Market Roundup
- Stanley Fischer and Lael Brainard are battling for Yellen’s soul: inflation risks vs. financial market turmoil.
- US January net overall capital flow +$118.4 bln, December rev -$106.8 bln, Japan US Tsy holdings $1.124 trln vs Y1.123 trln, China 1.238 trln vs $1.246 trln, longer term assets sold.
- US investors capitulate on Europe at the worst possible time.
- Trump wins Florida Republican primary, Rubio suspends campaign, takes Illinois and North Carolina too, Kasich takes Ohio, Clinton takes Florida, Ohio, Illinois and North Carolina in Democratic primaries.
- BoJ Gov Kuroda – Can theoretically cut rates to -0.5% in answer to question in Diet testimony, reiterates views expressed yesterday mainly, NIRP not meant to affect FX but admits it does amongst other factors, stable FX reflecting fundamentals desired, no more exemptions from NIRP, won’t hesitate to ease again if needed, notes economic damage of first sales tax hike.
- Economist Stiglitz warns of risks of global recession, pushes fiscal stimulus, advises Japan PM Abe to delay sales tax hike (as expected).
- BAML survey – Investors less bullish on Japan though still among favourites.
- Japan's megabanks go big with bonds as new rules loom – Nikkei.
- Japan Inc: Heavy meddling - architects of Abenomics revive interventionist spirit to try and compete more with China.
- Japan blue chips including banks, in blow to Abenomics, to offer smaller ’16 pay hikes.
- Japan to overhaul, update household spending data.
- Australia Feb Westpac/MI leading index 97.07, Jan 97.22, trend dev -0.82%.
- RBNZ – Banks can withstand severe dairy downturn.
- New Zealand’s Q4 current account deficit NZ$2.614 bln, NZ$2.8 bln eyed, 3.1% of GDP, Q3 deficit NZ$4.74 bln, 3.3%, deficit down on tourist spending.
Economic Data Ahead
- (0530 ET/0930 GMT) UK February claimant count, -9.1k eyed; last -14.8k.
- (0530 ET/0930 GMT) UK January ILO unemployment, 5.1% eyed; last 5.1%.
- (0530 ET/0930 GMT) UK January average weekly earnings – 3-mo average, +2.0% y/y eyed; last +1.9%.
- (0530 ET/0930 GMT) UK January - ex-bonus, +2.1% y/y eyed; last +2.0%.
- (0830 ET/1230 GMT) US February CPI, -0.2% m/m, +0.9% y/y eyed; last unchanged, +1.4%, index 236.90.
- (0830 ET/1230 GMT) US February –core, +0.2% m/m, +2.2% y/y eyed; last +0.3%, +2.2%, index 245.23.
- (0830 ET/1230 GMT) US February real weekly earnings; last +0.7% m/m.
- (0830 ET/1230 GMT) US February housing starts, 1.15 mln AR eyed; last 1.10 mln, -3.8% m/m.
- (0830 ET/1230 GMT) US February building permits, 1.20 mln AR eyed; last 1.20 mln, unchanged m/m.
- (0915 ET/1315 GMT) US February industrial output, -0.3% m/m eyed; last +0.9%.
- (0915 ET/1315 GMT) US February capacity utilization, 76.9% eyed; last 77.1%.
- (1130 ET/1530 GMT) US February Cleveland Fed CPI; last +0.2%.
Key Events Ahead
- N/A Sweden SEK3.5 bln/500 mln 5%/2.25% 2020/2032 government bond auctions.
- N/A Portugal E1-1.25 bln 6/12-mo, Greece E1 bln 13-week t-bill auctions.
- (0400 ET/0800 GMT) Iceland CB policy announcement, Riksbank executive board meeting.
- (0530 ET/0930 GMT) Denmark CB quarterly forecasts, press conference.
- (0630 ET/1030 GMT) Germany E4 bln 2026 Bund auction.
- (0830 ET/1230 GMT) UK ChancExch Osborne presents ’16 budget.
- (0830 ET/1230 GMT) Canada January international securities flow data.
- (1330 ET/1730 GMT) ECB Pres Draghi, Poland CB Gov Belka speak at Frankfurt event.
- (1400 ET/1800 GMT) FOMC policy announcement, no changes eyed, Fed funds target 0.375%.
- (1430 ET/1830 GMT) FOMC Chair Yellen press conference.
- (1805 ET/2205 GMT) RBA AsstGov DeBelle speech at FX Week Australia conference in Sydney.
FX Recap
USD: The dollar index stood at 96.633, stuck in familiar territory since drifting off a one-month low of 95.938 set last Friday. The euro was little changed against US dollar, just above $1.1100. Against the yen, both the greenback and euro nursed losses. The dollar fetched 113.16 yen, while the euro bought 125.71 yen following a fall of 0.5 percent on Tuesday.
