Market Roundup
- EUR/USD plays in between 1.1237 - 1.1310 levels.
- USD/JPY trading range 114.26 - 115.26; GBP/USD trading from 1.4438 to 1.4532 levels.
- DAX up + 2.6%, CAC +2.25%, FTSE-100 +1.25%, Brent +2.3%.
- Deutsche bank shares up 13.6%.
- Norway January core CPI 3.0% y/y vs 3.0% previous, 3.0% expected.
- Norway January Headline CPI 3.0% vs 3.0% previous, 2.5% expected.
- UK December Industrial Output -0.4% y/y vs +0.9% previous, +1.0% expected.
- UK December manufacturing Output -1.7% y/y vs -1.2% previous, -1.4% expected.
- FOMC Chair Yellen faces tough sell on Fed rate hikes in Congress.
- Negative US rates possible but no panacea for economic woes.
- Mrs Watanabe loses faith in Abenomics, turns bullish on yen.
- Economic Min Ishihara - Economic fundamentals recovering.
- Europe to call on G20 finance chiefs for urgent action on growth.
Economic Data Ahead
- (1000 ET/1500 GMT) The National Institute of Economic and Social Research releases its UK GDP estimates (3M) for January, the economy grew 0.6 pct in the previous quarter.
- (1000 ET/1500 GMT) EIA reports its Crude Oil Stocks change for the week ending Feb 5, which is expected to remain at 3.650M vs previous 7.792M.
- (1400 ET/1900 GMT) The U.S. Treasury Department's budget report is expected to show a budget surplus of $45 billion in January. There was budget deficit with a $14 billion in the previous month.
Key Events Ahead
- (1000 ET/1500 GMT) Federal Reserve Chair Janet Yellen delivers semi-annual monetary policy testimony before the House Financial Services Committee in Washington, her first major appearance since the Fed began raising rates.
- (1330 ET/1830 GMT) Federal Reserve Bank of San Francisco President John Williams speaks before the 2016 National Interagency Community Reinvestment Conference, "Pathways to Economic Opportunity," sponsored by the Federal Reserve Bank of San Francisco, Federal Deposit Insurance Corp, Office of the Comptroller of the Currency and the Community Development Financial Institutions Fund.
FX Recap
USD: The dollar struggled near 3-1/2-month low against a basket of major currencies as traders await for U.S. interest rate guidance from Federal Reserve Chair Janet Yellen. It was flat at 96.056, having touched 95.663 on Tuesday, its weakest since October. The greenback fell 0.3 percent against the yen to 114.63, close to a 15-month low of 114.05 hit the previous day.
EUR/USD: The euro edged down 0.2 percent to $1.12665 after hitting a 3-1/2-month high of $1.13385 on Tuesday, it was trading around 1.12598. On the lower side the major support is around 1.1250 and break below targets 1.1180/1.1100/1.1050 level. The pair's further bullishness can be seen only above 1.1340 and break above targets 1.1385/1.1430. The minor resistance is around 1.1280/1.1325.
USD/JPY: The Japanese currency, gained 0.5 percent against the dollar but was below a 15-month high hit on Tuesday. It last traded at 114.95 yen per dollar. The pair has broken major support 115, the short term trend is slightly weak as long as resistance 116.60 holds. On the lower side major support is around 114.20 and break below targets 113/111.80. The minor resistance is around 116.60 and break above targets 117.25/117.60.
USD/CHF: The pair has broken major support around 0.9780 and declined till 0.9690. It was trading around 0.97370. The short term trend is slightly weak as long as resistance 0.9800 holds. On the lower side major support is around 0.9700. Any break below 0.9700 will drag it down till 0.9630/0.9550. On the higher side resistance is around 0.9800 and break above 0.9800 will take the pair till 0.9850/0.9900.
