Market Roundup
• US housing starts -9% in Sept; single-family housing starts surge, multi-family falters; Building permits +6.3%.
• U.S. economy shows hints of broadening wage pressures-Fed Beige Book.
• Atlanta Fed raises U.S. third-quarter GDP view to 2.0 pct.
• Fed's Kaplan says U.S. inflation is likely firming.
• BoC holds rates at 0.5%, sees lower Canadian growth profile than in July due to lower export trajectory.
• BoC’s Poloz: Governing council actively discussed possibility of adding more monetary stimulus.
• BoC's Poloz: more of Canada's export shortfall may be structural than previously believed, rather than cyclical.
• EU may send Italy a warning on draft budget, but no decision yet.
• UK job growth slows but labour market withstanding Brexit shock – ONS.
• Exxon boss, Saudi minister differ on oil supply outlook.
• EUR weakens against the dollar before ECB meeting, GBP hits 8-day high but rebound not seen lasting.
• UK Finance Minister Hammond: further rise in gilt yields reflects fall in value of sterling.
• UK's Hammond assails "hard Brexit" camp, vows to protect economy.
• Brazil set for first rate cut in 4 years to aid economy.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e -737.7b-previous
• 23:50 Japan Foreign Invest JP Stock w/e 430.3b- previous
• 00:30 Australia Employment* Sep forecast 15.0k, -3.9k- previous
• 00:30 Australia Full-Time Employment* Sep 11.5k- previous
• 00:30 Australia Participation Rate* Sep forecast 64.8%, 64.70%- previous
• 00:30 Australia Unemployment Rate* Sep forecast 5.7%, 5.60%- previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.0953 levels and currently trading at 1.0969 levels. The pair has made session high at 1.1026 and hit lows at 1.0953 levels. The euro declined against US dollar on Wednesday as investors focused on whether European Central Bank President Mario Draghi will give any indications that the central bank will begin tapering its bond purchase program when it meets on Thursday. The ECB may defer until December any changes to its asset purchase, sources familiar with the discussion said last week. Any signal that the ECB plans to reduce bond purchases could roil bond markets globally, and create volatility for currencies. The dollar has been largely tracking U.S. Treasury yields in recent weeks on the view that the U.S. Federal Reserve is likely to raise interest rates when it meets in December. The greenback has rallied around 3 percent since the end of September, mirroring a climb in benchmark U.S. Treasury yields to a four-month high above 1.8 percent. The U.S. dollar index was little changed at 97.907, not far from the seven-month high of 98.169 hit Monday. The euro was 0.1 percent lower versus the U.S. dollar at $1.0972.
GBP/USD is supported in the range of 1.2200 and currently trading at 1.2275 levels. It reached session high at 1.2321 and hit low at 1.2248 levels. British pound initially inched higher against the dollar on Wednesday but declined as investors assessed the timing of a U.S. interest rate increase and ahead of the final U.S. presidential debate. Economic data has played second fiddle to politics this week and there was no reaction to data that showed UK job creation slowed but did not collapse after June's vote for Britain to leave the European Union. Having plunged to a record low last week on worries Britain was heading for a hard Brexit, prioritizing tighter controls on immigration over access to the single market, the Bank of England's trade-weighted sterling index jumped 1.4 percent on Tuesday. It was flat on the day at 74.5 at the bank's 4 p.m. print on Wednesday. After gaining as much as 0.3 percent during the day against the dollar, sterling declined to trade at 1.2287 in the Late US session.
USD/CAD is supported at 1.3000 levels and is trading at 1.3127 levels. It has made session high at 1.3140 and lows at 1.3004 levels. The Canadian dollar weakened against its U.S. counterpart on Wednesday after Bank of Canada policymakers said they had considered adding more monetary stimulus and that export weakness could be harder to turn around than they had thought, canceling out earlier oil-powered gains. The currency had strengthened to a nearly four-week high after a shock drop in U.S. crude inventories led to a surge in prices for oil, a major Canadian export. But those gains were erased as the central bank said it expects a permanent shortfall in exports to shave 0.6 percentage points off growth by the end of 2018. The central bank cut its growth forecast, citing a looming slowdown in housing and the weaker export outlook, but held its overnight rate at 0.5 percent, where it has been since July. The Canadian dollar was last trading at C$1.3135 to the greenback, or 76.13 U.S. cents, weaker than Tuesday's close of C$1.3119, or 76.23 U.S. cents.
AUD/USD is supported around 0.7657 levels and currently trading at 0.7717 levels. It hit session high at 0.7730 and made session lows at 0.7667 levels. The Australian dollar firmed against US dollar on Wednesday as steady reading on overall economic growth and higher oil prices supported the commodity related Australian dollar. The Australian dollar notched five straight sessions of gains, steadying around $0.7716, just below a September high of $0.7755. Meanwhile, U.S. data released overnight failed to support the U.S. dollar with a pullback in core inflation slightly reducing the probability that the Federal Reserve will increase interest rates in December. Oil prices were up more than 2 percent, with U.S. crude touching a 15-month high after the government reported a sharp drop in domestic inventories for the sixth week in seven.
Equities Recap
European stocks rose on Wednesday as gains in the shares of major banks and retail companies offset weaker earnings elsewhere in the market.
UK's benchmark FTSE 100 closed up by 0.3 percent, the pan-European FTSEurofirst 300 ended the day up by 0.35 percent, Germany's Dax ended up by 0.2 percent, France’s CAC finished the day up by 0.3 percent.
U.S. stocks were on track for its second straight advance on Wednesday, as a climb in oil prices buoyed the energy sector and earnings from Morgan Stanley helped lift financials.
Dow Jones closed up by 0.23 percent, S&P 500 ended up by 0.22 percent, Nasdaq finished the day up by 0.05 percent.
Treasuries Recap
U.S. Treasury yields were little changed on Wednesday as dealers bought and sold government bonds to hedge securities they underwrote, which was led by Saudi Arabia's first-ever global bond issue.
Benchmark U.S. 10-year Treasury notes were up 1/32 in price to yield 1.743 percent, down half a basis point from late Tuesday. The 10-year yield remained below a four-month peak of 1.841 percent reached on Monday.
The two-year yield was flat at 0.799 percent, and the 30-year yield was little changed at 2.508 percent.
Commodities Recap
Gold rose to a two-week high on Wednesday, gaining for the third straight session and breaching the 200-day moving average amid uncertainty over the timing of a U.S. interest rate increase and ahead of the final U.S. presidential debate.
Spot gold was up 0.5 percent at $1,268.44 an ounce by 2:27 p.m. EDT (1827 GMT), after touching its highest since Oct. 5 at $1,273.34. U.S. gold futures settled up 0.6 percent at $1,269.90.
Oil prices jumped more than 2 percent on Wednesday, with U.S. crude settling at its highest in 15 months after the government reported a surprisingly large drop in inventories for the sixth week out of seven.
U.S. West Texas Intermediate (WTI) crude's front-month contract, November, closed up $1.31, or 2.6 percent, at $51.60 a barrel for its highest settlement since July 14. London-traded Brent crude settled up 99 cents, or 1.9 percent, at $52.67.
