Market Roundup
• US monthly home prices +0.5%t in Nov v revised 0.3% in Oct; +6.1% v 6.2% y/y – FHFA.
• Trump to act on Mexico border wall, bolster immigration police.
• Dow hits 20,000 as Trump and earnings fuel rally, S&P and Nasdaq also hit record highs.
• USD hits 7-wk low on Trump worries, GBP above1.26 for the first time in 6-wks.
• ECB’s Lautenschlaeger: ECB should soon start discussing exit from stimulus, preconditions for a stable rise in inflation exists.
• Britain to publish Article 50 bill, on Thursday, as May agrees to set out Brexit plan.
• Germany calls bankers to Frankfurt for Brexit move talks, More than 20 banks to meet officials on Monday.
• ECB policy working, but with a greater lag - ECB research.
• US gasoline stockpiles build for fourth week on weak demand, crude oil stocks were higher as well.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand CPI QQ* Q4 forecast 0.3%, 0.20%-previous
• 21:45 New Zealand CPI YY* Q4 forecast 1.2%, 0.20%- previous
• 21:45 New Zealand CPI Index Q4 1209 – previous
• 23:50 Japan Foreign Bond Investment bank w/e 332.1b-previous
• 23:50 Japan Foreign Invest JP Stock w/e 246.5b-previous
Looking Ahead - Events, Other Releases (GMT)
• 23:00 New ZealandRBNZ Governor Wheeler Speaks in Christchurch (Not public)
• --:-- New Zealand RBNZ's head of macro-financial stability, Bernard Hodgetts, Board Member David Hargreaves and Monetary Economics Member Ashley Dunstan to host a seminar on housing markets and macro-prudential policy at the Chartered Accountants Wellington Conference Centre (to Jan. 27).
Currency Summaries
EUR/USD is likely to find support at 1.0690 levels and currently trading at 1.0744 levels. The pair has made session high at 1.0752 and hit lows at 1.0717 levels. Euro inched higher against the dollar on Wednesday as the dollar failed to carry on its upward momentum on lingering concerns about trade protectionism. Investors bet Trump’s promised infrastructure spending and tax cuts would boost economic growth and inflation, leading the Federal Reserve to follow through with a series of rate hikes. Moves by Trump on oil pipeline projects on Tuesday had boosted U.S. equity markets and propped up the greenback. The dollar was generally weaker on Wednesday despite U.S. shares gaining and the Dow Jones Industrial Average trading above 20,000 for the first time. The dollar index against a basket of major currencies gave back a bulk of its overnight gains and was last down 0.2 percent at 100.180.The euro was a shade higher at $1.0751. The common currency had lost about 0.3 percent overnight, sliding from a near seven-week high of $1.0775.
GBP/USD is supported in the range of 1.2483 levels and currently trading at 1.2628 levels. It reached session high at 1.2634 and dropped to session low at 1.2541 levels. Sterling rose against the dollar on Wednesday as sterling was boosted by hopes that Theresa May's first meeting with Donald Trump would pave the way for a rapid U.S. trade deal. After strong morning, an afternoon burst of buying took the pound up past $1.2600 for the first since Dec. 14 and it reached $1.2636 before running out of steam. Speaking in parliament, May said her meeting with newly inaugurated U.S. President Donald Trump later this week was a sign of the strength of the special relationship between the two countries. She also said she was not afraid to speak frankly to a president of the United States when asked whether she was concerned by Trump's comments about women. Sterling was last up 0.6 percent against the dollar at $1.2603 after hitting a six-week high of $1.2636
USD/CAD is supported at 1.3000 levels and is trading at 1.3061 levels. It has made session high at 1.3131 and lows at 1.3060 levels. The Canadian dollar rose against its U.S. counterpart on Wednesday as dollar softened against a basket of major currencies and oil prices gained after crude oil inventory data. The U.S. dollar tumbled to a seven-week low against a basket of currencies on worries that Trump was focusing too much on protectionism and isolationism, and not enough on pro-growth policies. A more protectionist United States would threaten Canada's economy. But Canadian officials are convinced Mexico will suffer the most damage from changes to the North American Free Trade agreement, under which Canada sends 75 percent of its exports to the United. Trump signed orders on Tuesday smoothing the path for Keystone. If constructed, the pipeline would provide oil producers in Canada with a quicker route to send crude to U.S. The Canadian dollar was trading at C$1.3121 to the greenback, or 76.21 U.S. cents, stronger than Tuesday's close of C$1.3161, or 75.98 U.S. cents.
USD/JPY is supported around 112.95 levels and currently trading at 113.34 levels. It peaked to hit a session high at 113.92 and made session lows at 113.25 levels. The U.S. dollar dipped against the yen on Wednesday as the greenback was weighted down by worries that U.S. President Donald Trump was focusing too much on protectionism and not enough on pro-growth policies. Moves by Trump on oil pipeline projects on Tuesday had boosted U.S. equity markets and propped up the greenback. The dollar was generally weaker on Wednesday despite U.S. shares gaining and the Dow Jones Industrial Average trading above 20,000 for the first time. But the focus on Wednesday shifted away from policies that might boost growth. Trump was expected later in the day to start signing executive orders aimed at securing the U.S. border, including a temporary ban on most refugees. The dollar was down 0.2 percent against the yen at 113.53 yen.
Equities Recap
European shares rose sharply on Wednesday, boosted by strong earning updates from Logitech LOGN.S and Banco Santander, with the STOXX 600 scoring its biggest one-day gain for 11 weeks.
UK's benchmark FTSE 100 closed up by 0.3 percent, the pan-European FTSEurofirst 300 ended the day up by 1.37 percent, Germany's Dax ended up by 2 percent, France’s CAC finished the day up by 1.2 percent.
U.S. stocks climbed on Wednesday and the Dow Jones Industrial Average closed atop the 20,000 mark for the first time as solid earnings and optimism over President Donald Trump's pro-growth initiatives revitalized a post-election rally.
Dow Jones closed up by 0.76 percent, S&P 500 ended down 0.80 percent, Nasdaq finished the day up by 0.98 percent.
Treasuries Recap
U.S. Treasury yields increased on Wednesday with benchmark yields hitting a four-week high as Wall Street's key indexes posted record highs amid investor optimism about the economy and the policies of the administration of President Donald Trump.
The yield on U.S. benchmark 10-year Treasury notes rose 5 basis points to 2.521 percent, below Wednesday's session high of 2.538 percent earlier, which was its highest since Dec. 28.
Commodities Recap
Gold prices fell to a 1-1/2-week low on Wednesday as renewed hopes that U.S. President Donald Trump will unleash growth-friendly spending policies boosted shares and eroded bullion's safe-haven attraction.
Spot gold was down 1 percent at $1,196.79 an ounce by 2:08 EST (1908 GMT) after touching $1,192.74, the weakest since Jan. 13, while U.S. gold futures settled down $13, or 1.07 percent, at $1,197.8 per ounce.
Oil prices rebounded from early losses on Wednesday to finish flat even after data showed a build in U.S. crude inventories, reinforcing the view that oil prices are range bound, buoyed by expected OPEC production cuts while pressured by U.S. output growth.
U.S. crude futures for March delivery settled at $53.18 a barrel, unchanged on the day, after earlier dropping to as low as $52.56 per barrel.Benchmark Brent crude settled down 36 cents a barrel at $55.08.
