Market Roundup
- USD/JPY plays 113.75-114.45 and drifts from high into NY.
- EUR/JPY reaches 124.35 high from 123.65.
- Swiss Q4 GDP 0.4% q/q vs -0.1% Q3 revised 0.4% y/y vs +0.8% previous.
- EZ Jan production prices -2.9% y/y vs -3.0% previous, -2.9% expected.
- UK Feb construction PMI 54.2 vs 55.00 previous, 55.00 expected.
- ECB's Coeure - Studying how other jurisdictions use negative rates.
- ECB's Villeroy - looking for second round effects of low oil.
- ECB's Villeroy - Even though not deflation the battle is not over.
- Moody's China outlook on Aa3 govt bond rating to negative vs stable.
- China RRR cut not signal of impending large-scale fiscal stimulus - Xinhua.
- BoJ Gov Kuroda - Price trend improving, crude oil holding prices back.
- UK Jan BRC shop rises -2.2% y/y, 34th straight fall, Jan -1.8%.
- Australia Q4 GDP +0.6% q/q, +3.0% y/y, +0.4% and +2.5% expected.
Economic Data Ahead
- (0815 ET/1315 GMT) Data from payrolls processor ADP will likely show that private payrolls increased by 190,000 jobs in February after rising 205,000 in January.
- (1030 ET/1530 GMT) EIA reports Crude Oil Stocks for the week ending Feb 26, which is expected to have fallen slightly to 3.500M from 3.502M.
- (1400 ET/1900 GMT) The Federal Reserve issues its so-called Beige Book, a compendium of anecdotes on the health of the economy drawn from the central bank's sources across the nation. It will likely continue to flash mixed signals for the U.S. economy, with broadly positive momentum expected on jobs and consumer spending.
- Brazil's central bank meets to decide its next monetary policy move amid growing pressure to keep interest rates on hold at 14.25 percent.
Key Events Ahead
- (0900 ET/1400 GMT) BoE MPC Member Jon Cunliffe's speech
- (1100 ET/1600 GMT) Federal Reserve Bank of San Francisco President John Williams will speak on the economic outlook before the Bishop Ranch Forum in California. Williams, a policy centrist, expects a tightening labor market to start boosting inflation later this year, making rate hikes an imperative for coming months.
- (1145 ET/1645 GMT) FedTrade ops 15-yr F.Mae/Fr.Mac max $575mln
- Canadian Prime Minister Justin Trudeau will give a keynote speech to an innovation and sustainability summit where he will discuss his government's plans to invest in green growth.
FX Recap
USD: The dollar traded at around a 1-month high against a basket of major currencies after encouraging U.S. economic data drove investors to bet that the U.S. Fed may raise interest rates this year after all. The dollar index was at 98.455, up 0.2 percent from the previous day and not far from Tuesday's one-month peak of 98.570.
USD/JPY: The Japanese yen has recovered till 114.45 at the time of writing after making a low of 112.15. The short term trend is slightly weak as long as resistance115 holds. On the lower side major support is around 113.30 and break below targets 112.80/112. The major resistance is around 115 and break above targets 116/117.50.
EUR/USD: The euro was steady near Tuesday's 1-month low of $1.08340, staying under pressure as investors expect the ECB to step up monetary stimulus at its policy meeting next week. It was trading around 1.08650 and the intraday trend is weak as long as resistance 1.0900 holds. Any break above 1.0900 will take the pair till 1.09625/1.09850 in short term. The minor resistance is at 1.0880. On the lower side major support is around 1.0850 and any break below 1.0850 will drag it till 1.0825/1.0780.
GBP/USD: The Sterling was hovering near a 7-year low against the dollar with a weaker than expected reading of construction industry sentiment adding to a blow from weak numbers on manufacturing a day earlier. The construction purchasing managers index showed growth in the sector fell to a 10-month low in February in what was its weakest reading in almost three years. It fell 0.2 percent to $1.3935 and 78.02 pence per euro on Wednesday. The Cable has broken major support 1.3940 and declined till 1.39140 at the time of writing. On the lower side any break below 1.3940 confirms minor weakness, a decline till 1.3830/1.3780 is possible. The major resistance is around 1.4020 and break above targets 1.4060/1.4085. The minor resistance is around 1.3980.