GBP/USD: The Sterling remained strong after a poor batch of industrial output data on Wednesday, an indication that it is recovering after two months of sell-off on worries about Britain's economic and political outlook. It traded a quarter of a percent higher at $1.4506 by 1000 GMT. It also gained half a percent to 77.63 pence per euro. The pair has broken minor resistance around 1.4490 and jumped till 1.4530 at the time of writing. Any break above confirms minor trend reversal; a jump till 1.4580/1.4600 is possible. On the lower side the support is around 1.4420 and break below targets 1.4380/1.4350. The minor support is around 1.4450 and the short term weakness is only below 1.4320.
AUD/USD: The Australian dollar has taken support near 0.6975 and recovered from that level. It was trading around 0.7099. The short term trend is slightly bullish as long as support 0.6920 holds. On the higher side major resistance is around 0.7135 and break above targets 0.7170/0.7240. The minor support is around 0.7050 and break below will drag the pair till 0.6980/0.6920. The Aussie dollar skidded 1 percent against the yen to 80.53 yen as worries about the health of global banks and sliding commodity prices drove investors to safe haven assets. The next major bear target is 79.17, a level last seen mid-2012. The euro rose 0.5 percent to A$1.6048, not far from a 4-month peak of A$1.6145 touched in the last session.
NZD/USD: The New Zealand dollar fell to $0.6613 after hitting a low of $0.6564 overnight. It continued to edge down for the fifth day against safe haven currencies such as the euro and the yen. The Kiwi would likely face resistance around the $0.6700 level, according to analysts.
Equities Recap
The European stocks rallied after posting losses in Asia, as worries about the health of banks eased and oil prices recovered from Tuesday's steep falls.
The pan-European FTSEurofirst 300 index climbed 1.5 percent on a Financial Times report that Deutsche Bank was considering buying back several billion euros of its debt, by 0818 GMT it turned negative, down 0.1 pct. while the STOXX Europe 600 banks index rose 3.5 percent. UK's FTSE was down 0.2 pct, Germany's DAX rose 0.7 pct and France's CAC climbed 0.2 pct in early deals.
Tokyo's Nikkei closed down 2.31 pct at 15,713.39, Australia's S&P/ASX 200 Index ended down 1.27 pct at 4,770.90 points. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent.
Commodities Recap
Oil prices recovered from an 8 percent drop on Tuesday after Iran said it was open to cooperation with Saudi Arabia on current conditions in the market. The front-month Brent contract rose 63 cents, or 2 percent, higher at $31.95 a barrel by 0800 GMT. U.S. crude for March delivery was 54 cents higher at $28.48 a barrel.
Gold climbed towards a 7-1/2-month high as investors preferred the safe-haven assets amid tumbling stock markets and worries about the global economy. Spot gold rose 0.1 percent at $1,189.71 an ounce by 0705 GMT, after earlier hitting an intraday high of $1,194.06. It was last at $1,186.80 an ounce.
Treasuries Recap
US 10-year Treasury Yield stood at 1.7600, up 0.031 pct.
German 10-year government bond yields were edged up just 0.6 basis points to 0.24 percent, while the 2-year yields were 1 basis point higher on the day at minus 0.51 percent. Portuguese 10-year yields were down 15 bps at 3.40 percent after rising more than 30 bps on Tuesday.
Japanese government bonds dropped as investors booked profits ahead of a public holiday. The 10-year JGB yield added 4 basis points to 0.10 percent, after it marked a record low of minus 0.035 percent on Tuesday. The 5-year JGB yield rose 3 basis points to minus 0.225 percent, after notching a record low minus 0.265 percent earlier in the session. The yield on the 2-year bond added 2.5 percent to 0.220 percent. March 10-year JGB futures prices skidded 0.36 to close at 151.89, after earlier marking a record intraday high of 152.39.
UK Gilts opened just 3 ticks lower than the settlement of 121.83, as expected, as core markets scaled back some of the recent rally. Dealers are respecting recent ranges on 10-year cash as the market consolidates ahead of Fed Chair Yellen's testimony later today.
Australian government bond futures held near multi-month peaks, with the 3-year bond contract steady at 98.280. The 10-year contract was also unchanged at 97.5950, while the 20-year contract flat at 97.0650. New Zealand government bonds dropped, sending yields 2 basis points higher in the middle of the curve.
