Market Roundup
• Fed holds interest rates steady, sees inflation rising this year.
• US Jan ADP National Employment, 234k, 185k forecast, 250k previous, 242k revised.
• US Q4 Employment Wages QQ, 0.5%, 0.7% previous.
• US Q4 Employment Benefits QQ, 0.5%, 0.8% previous.
• US Q4 Employment Costs, 0.6%, 0.6% forecast 0.7% previous.
• US Jan Chicago PMI, 65.7, 64.1 forecasts, 67.6 previous, 67.8 revised.
• US Dec Pending Homes Index, 110.1, 109.5 previous, 109.6 revised.
• US Dec Pending Sales Change MM, 0.5%, 0.4% forecast, 0.2% previous, 0.3% revised.
• US w/e Mortgage Market Index, 413.4, 424.4 previous.
• US w/e MBA Purchase Index, 255.5, 264.4 previous.
• US w/e Mortgage Refinance Index, 1,288.0, 1,325.8 previous.
• US w/e MBA Mortgage Applications, -2.6%, 4.5% previous.
• US w/e MBA 30-Yr Mortgage Rate, 4.41%, 4.36% previous.
• Trump pushes hardline immigration policies even as he urges unity.
• Letter from Trump prompts African leaders to refrain from criticising him.
• UK government will hand over Brexit analysis after damaging leak.
• FBI has 'grave concerns' over Republican memo's accuracy.
• Mueller to interview former spokesman of Trump legal team –source.
• U.S. public health chief quits over financial conflicts.
• ECB's Coeure praises "outstanding" Lane in race for top jobs.
• German parties agree on climate as coalition talks progress.
• German industrial workers start 24-hour strikes in row over pay, hours.
• 5-Star leader says could back broad Italy govt – source.
Looking Ahead - Economic Data (GMT)
• 31 Jan 22:30 Australia Jan AIG Manufacturing Index, 56.20 previous
• 31 Jan 23:50 Japan w/e Foreign Bond Investment, 411.1B previous
• 31 Jan 23:50 Japan w/e Foreign Invest JP Stock, -148.2B previous
• 1 Feb 00:30 Australia Dec Building Approvals, -8.0% forecast, 11.7% previous
• 1 Feb 00:30 Australia Dec Private House Approvals, -2.0% previous
• 1 Feb 00:30 Australia Q4 Export Prices, -3.0% previous
• 1 Feb 00:30 Australia Q4 Import Prices, -1.6% previous
• 1 Feb 01:45 China Jan Caixin Mfg PMI Final, 51.3 forecasts, 51.5 previous
• 1 Feb 00:30 Japan Jan Nikkei Mfg PMI, 54.4 previous
Looking Ahead - Events, Other Releases (GMT)
• 10:30 EIB Vice President Dario Scannapieco will hold a press conference to present bank's 2017 results in Serbia and the Western Balkans, its perspectives for 2018 and strategy - Belgrade
• 11:15 Speech by ECB's Peter Praet at the luncheon conference of Cercle de Lorraine – Brussels
Currency Summaries
EUR/USD is likely to find support at 1.2330 levels and currently trading at 1.2413 levels. The pair has made session high at 1.2474 and hit lows at 1.2403 levels. The euro turned negative against the greenback on Wednesday after the Federal Reserve left interest rates unchanged but said it expected inflation to rise this year.The Fed ended a two-day meeting on monetary policy on Wednesday, leaving the target interest rate unchanged at 1.25-1.50 percent. But it said it anticipated the economy to expand at a moderate pace and the labor market to remain strong in 2018, citing solid gains in employment, household spending and capital investment. The dollar index fell 0.08 percent, while the euro turned negative after the Fed statement, it was last trading at $1.2412.The euro had climbed earlier after firm underlying euro zone inflation data for January kept expectations alive for a swift withdrawal of the central bank's stimulus policies. Traders will now be looking ahead to the U.S. government's job report on Friday that will include data on nonfarm payrolls and average hourly earnings.
