Market Roundup
• US MBA Mortgage Applications w/e, 3.6%, -2.1% previous.
• US MBA Purchase Index w/e, 242.9, 233.2 previous.
• US Building Permits Number Sep, 1.215M, 1.250M forecast, 1.272 M previous.
• US Building Permits Change MM Sep, -4.5%, 3.4% previous.
• US Housing Starts Number Sep, 1.217M, 1.175M forecast, 1.180 M previous.
• CA Manufacturing Sales MM Aug, 1.6%, -0.1% forecast, -2.6% previous.
• US economy hums along, still few signs of pickup in inflation –Fed.
• Trump intensified his efforts to sell his tax reform plan to Democrats.
• Trump does not support Alexander-Murray healthcare bill -White House.
• OPEC leans towards 9-month extension of oil supply cut – sources.
• Xi says China will continue to open its economy, deepen financial reforms.
Looking Ahead - Economic Data (GMT)
• 05:20 Japan Exports YY Sep, 14.9% forecast, 18.1% previous
• 05:20 Japan Imports YY Sep, 15% forecast, 15.2% previous
• 05:20 Japan Trade Balance Sep, 559.8B forecast, 113.6B previous
• 06:00 Australia Employment Sep, 15k forecast, 54.2k previous
• 06:00 Australia Unemployment rate Sep, 5.6% forecast,5.6% previous
• 07:30 China Industrial Output YY Sep, 6.2% forecast, 6% previous
• 07:30 China Retail sales YY Sep, 10.2% forecast, 10.1% previous
• N/A China GDP YY Q3, 6.8% forecast, 6.9% previous
Looking Ahead - Events, Other Releases (GMT)
• 13:30 Fed’s Esther George speaks at Altus, Oklahoma
Currency Summaries
EUR/USD is likely to find support at 1.1715 levels and currently trading at 1.1792 levels. The pair has made session high at 1.1727 and hit lows at 1.1787 levels. Euro rose against the dollar on Wednesday as the dollar lost some steam after data showed U.S. homebuilding fell to a one-year low in September as Hurricanes Harvey and Irma disrupted the construction of single-family homes in the South. U.S. home building fell to a one-year low in September as Hurricanes Harvey and Irma disrupted the construction of single-family homes in the South, suggesting housing probably remained a drag on economic growth in the third quarter. The report on Wednesday from the Commerce Department also showed a decline in building permits, raising concerns that the housing market recovery was stalling. Homebuilding and sales are well below their peaks before the housing bubble burst in 2006. The dollar initially found some support from higher U.S. Treasury yields, the greenback, but reversed most of the gain in the after trading. The dollar index, which tracks the greenback against six major currencies, was down 0.12 percent at 93.371, after rising as high as 93.797. The euro was up 0.26 percent to $1.1797.
GBP/USD is supported in the range of 1.3118 levels and currently trading at 1.3197 levels. It reached session high at 1.3200 and dropped to session low at 1.3136 levels. The British pound dipped against the greenback on Wednesday after data showed British wage growth was still lagging well behind inflation, feeding doubts over the Bank of England's interest rate outlook. Although investors still broadly expect the Bank to hike rates in November when it releases its next Inflation Report, many are betting it will then keep them on hold for some time - perhaps throughout 2018 - and the latest numbers supported that view. Wage growth came in slightly stronger than expected at an annual 2.2 percent in the three months to August, but the number of people in work rose by about half as much as it did in the three months to July. The pound had already slipped half a percent on Tuesday after comments from BoE policymakers were interpreted as broadly dovish by markets. It added to those losses on Wednesday, falling as much as 0.4 percent after the data to a low of $1.3136 before recovering a little. Traders are now eyeing retail sales data due on Thursday for more clues on the health of the British economy, as well as a speech in Brussels to fellow EU leaders by Prime Minister Theresa May, who is trying to break a deadlock in Brexit talks.
