Market Roundup
- GBP/USD hits 1.3881 from 1.4029 on Brexit plays.
- USD/JPY hits 111.63 low from 112.26 high.
- Swiss Jan UBS Consumption Indicator 1.66 vs 1.61 revised previous.
- France Feb Consumer confidence 95 vs 97 previous, 97 expected.
- UK Jan BBA Mortgage approvals 47.509k vs 43.660k revised previous.
- UK Feb CBI Distributive Trades +10 vs 16 previous, 12 expected.
- Norway Q1 oil investments weaker than expected: 2016 NOK189bln vs 192.8bln.
- HSBC joins 15-20% Sterling fall on Brexit club (GS & Citi).
- BoJ Gov Kuroda - Won't cut rates without eye on economic impact.
- Kuroda - Ready to ease if market rout hurts economy.
- Kuroda negative rates not a signal a limit to QE.
- Kuroda BoJ doesn't explicitly target FX or stocks (in Diet testimony).
- FOMC Fischer - Market turmoil may pass with little (lasting) econ impact.
Economic Data Ahead
- (0900 ET/1400 GMT) Mexican consumer prices are likely to have risen 0.2 percent during the first half of February. The core price indexis likely to have climbed 0.23 percent in early February.
- (0945 ET/1445 GMT) The financial firm Markit releases its Services PMI for February which is expected to rise slightly to 53.5 from 53.20.
- (1000 ET/1500 GMT) Data from the U.S. Commerce Department is expected to show new home sales fell 4.4 percent in January to a 520,000 unit-rate, likely reflecting bad weather.
- (1030 ET/1530 GMT) EIA reports its Crude Oil Stocks Change for the week ending Feb 19.
Key Events Ahead
- (0800/1300) The Federal Reserve Bank of Richmond President Jeffrey Lacker will speak on "Can Monetary Policy Affect Economic Growth?" before the "Leaders + Legends" lecture series sponsored by the Johns Hopkins Carey Business School in Baltimore.
- (1145 ET/1645 GMT) FedTrade Ops 30yr F.Mae/ max $2.300bln.
- (1235 ET/1735 GMT) Bank of Canada Deputy Governor Lawrence Schembri gives a speech at the Guelph Chamber of Commerce. The topic will be "Connecting the Dots: Elevated Household Debt and the Risk to Financial Stability".
- (1310 ET/1810 GMT) BoE MPC Member Jon Cunliffe's Speech.
- (1315 ET/1815 GMT) The Federal Reserve Bank of Dallas President Robert Kaplan is scheduled to speak on "Current Economic Conditions and Monetary Policy" before the Harvard Clubs of Dallas and Fort Worth.
- (1900 ET/0000 GMT) The Federal Reserve Bank of St. Louis President James Bullard will give a presentation on the U.S economy and monetary policy before the Money Marketeers of New York University.
FX Recap
USD: The dollar dropped against the Japanese yen, trading at a 10-day low of 111.63 yen, close to a 15-month trough of 110.85 hit earlier in the month. Against the basket of currencies it was up 0.32 pct at 97.78. The dollar index has broken major resistance 97.60 and the short term trend is slightly bullish as long as minor support 97 holds. The minor support is around 97 and break below targets 96.50/96.25/95.50.
EUR/USD: The euro fell 0.2 percent to $1.0991; it has broken major support around 1.09800 and declined till 1.09780. The short term trend is weak as long as resistance 1.10350 holds. Any break above 1.10350 will take the pair till 1.1055/1.1088 in short term. On the lower side any break below 1.0980 will drag it till 1.0920/1.0890/1.0835.
USD/JPY: A fall in oil prices, after Saudi Arabia ruled out production cuts, drove a risk-off mood across markets that boosted demand for the safe-haven yen. Against the dollar, it slightly recovered after making a low of 111.63 and was trading around 111.80. The short term trend is slightly weak as long as resistance 112.85 holds. On the lower side major support is around 111.50 and break below targets 110.85/110. The minor resistance is around 112.85 and break above targets 113.60 /114.50. The Japanese yen hit an almost 3-year high against the euro of 123.04 yen.