GBP/USD is supported in the range of 1.3970 levels and currently trading at 1.4189 levels. It reached session high at 1.4231 and dropped to session low at 1.4120 levels. Sterling firmed against the dollar on Wednesday as market reaction to a statement from Fed policy-makers was mostly muted and dollar gave up its initial gains against sterling after the Fed statement. The Fed said it anticipated inflation would rise this year, signaling it remained on track to raise borrowing costs again in March under incoming central bank chief Jerome Powell. Most observers shrugged off the statement as expected, but some see the possibility the Fed raises interest rates four times this year, or one more than the market anticipates. Sterling has climbed more than 5 percent since the start of the year as the U.S. currency has weakened broadly and as investors have become optimistic about Britain's economy and the prospect of a Brexit deal that is more favourable to the UK. The pound was up 0.4 percent at a daily high of $1.4233, not far from the $1.4346 post-Brexit vote high it reached last week.
USD/CAD is supported at 1.2274 levels and is trading at 1.2300 levels. It has made session high at 1.2318 and lows at 1.2246 levels. The Canadian dollar strengthened to a four-month high against its U.S. counterpart on Wednesday as Canadian dollar was boosted after data showed strong growth in Canada's economy in November. Canadian gross domestic product rose by 0.4 percent in November from October, Statistics Canada said. The increase was in line with economists' expectations and the biggest gain since May 2017.The data supported expectations for growth to accelerate in the fourth quarter, but likely not as fast as the 2.5 percent annualized gain that the Bank of Canada has projected. The central bank has raised interest rates three times since July. Money markets expect another hike by May. Oil prices rebounded from earlier losses to end higher after the U.S. Energy Department said oil inventories rose for the first time in nearly three months. The Canadian dollar was trading 0.3 percent higher at C$1.2300 to the greenback or 81.36 U.S. cents. The currency touched its strongest since Sept. 20 at C$1.2244.
AUD/USD is supported around 0.8041 levels and currently trading at 0.8056 levels. It hit session high at 0.8112 and made session lows at 0.8048 levels. The Australian dollar stumbled against US dollar on Wednesday as a tame reading on domestic inflation led investors to push out the likely timing of a hike in interest rates, with a move not fully priced in until early next year. Australian consumer prices remained subdued last quarter as core inflation ended a second whole year below the central bank's target, leading investors to widen the odds on a hike in interest rates anytime soon. Annual CPI inflation ran at 1.9 percent, again underestimates. Key measures of underlying inflation favoured by the Reserve Bank of Australia (RBA) averaged around 1.9 percent for the year. Odds on a rate hike this year. The Aussie slipped 0.28 percent to $0.8055 as the headline consumer price index (CPI) rose 0.6 percent in the December quarter, missing forecasts for a 0.7 percent rise. Investors reacted by widening the odds on a rate hike this year. Interest rate futures now imply around a 50-50 chance of a rise by September, compared to August before the data. A move to 1.75 percent is not fully priced in until February 2019, out from November this year.
Equities Recap
European shares fell on Wednesday as investors locked in profits at the end of a strong month while results from some of the region's biggest names also weighed.
UK's benchmark FTSE 100 closed down by 0.82 percent, the pan-European FTSEurofirst 300 ended the day down by 0.66 percent, Germany's Dax ended down by 0.12 percent, France’s CAC finished the day up by 0.10 percent.
U.S. stocks finished little changed on Wednesday as indexes gave up early gains after the Federal Reserve said it sees inflation rising this year, signaling it remains on track to boost interest rates again in March.
Dow Jones closed up by 0.30 percent, S&P 500 ended down by 0.08 percent, Nasdaq finished the day up by 0.17 percent.
Treasuries Recap
The U.S. yield curve flattened to levels not seen in over decade on Wednesday as traders sold more short-dated Treasuries in anticipation the Federal Reserve may raise rates faster to combat an expected acceleration in domestic inflation in 2018.
The spread between five-year and 30-year Treasury yields was last at 42.6 basis points after touching 42.0 basis points, which was last seen in August 2007.
Commodities Recap
Gold prices were flat on Wednesday but dipped slightly after the U.S. Federal Reserve said it would keep interest rates the same, but expected inflation to rise this year.
Spot gold edged down 0.07 percent at $1,337.20 by 2:41 p.m. EST (1941 GMT), hitting a one-week low, while U.S. gold futures for February delivery settled up $3.60, or 0.3 percent, at $1,339.
Oil prices rebounded from earlier losses to end higher on Wednesday after the U.S. Energy Department said oil inventories rose for the first time in nearly three months, but was offset by strong demand for gasoline and distillate products and news that OPEC countries maintained heavy supply cuts in January.
U.S. crude futures settled up 23 cents to $64.73 a barrel, a up 0.4 percent, after hitting a low of $63.92 shortly after the release. Brent crude rose 3 cents to $69.05 a barrel.
