Market Roundup
- GBP/USD off Monday 1.4057 low but heavy at 1.4083.
- USD/JPY holding 111.86 low: Bear trend resumption.
- Germany Feb IFO Business Climate 105.7 vs 107.3 previous, 106.7 expected.
- Germany Feb IFO Current Conditions 112.9 vs 112.5 previous, 112.00 expected.
- Germany Feb IFO Expectations 98.8 vs 102.3 revised, previous, 112.00 expected.
- France Feb Business Climate 103 vs 102 previous, 102 expected.
- ECB/Finland CB Liikanen - ECB ready to do more - YLE TV.
- Riksbank's Ingves-Intervention would be to stop SEK gainiong too fast.
- Riksbank's Floden-risk to credibility if RB not active.
- BoE Carney- Not making judgements on EU referendum outcome.
- Carney noted sterling move after timing of vote clearer.
- BoE Shafik - More likely next rate move will be up.
- BoE Weale sees upside risk to inflation.
- Japan, China other CBs dump cash at US Fed to stabilize currencies.
Economic Data Preview
- (0830 ET/1330 GMT) Brazil is expected to post a current account deficit of $5.9 billion in January and likely attracted $4.95 billion as foreign direct investment in January.
- (0900 ET/1400 GMT) The S&P/Case-Shiller house price index likely rose 5.8 percent in December from a year ago.
- (0900 ET/1400 GMT) Mexico is set to release its Q4 GDP data. The preliminary data in January showed the economy grew 0.6 pct quarter-on-quarter, slowing from the 0.8 percent rate in Q3. The economic activity for December likely expanded at 2.35 percent.
- (1000 ET/1500 GMT) U.S. home resales likely dropped 2.9 percent to an annual rate of 5.32 million units in January after a record surge in December. But January's sales pace would still be above the 2015 average, indicating that the housing market recovery remains intact.
- (1000 ET/1500 GMT) The Conference Board is expected to report that its consumer confidence index slipped to 97.0 in February because of the stock market turmoil from a reading of 98.1 in January.
- (1000 ET/1500 GMT) The Federal Reserve Bank of Richmond releases its manufacturing index for February. The index showed a reading of 2.0 in January.
- (1630 ET/2130 GMT) API reports its weekly crude oil stocks.
Key Events
- (0900 ET/1400 GMT) The Federal Reserve Bank of Minneapolis President Neel Kashkari is scheduled to speak before the St. Paul Regional Economic Development Partnership Winter Investor Meeting, in Minneapolis.
- (1145 ET/1645 GMT) FedTrade Ops 30-yr Ginnie Mae max $850mln.
- (1200 ET/1700 GMT) The Bank of England's Chief Economist Andrew G Haldane speaks.
- (2030 ET/0130 GMT) Stanley Fischer, Federal Reserve Vice Chair, will speak on "Developments in Monetary Policy" before the CERA Week 2016 event.
- Canadian Finance Minister Bill Morneau is due to testify to the House of Commons finance committee. He will undoubtedly be pressed on the 2016/17 budget deficit, which Prime Minister Justin Trudeau says will be larger than the C$10 billion the Liberals promised during last year's successful election campaign.
FX Beat
USD: The dollar edged lower against the yen, down almost 1 percent on the day back below 112 yen, against a basket of currencies it slipped back to 97.28 on Tuesday from a 3-week high of 97.60 on Monday.
EUR/USD: The Euro was trading at 1.10104 and has broken major support at 1.1000 and declined till 1.09917. The intraday trend is weak as long as resistance 1.10550 holds. Any break above 1.10550 will take the pair till 1.1088/1.1125/1.1140. The short term bearish invalidation is only above 1.1150. On the lower side any break below 1.1000 will drag it down till 1.1092/1.10825. The single currency touched 123.525 yen, its lowest since April 2013.
USD/JPY: The Japanese yen gained broadly on Tuesday as a recent rally in risky assets and crude oil fizzled out and revived demand for the safe-haven currency. The pair has broken major support 112 and declined till 111.85 at the time of writing, it was trading around 111.99. The short term trend is slightly weak as long as resistance 112.85 holds.On the lower side major support is around 112 and break below targets 110.85/110. The minor resistance is around 112.85 and break above targets 113.60 /114.50.