EUR/USD: Pair fails to break key support at $1.1050 and currently hovers around $1.11 marks. It made intraday high at $1.1120 and low at $1.1094 levels. Short term bias remains bearish till the time pair holds key resistance level at $1.1218. A daily close above key resistance will drag the parity towards $1.1376 marks. On the down side, key support level is seen at $1.1050/$1.1012 marks.
USD/JPY: The USD dollar rose against Japanese Yen on Wednesday ahead of FOMC, which will be watched closely for hints as to when the Fed next expects to tighten policy. USD/JPY is currently trading around 113.45 levels. It made intraday high at 113.55 and low at 113.02 levels. Pair is likely to consolidate below 114.87 levels. A daily close above 114.87 is required to confirm the bullish trend. On the other side, key support level is seen at 112.60 levels. A daily close below key support level at 110.98 will drag the parity towards 108.75/107.51 marks thereafter. On the top side, key resistance levels are seen at 114.87/115.96 levels.
GBP/USD: Sterling was back near $1.4150, having retreated from Friday's peak of $1.4437, driven by oscillating views on whether Britain would leave the European Union. A current down fall from $1.4436 is a corrective move and likely to take the parity towards key support level at $1.4032/$1.3835 thereafter. Short term bias remains bearish till the time pair holds key resistance at $1.4436 level. Alternatively, a daily close above $1.4378 will take the parity towards key resistance at $1.4508. UK job data will be the main focus in European session together with budget release.
AUD/USD: US dollar continues to gain against Aussie and currently trading around $0.7460 levels. A sustained close above $0.7593 levels will drag the parity towards 0.7653 area. On the downside, a break below $0.7365 support levels will turn bias back to the downside for retesting 0.6826 low. From the data front from Australia, Australia Westpac leading index dropped -0.2% mom in February.
NZD/USD: Kiwi was trading with a loss of 1.01% at $0.6585 against the US dollar, falling to a two-week low of $0.6576. Pair remains well supported below $0.67 marks and made high at $0.6684 levels. Key support was found at $0.6585, with resistance at $0.6717 levels. New Zealand’s dairy prices declined from their previous level according to fresh data from Fonterra. The latest release showed more decline as the GDT Price Index fell 2.9%, with the average price reaching $2,190 per metric ton, following the 1.4% hike to $2,253 per metric ton booked March 1. In addition, New Zealand’s current account deficit shrank from $4.74 billion in the third quarter to $2.61 billion last quarter.
Equities Recap
Japan's benchmark Nikkei 225 index was trading 0.38% lower at 17,051.89 points, while the Topix index fell 0.15% to 1,370.05 points.
Chinese markets opened on a positive note, with Hong Kong's Hang Seng index was trading 0.08% higher at 20,304.25 points and the Shanghai Composite climbing 0.29% to 2,872.31 points.
South Korea's Kospi index grew 0.16% to 1,973.81 points early on Wednesday.
The S&P/ASX 200 index was trading 0.07% lower at 5,107.50 points on Wednesday afternoon in Sydney, while New Zealand's S&P/NZX 50 index slipped 0.18% to 6,565.69 points.
Commodities Recap
Oil prices rose on Wednesday after falling the previous session on expectations U.S. output will decline further as some producers are under increasing financial distress and as early inventory data showed a less-than-expected increase. U.S. crude futures were trading at $36.86 per barrel at 0247 GMT, up 52 cents from their last settlement. Brent was up 39 cents at $39.13 a barrel. Oil rose after prices dropped about 2 percent the previous session.
Gold was largely unchanged on Wednesday, after dropping for the past three sessions to its lowest in nearly two weeks, as investors waited for the outcome of the Federal Reserve policy meeting. FOMC began its two-day meeting on Tuesday and it is likely to issue a statement at 1800 GMT. Spot gold was down 0.02 percent at $1,231.80 an ounce by 0221 GMT and U.S. gold added 0.1 percent to $1,232.5 an ounce. Spot gold fell to $1,225.70 in the last session, its lowest since March 2.
Treasuries Recap
Australian government bond futures edged up from multi-week lows, with the three-year bond contract 5 ticks firmer at 97.980. The 10-year contract rose 2 ticks to 97.3500, while the 20-year contract added 2.25 ticks to 96.7950.
New Zealand government bonds eased, sending yields 2 basis points higher at the long end of the curve.
BOJ offers to lend Y1.6476 trln of JGBs on spot basis through 3/17 as a secondary source of JGBs.
U.S. 10-year treasuries yield at 1.961 percent vs U.S. close of 1.959 percent on Tuesday.