USD/CHF: The Swiss franc weakened against the other major currencies on Wednesday. It has recovered after making a low of 0.9950 against the dollar and was trading around 0.99834. The short term trend is slightly bullish as long as support 0.9950 holds. The Switzerland's economy grew an unexpected 0.9 percent and exports showed signs of resilience in 2015 in the face of a sharp rise in the franc. On the higher side any break above 1.0040 will take it till 1.00725/1.01300. The major support is around 0.9950 and break below targets 0.9850/0.9780. The overall bullish invalidation is only below 0.9780. The franc fell to 113.97 against the yen, from an early near 2-week high of 114.47. Against the euro and the pound, it edged down to 1.0854 and 1.3961 from early highs of 1.0828 and 1.3896, respectively.
AUD/USD: The Australian dollar was the biggest gainer on the day, up almost 1 percent at one point after the economy grew at a much faster rate than expected, prompting markets to mark down the risk of a further cut in interest rates. It was at $0.7232, up 0.8 percent on the day. The short term trend is slightly weak as long as resistance 0.7260 holds. On the higher side major resistance is around 0.7260 and break above targets 0.7300/0.7380. The major support is around 0.7150 and break below will drag it till 0.7100/0.7075/0.7020. The Aussie reached a 1-month high of 82.57 yen, while the euro slid towards A$1.5000, a low not seen since early January. Against the New Zealand dollar, It scaled to a 1-month peak of NZ$1.0901.
NZD/USD: The kiwi was little changed on the greenback at $0.6636, having eased back from a session high of $0.6663. It caught an early boost from a slight improvement in global dairy prices at a key auction overnight.
Equities Recap
Shares rallied on Wednesday as the recovery in oil prices and a set of positive economic data from Australia to the United States eased worries of a global economic slowdown.
The FTSEuroFirst index of leading 300 shares was up 0.7 percent at 1,3412 points, on track to record its fifth straight day of gains. UK's FTSE 100 rose 0.6 percent, Germany's DAX gained 1 percent and France's CAC inched higher 0.8 percent in early deals.
Japan's Nikkei rose 4 percent, Hong Kong's Hang Seng Index climbed 3 percent and China's main bourses rose more than 4 percent. MSCI's broadest index of Asia-Pacific shares outside Japan gained 2.4 percent to its highest levels since Jan. 7, and building on gains in the previous session.
Commodities Recap
Oil dropped further below $37 a barrel as an industry report showing a rise in U.S. crude stockpiles to a new record offset support from producer efforts to tackle a supply glut. Global benchmark Brent crude fell 27 cents at $36.54 a barrel by 0946 GMT. U.S. crude futures were down 1 percent at $33.98 a barrel after hitting a one-month high of $34.76 on Tuesday.
Gold slipped on Wednesday as global equities and the dollar rose following strong U.S. manufacturing data renewed speculation the Federal Reserve could raise interest rates this year. Spot gold slipped from its recent high to $1,230 an ounce but is still up 16 percent so far this year.
Treasuries Recap
The 10-year U.S. Treasuries yield rose to a 2-week high of 1.84 percent. While the 10-year German Bund yield rose nearly 4 basis points to 0.187 percent.
Japanese government bonds edged higher from session lows but declined on Wednesday, taking their cue from surging stocks and a recovery in risk appetites that sapped the appeal of fixed-income assets. The benchmark 10-year JGB yield added half a basis point to minus 0.040 percent, moving away from a session low of minus 0.045 percent. The 30-year yield was flat at 0.785 percent, down from a session high of 0.815 percent. March 10-year JGB futures fell 0.13 point to end at 152.02.
UK Gilts opened 55 ticks lower than the settlement of 121.79, but only 1 tick lower than the close, as core markets came under pressure from a solid equity market. Sellers have made decent progress taking 10-year cash yields to 1.448% from the close of 1.399%.
Australian bond futures were under pressure from a negative U.S. lead, with the 3-year contract losing 12 ticks to 98.190 and the 10-year contract dropping 11 ticks to 97.535. While the New Zealand government bonds eased, sending yields 3.5 basis points higher at the short end and 8 basis points higher at the long end.
