Market Roundup
• Fed chief says policy guidance beneficial but must be conditional.
• Fed should stand pat on interest rates for now-Bullard.
• Fed's Bostic sees gradual rate hikes to balance growth, inflation.
• U.S. Oct PPI ex-food/energy m/m, 0.2% forecast 0.4% previous.
• U.S. Redbook m/m, -1.2%, -1.0% previous.
• U.S. Redbook y/y, 2.3%, 2.6% previous.
• Top central bankers vow to talk investors out of easy money.
• Fifth NAFTA round reaches Mexico under shadow of U.S. tax reform.
• Sessions says he now recalls campaign meeting where Russia discussed.
• Venezuela says debt refinancing underway, S&P calls selective default.
• Eurozone growth, eclipsing U.S. economy, set to be best in decade.
• German economy powers on with trade, investments driving growth.
• Steady UK inflation leaves question mark over BoE rate action.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Q3 GDP q/q, 0.3% forecast, 0.6% previous
• 23:50 Japan Q3 GDP q/q annualised, 1.3% R forecast, 2.5% previous
• 23:50 Japan Q3 GDP capital expenditure, 0.3% forecast, 0.5% previous
• 00:30 Australia Nov Consumer sentiment, 3.6% previous
• 00:30 Australia Q3 Wage price index q/q, 0.7% forecast, 0.5% previous
• 00:30 Australia Q3 Wage price index y/y, 2.2% forecast, 1.9% previous
Looking Ahead - Events, Other Releases (GMT)
• 08:00 Chicago Fed President Charles Evans speaks in London
• 10:00 ECB's Praet and Denmarks Nationalbank governor Lars Rohde speak in Frankfurt
• 12:00 BoE Chief Economist Haldane speaks in Frankfurt
• 13:00 BoE Deputy Gov Ben Broadbent speaks in London
• 21:00 Boston Fed President Eric Rosengren speaks in Boston
Currency Summaries
EUR/USD is likely to find support at 1.1740 levels and currently trading at 1.1797 levels. The pair has made session high at 1.1804 and hit lows at 1.1742 levels. The euro rose against the greenback on Tuesday and was on track for its largest percentage gain in more than two months, after data showed Germany's economy shifted into a higher gear in the third quarter. The euro was up 1.06 percent at $1.1791, set for its largest one-day percentage gain against the greenback since Sept. 7. Germany's seasonally adjusted gross domestic product (GDP) rose by 0.8 percent on the quarter, compared forecast of 0.6 percent. In a further positive sign for Europe's biggest economy, the ZEW institute said investor morale improved in November and prospects for the economy remained "encouragingly positive. “Germany helped the eurozone economy expand by 2.5 percent in the September quarter compared with the same period in 2016, and more than the United States, data showed on Tuesday. The euro zone's annual economic growth rate outstripped that of the United States in the third quarter, setting up 2017 as the best year for the currency area since financial markets crashed a decade ago. The dollar index, which tracks the greenback against six major currencies, was down 0.74 percent at 93.82. The index was little changed after data showed U.S. producer prices rose more than expected in October.
GBP/USD is supported in the range of 1.3070 levels and currently trading at 1.3170 levels. It reached session high at 1.3185 and dropped to session low at 1.3095 levels. Sterling firmed against the dollar on Tuesday as uncertainty over the fate of a U.S. tax cut prompted investors to sell the dollar. Worries about Republican tax plans and the economy's ability to deal with more interest rate hikes dented appetite for assets perceived as risky. On Monday, Congressional Republicans pushed ahead with a proposed U.S. tax code overhaul, but risks lay ahead with major intra-party disputes unsettled. A failed tax overhaul would hit risk appetite and benefit safe haven assets. Sterling initially fell against the dollar, by 1930 GMT it had recovered to $1.3168, up 0.1 percent on the day, as the greenback weakened broadly. On the data front, British inflation held at its highest level in five-and-a-half years in October, and wrong-footed expectations from the Bank of England and other economists that it would hit a new peak. Consumer price inflation held at an annual rate of 3.0 percent in October, the Office for National Statistics said, below economists' average expectation in a poll for a 3.1 percent annual rise. Tuesday's figures are likely to reinforce doubts among economists about the wisdom of the BoE's decision to raise rates at a time when the economy is sluggish, especially as the effect of last year's Brexit vote on import prices was already at its high point.