GBP/USD: The Sterling plunged to a 7-year low around $1.3961 in Asian trading, on concern Britons might vote to leave the European Union in a June referendum. It last traded at $1.3976, down 0.3 percent on the day and at 78.66 pence per euro. The Cable has broken major support 1.4050 and declined till 1.38894 at the time of writing. The short term trend is still weak as long as resistance 1.4025 holds. Any break above 1.4025 will take the pair to next level till 1.4060/1.4100 level. On the lower side major support is around 1.3880 and break below targets 1.3850/1.3800.
USD/CHF: The pair has retreated after making a high of 0.9999 and was trading around 0.9921. 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 it till 0.9850/0.9780. The Swiss franc was close to a one-month high against the euro.
AUD/USD: The Australian dollar eased to $0.7200, from $0.7216 early, but remained not far from a seven- week peak of $0.7259 touched on Tuesday. Support was found at $0.7158, it has gained 1.7 percent this month, having proved resilient to global growth worries and falling oil prices. The short term trend is slightly bearish as long as resistance 0.7250 holds. On the higher side minor resistance is around 0.7180 and break above targets 0.7250/0.7300. Fears Britain might leave the European Union kept sterling pinned near 10-month lows at A$1.9428, having dropped 6 pence since Monday. It stood at NZ$2.1093, having shed nearly 3 percent in as many sessions.
Equities Recap
Oil prices dragged European and Asian shares lower as Saudi Arabia effectively ruled out output cuts by major producers, driving investors towards low-risk assets such as the Japanese yen and gold.
The pan-European FTSEurofirst 300 share index fell 1.4 percent, Britain's FTSE 100 index lost 1 percent, Germany's DAX and France's CAC both were down o.2 pct.
Tokyo's Nikkei closed down 0.85 pct at 15,915.79 on the lower oil prices and a stronger yen, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.2 percent, slipping further from Monday's six-week high. China's CSI300 Index ended up 0.7 pct at 3,109.55 points, Shanghai Composite Index gained 0.9 pct at 2,928.90 points and HK's Hang Seng index closes down 1.2 pct at 19,192.45 points
Commodities Recap
Oil extended losses from the previous session and dropped below $33 per barrel after Saudi Arabia ruled out production cuts and an industry report said U.S. crude stockpiles hit a record, underlining the supply glut. Brent crude was down 76 cents at $32.51 a barrel at 0938 GMT. U.S. crude fell 94 cents to $30.93.
Gold kept its sharp overnight gains on Wednesday, supported along with other safe-haven assets as risk-aversion sent equities lower. Spot gold eased slightly to $1,225.60 an ounce by 0659 GMT, after gaining about 1.5 percent in the previous session.
Treasuries Recap
The slide in stocks and oil dragged down yields of the lowest-risk government bonds. German 10-year yields fell 2.1 basis points to 0.16 percent and their U.S. equivalents fell 2.6 bps to 1.72 percent.
Japanese government bond prices edged higher, with yields from 10 to 40 years hitting record lows after the Bank of Japan's bond purchase highlighted reluctance of investors to sell bonds with positive yields. The benchmark 10-year yield slipped 5.0 bps to minus 0.055 percent, breaking below its previous low of minus 0.035 percent hit earlier this month. The 20-year yield fell 6.5 bps to 0.600 percent while the 30-year yield also dropped 6.5 bps to 0.915 percent.
UK Gilts opened 19 ticks higher than the settlement of 121.84 as core fixed income markets were elevated by another decline in oil prices. Buyers gained confidence with a break of support on 10-year cash yields from yesterday's low 1.388 pct and looking at former lows at 1.349 pct.
Portuguese 10-year bond yields fell more than 20 bps in early trading to 3.16 pct, pulling further away from near 2-year highs of 4.38 pct hit a fortnight ago. Other euro zone equivalents were flat or 1-2 bps lower on the day.
Australian government bond futures were little changed, with the 3-year bond contract steady at 98.230. The 10-year contract was flat at 97.5800, while the 20-year contract was also steady at 97.0450. New Zealand government bonds gained, sending yields 1.5 basis points lower along most of the curve. The spread between 10- and 3-year government bonds narrowed further to 63 basis points, the smallest in 10 months.