GBP/USD: The Sterling slipped back below $1.41 on Tuesday as Carney and other BoE policymakers are speaking in the parliament. It slightly recovered till 1.41678 yesterday after trading at 7-year low of $1.4057. The short term trend is still weak as long as resistance 1.4190 holds. Any break above 1.4190 will take it to next level till 1.4250/1.4300 level. On the lower side major support is around 1.4050 and break below targets 1.40202/1.39820. Against the euro, it was trading at 77 pence.
USD/CHF: The pair has broken major resistance 0.9960 and jumped till 0.9996, It was trading around 0.99769. On the higher side it is facing resistance around 1.000 and break above targets 1.0035/1.00729. The short term trend is slightly bullish as long as support 0.9900 holds. Any break below 0.9900 will drag the pair till 0.9850/0.9780.
AUD/USD: The Australian dollar was supported by improving risk appetite fuelled by a sustained rally in iron ore prices. It has broken major resistance at 0.7250 and jumped till 0.7258 and was trading around 0.72518. The short term trend is slightly bullish as long as support 0.7150 holds. On the higher the major resistance was found at the 200-day moving average of$0.7278, a level that has contained rallies for 16 months, a break above targets 0.7300/0.7380. The major support is around 0.7150 and break below will drag the pair till 0.7100/0.7075. The Aussie held near multi-week highs against the pound and euro on worries Britain could exit the European Union (EU). Sterling hovered at A$1.9570, having dropped 2.8 percent on Monday when it touched A 10-month low of A$1.9484. The pound has shed 7 pence so far this year.
NZD/USD: The New Zealand dollar rallied on positive sentiment towards commodity currencies. It was trading at $0.6689, from as low as $0.6623 the previous day. It could test February highs around the $0.6750 according to analysts.
Equities Recap
Stocks and oil dropped on Tuesday as the risk rally faded out and the China's yuan boosted the investor demand for safer assets such as the Japanese yen, government bonds and gold.
The Europe's FTSEurofirst 300 index was down 0.6 pct, London's FTSE 100 slid 0.9 percent, Germany's DAX and France's CAC 40 were both down 0.8 percent in early deals.
Tokyo's Nikkei closed down 0.37 pct at 16,052.05, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent. China's CSI300 Index ended down 0.9 pct at 3,089.36 points, while Shanghai Composite Index fell 0.8 pct at 2,903.33 points. HK's hang seng index lost 0.3 pct at 19,414.78 points.
Commodities Recap
Oil futures slipped more than half a dollar on worries that rising Iranian output would deepen a global oversupply. U.S. front-month West Texas Intermediate crude futures were trading at $32.72 per barrel at 0753 GMT, down 67 cents from Monday's settlement. International benchmark Brent was down 61 cents at $34.08 a barrel.
Gold rose on Tuesday as Asian shares traded in red and the dollar slipped, with the metal also supported by big inflows into bullion funds. Spot gold rose 1 percent to $1,222.50 an ounce.
Treasuries Recap
The 10-year U.S. Treasury yields stood at 1.7691, up 3 bps, while the yield on UK equivalents was at 1.428, up 33 bps.
JGB prices ended the day marginally mixed, with the curve flattening further. The benchmark 20-yr and 40-yr JGB yields hit fresh record lows at 0.65% (-3bp) and 1.085% (-3.5bp), respectively, while the benchmark 30-yr JGB yield briefly hit its record low of 0.96% posted on June 11, 2003. The new 40s traded in a 1.085%-1.095% range in the post-auction secondary market, before finishing the day down 2.5bp at 1.095%.
The German Bunds were down half a dozen ticks after the French Feb business climate surprised at 103 vs exp of 102 although the previous reading was revised higher to 103 from 102. Bunds had already eased back a little from the highs from last night after peaking out at 165.57, last at 165.35.
Australian government bond futures inched higher, with the 3-year bond contract adding 1 tick to 98.220. The 10-year contract added 2 ticks to 97.5650, while the 20-year contract was steady at 97.0100. The spread between 10- and 3-year government bonds dropped to 64 basis points, the smallest in 10 months. New Zealand government bonds were a tad firmer, with yields down a basis point along the curve.
