trading at 0.7459 levels. It hit session high at 0.7473 and made session lows at 0.7427 levels. The Australian dollar declined against US dollar on Thursday as the dollar rebounded after European Central Bank announced its decision to reduce the long-running bond buying program to 60 billion euros a month, from 80 billion, from April to December 2017. Also supporting the upbeat dollar sentiment was a report that showed the number of Americans filing for unemployment benefits fell from a five-month high last week, pointing to labor market strength that underscored the economy's momentum. Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 258,000 for the week ended Dec. 3, the Labor Department said on Thursday. Claims for the prior week were unrevised. Australian dollar which was firmer before the ECB statement fell as the market focused on the central bank's move to extend its quantitative easing programme until the end of 2017, beyond the six-month extension expected. The Australian dollar edged lower to $0.7490, from earlier highs of $0.7498 touched early on Thursday.
Equities Recap
European shares rose to their highest in eleven months on Thursday as the European Central Bank's unexpected decision to cut its monthly asset purchases helped banks extend their rally.
UK's benchmark FTSE 100 closed up by 0.4 percent, FTSEurofirst 300 ended the day up by 1.24 percent, Germany's Dax ended up by 1.8 percent, France’s CAC finished the day up by 1 percent.
Major U.S. stock indexes climbed again on Thursday and set fresh record highs, bolstered by data showing U.S. labor market strength, as a month-long rally since the presidential election of Donald Trump rolled on.
Dow Jones closed up by 0.32 percent, S&P 500 ended up 0.20 percent, Nasdaq finished the day up by 0.43 percent.
Treasuries Recap
U.S. Treasury yields rose on Thursday in line with their European counterparts after the European Central Bank said it would trim its monthly pace of bond purchases to 60 billion euros from 80 billion euros, starting in April.
The benchmark 10-year Treasury note's yield was up 5 basis points at 2.396 percent, retreating from a session high of 2.427 percent.
The 10-year yield held below the 2.492 percent level reached on Dec. 1, which was its highest since July 2015.
Commodities Recap
Gold retreated into the red on Thursday after the dollar rebounded on the back of a decision by the European Central Bank to extend monthly asset purchases until next December albeit at a lower monthly level.
Spot gold was down 0.3 percent at $1,170.40 an ounce by 2:31 p.m. EST (1931 GMT), and U.S. gold futures settled down 0.4 percent at $1,172.40 per ounce.
Oil rebounded from the week's lows to close above $50 a barrel on Thursday, on growing optimism that non-OPEC producers might agree to cut output following a cartel agreement to limit production.
Brent settled up 89 cents, or 1.7 percent, at $53.89 a barrel. U.S. light, sweet crude settled up $1.07, or 2.2 percent, at $50.84 a barrel.