USD/CAD is supported at 1.2689 levels and is trading at 1.2728 levels. It has made session high at 1.2772 and lows at 1.2702 levels. The Canadian dollar strengthened against its U.S. counterpart on Tuesday as the greenback broadly fell, while investors turned their attention to the resumption of NAFTA renegotiations later this week. The U.S. dollar retreated against a basket of major currencies after strong German economic growth data drove the euro to a three-week high. U.S., Canadian and Mexican negotiators hope to make modest progress in the next round of North American Free Trade Agreement talks in Mexico City this week. NAFTA working groups are due to begin meeting on Wednesday. On Friday, talks will formally get underway through Nov. 21. The gain for the Canadian dollar came despite the third straight day of declining prices of oil, one of Canada's major exports. The Canadian dollar is unlikely to recapture its tight link with the price of oil even as the interest rate outlook settles, given that crude trades are far removed from levels needed to affect investment in Canada's energy sector. The Canadian dollar was trading at C$1.2733 to the greenback, or 78.67 U.S. cents, up 0.2 percent. The currency's strongest level of the session was C$1.2701, while it touched its weakest since last Wednesday at C$1.2771.
AUD/USD is supported around 0.7608 levels and currently trading at 0.7635 levels. It hit session high at 0.7642 and made session lows at 0.7610 levels. The Australian dollar crept away from four-month lows on Tuesday as a surprisingly strong survey of business activity at home helped salve the sting from disappointing Chinese data. The Aussie dollar nudged up to $0.7630, from a trough of $0.7609, though the technical background remained bearish following the initial break of support around $0.7625/30 overnight. It got a helping hand when the latest survey of businesses from NAB showed them enjoying the best conditions in two decades with sales and profits surging in October. The upbeat outcome will be a comfort to the Reserve Bank of Australia (RBA), which last week reaffirmed its outlook for an acceleration in economic growth even as it trimmed forecasts for inflation. The survey also helped offset data on Chinese retail sales and industrial production that missed market forecasts, suggesting the economy may be loosing some steam as Beijing cracks down on debt risks and pollution. Investors often use the Aussie as a liquid proxy for Chinese wagers, reflecting in part the Asian giant's position as Australia's single biggest export customer.
Equities Recap
European shares remained stuck at seven-week lows on Tuesday as a fall among commodities-related sectors and telecoms firm Altice outweighed a buoyant tech sector.
UK's benchmark FTSE 100 closed flat, the pan-European FTSEurofirst 300 ended the day down by 0.66 percent, Germany's Dax ended down by 0.3 percent, France’s CAC finished the day down by 0.5 percent.
U.S. stock indexes were lower on Tuesday after GE shares plunged for the second straight day and a drop in oil prices hit energy stocks.
Dow Jones closed down by 0.13 percent, S&P 500 ended down by 0.23 percent, Nasdaq finished the day down by 0.30 percent.
Treasuries Recap
U.S. Treasury two-year note yields climbed to a nine-year peak on Tuesday while those on the long-dated debt fell as the yield curve flattened for a second straight day and investors braced for the next tightening by the Federal Reserve in December.
The 10-year Treasury yield was at 2.378 percent, down from 2.4 percent late on Monday. Earlier in the global session, U.S. 10-year yields hit 2.414, the highest since late October.
The U.S. two-year yield hit a nine-year peak just shy of 1.7 percent, up from Monday's 1.687 percent.
U.S. 30-year bond yields, on the other hand, fell to 2.841 percent, from 2.869 percent on Monday.
Commodities Recap
Gold rose slightly on Tuesday, as a weakening U.S. dollar and sluggish stock market helped pull the precious metal off a one-week low hit in early trade, while traders also said uncertainty over the fate of a U.S. tax cut prompted some safe-haven buying of gold.
Spot gold was up 0.34 percent at $1,281.94 per ounce by 1:50 p.m. EST (1850 GMT), bouncing off a one-week low of $1,270.56 hit in earlier trade. U.S. gold futures for December delivery settled up $4, or 0.3 percent, at $1,282.90 per ounce.
Oil prices fell 2 percent on Tuesday, headed for a third straight daily decline, on forecasts for rising U.S. crude output and a gloomier outlook for global demand growth in a report from the International Energy Agency (IEA).
Brent futures fell 95 cents, or 1.5 percent, to settle at $62.21 a barrel, while U.S. West Texas Intermediate (WTI) crude lost $1.06, or 1.9 percent, to end at $55.70, the lowest close for both contracts since Nov. 3.