USD/CAD is supported at 1.2431 levels and is trading at 1.2472 levels. It has made session high at 1.2514 and lows at 1.2460 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday as Canadian dollar was boosted by higher oil prices and data showing a surprise rise in domestic manufacturing sales. Canadian factory sales grew by 1.6 percent in August from July as sales increased in motor vehicles, and petroleum and coal, Statistics Canada said. Analysts had forecast a decrease of 0.1 percent. Chances of a hike at next week's interest rate decision have fallen to 22 percent from nearly 50 percent in mid-September, the overnight index swaps market indicates. Prices of oil, one of Canada's major exports, rose as weekly U.S. crude inventories were expected to have fallen steeply and geopolitical tensions around oil-rich Iraq and Iran raised risk premiums. Gains for the loonie have come after news on Tuesday that talks on renegotiation of the North American Free Trade Agreement would be extended through the first quarter of next year. The Canadian dollar was trading at C$1.2467 to the greenback, up 0.4 percent. The currency, which has recovered from an 11-day low on Tuesday at C$1.2591, traded in a range of C$1.2487 to C$1.2534.
USD/JPY is supported around 108.00 levels and currently trading at 109.46 levels. It peaked to hit session high at 109.52 and made session lows at 109.11 levels. The U.S. dollar strengthened against the yen on Wednesday on speculation that the eventual successor to U.S. Federal Reserve Chair Janet Yellen will favor higher interest rates. U.S. President Donald Trump was favoring policy hawk John Taylor as the next head of the Fed, Bloomberg reported, pushing the dollar higher against Japanese yen. Taylor, a Stanford economist, is seen as more likely to raise rates than Yellen, which would boost the dollar and dent safe-haven assets. Meanwhile, Boston Fed President Eric Rosengren said on Monday, the Fed will probably need to raise rates in December and then three or four times "over the course of next year", assuming U.S. unemployment continues to fall and inflation rises. On the data front, U.S. homebuilding fell to a one-year low in September as Hurricanes Harvey and Irma disrupted the construction of single-family homes in the South, suggesting housing probably remained a drag on economic growth in the third quarter. The greenback was last trading at 0.67 percent higher against the Japanese yen at 112.88 yen.
Equities Recap
Dealmaking activity helped European shares inch higher on Wednesday as the focus turned to a flurry of third-quarter company earning updates.
UK's benchmark FTSE 100 closed up by 0.34 percent, the pan-European FTSEurofirst 300 ended the day up by 0.25 percent, Germany's Dax ended up by 0.32 percent, France’s CAC finished the day up by 0.38 percent.
The Dow Jones Industrial Average closed above the 23,000 level for the first time on Wednesday, driven by a jump in IBM after the computing giant hinted at a return to revenue growth.
Dow Jones closed up by 0.69 percent, S&P 500 ended up 0.08 percent, Nasdaq finished the day up by 0.01 percent.
Treasuries Recap
The U.S. Treasury yield curve flattened on Wednesday with the difference in yield between U.S. 5-year and 30-year Treasuries falling to the lowest since November 2007 and the spread between 2-year and 10-year Treasuries hitting the lowest since August 2016.
Benchmark 10-year Treasury notes were last down 12/32 in price to yield 2.341 percent. Yields had earlier climbed to a six-day high.
Commodities Recap
Gold fell for a third straight session on Wednesday on pressure from the U.S. dollar's gains for much of the session and amid speculation that the next chair of the Federal Reserve could be a policy hawk.
Spot gold was down 0.3 percent at $1,281.50 an ounce by 2:21 p.m. EDT (1821 GMT), having touched its lowest since Oct. 9 at $1,276.73.
U.S. gold futures for December delivery settled down $3.20 or 0.3 percent, at $1,283 per ounce.
Brent oil prices retreated from three-week highs on Wednesday, after a surprising drop in U.S. refining rates and an unexpected gasoline and diesel stock build signaled lower demand in the world's top oil consumer.
Brent crude futures were up 19 cents to $58.07 a barrel by 1:37 p.m. EDT (1737 GMT). The global benchmark hits its highest in three weeks earlier in the session at $58.54 a barrel because of ongoing tensions around oil-rich Iraq and Iran, which raised risk premiums.U.S. West Texas Intermediate (WTI) crude futures were up 15 cents to $52.03 a barrel.
