Market Roundup
• Fed policymakers held wide-ranging debates over inflation outlook, stock prices and financial stability - July 25-26 FOMC minutes.
• Some members said further rate hikes should wait until there were signs inflation would rise to Fed's 2% target.
• Policymakers had differing views on whether high stock prices were of consequence for monetary policy.
• Fed's Mester: US rate hikes should continue despite weak inflation.
• US Building Permits: Number Jul 1.223M, 1.250M forecast, 1.275M previous.
• US Housing Starts: Number Jul 1.155M, 1.220M forecast, 1.231M previous.
• US economy seen growing 3.8% in Q3 vs 3.7% estimate Aug 15 - Atlanta Fed.
• US MBA 30-Yr Mortgage Rate w/e 4.12%, 4.14% previous.
• US takes tough lines as NAFTA negotiations begin.
• Trump disbands business councils after CEOs exit in protest.
• Trump praises N.Korea's Kim for 'wise' decision on Guam.
• UK unemployment falls to lowest since 1975, wage growth still muted.
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand Producer Prices-Inputs QQ Q2 0.8% previous
• 22:45 New Zealand PPI Output QQ Q2 1.4% previous
• 23:50 Japan Exports YY Jul 13.6% forecast, 9.7 % previous
• 23:50 Japan Imports YY Jul 17.0% forecast, 15.5 % previous
• 23:50 Japan Trade balance Total YEN Jul 392.0B forecast, 439.9B previous
• 01:30 Australia Employment Jul 20.0k forecast, 14.0k previous
• 01:30 Australia Unemployment Rate Jul 5.6% forecast, 5.6% previous
Looking Ahead - Events, Other Releases (GMT)
• 17:00 Dallas Fed’s Kaplan participates in a Q&A session at the Lubbock Chamber of Commerce-Texas.
• 17:45 Minneapolis Fed’s Kashkari participates in a Q&A session at the Edina Rotary Club-Minnesota.
Currency Summaries
EUR/USD is likely to find support at 1.1680 levels and currently trading at 1.1767 levels. The pair has made session high at 1.1777 and hit lows at 1.1680 levels. Euro jumped higher against dollar on Wednesday as the dollar eased after the release of the minutes from July's meeting of the Federal Open Markets Committee that showed Federal Reserve policymakers appeared increasingly wary about recent weak inflation and some called for a halt to further interest rate hikes until it was clear the trend was transitory, according to the minutes of the central bank's last policy meeting. In the minutes, released on Wednesday, policymakers had a lengthy discussion about a recent streak of soft inflation readings. Inflation has remained below the central bank's 2 percent target for more than five years. The Fed has raised its benchmark overnight lending rate twice this year compared to once in each of the previous two years amid low unemployment and continued moderate economic growth. It currently forecasts one more rate rise before the end of this year. The dollar sank to session lows against the yen, euro, Swiss franc and a number of other currencies after the minutes were released. The euro was last up 0.25 percent against the dollar at $1.1763.
GBP/USD is supported in the range of 1.2838 levels and currently trading at 1.2885 levels. It reached session high at 1.2893 and dropped to session low at 1.2840 levels. Sterling rose against the dollar on Wednesday after dollar turned lower after the release of the minutes from Federal Reserve's July meeting at which policymakers voted unanimously to keep U.S. interest rates unchanged. Sterling was also supported by upbeat data which showed UK wages rose faster than expected in the three months to June, closing the gap to headline inflation. Britain's labour market bucked tepid economic growth in the second quarter as the unemployment rate unexpectedly fell to its lowest since 1975, official data showed on Wednesday. The unemployment rate in the three months to the end of June fell to 4.4 percent, against the average forecast for it to hold at 4.5 percent in a poll of economists. But the figures on wage growth showed the challenge facing Prime Minister Theresa May and her government, with households feeling the strain of rising prices since last year's Brexit vote.The Office for National Statistics said workers' total earnings including bonuses rose by an annual 2.1 percent in the three months to June, compared with 1.9 percent in the period to May, but this was boosted by bonus payments in the financial sector. British pound rose after late dip in dollar, it was last trading at $1.2894, 0.20 percent higher on the day.
USD/CAD is supported at 1.2593 levels and is trading at 1.2634 levels. It has made session high at 1.2730 and lows at 1.2630 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday as dollar slipped sharply after the release of the minutes from Federal Reserve's July meeting, while investors awaited the start of negotiations to modernize the North American Free Trade Agreement. The United States, Canada and Mexico are due to kick off NAFTA talks later in the day. The biggest uncertainty is whether a deal can pass President Donald Trump's "America First" test. On Tuesday, the loonie hit its lowest level since July 12 at C$1.2778, pressured by broader gains for the greenback as North Korea tensions eased and data showed a jump in U.S. retail sales. Oil prices fell even though U.S. crude stockpiles declined by the most in a year, as the government also reported that domestic crude production was edging higher. U.S. crude fell 1.49 percent to $46.84 per barrel and Brent was last at $50.34, down 0.91 percent on the day. The Canadian dollar was trading at C$1.2621 to the greenback, or, up 1.06 percent.The currency traded in a range of C$1.2732 to C$1.2620.
USD/JPY is supported around 109.93 levels and currently trading at 110.19 levels. It peaked to hit session high at 110.93 and made session lows at 110.00 levels. The U.S. dollar weakened against the Japanese yen on Wednesday after the release of minutes from the Federal Reserve's July meeting that showed the policymakers had grown increasingly worried about weak U.S. inflation readings, suggesting that the Fed may hold off on raising interest rates. Fed policymakers spoke at length at the meeting about a recent streak of soft inflation readings, according to the minutes. Inflation has remained below the central bank's 2 percent target for more than five years. Fed funds futures prices show traders see just a 42 percent chance of an interest rate increase by year-end and now see a marginal chance of a rate cut, according to CME Group's FedWatch tool. The greenback had been under pressure prior to the minutes' release as an exodus from and eventual disbanding of U.S. President Donald Trump's manufacturing council and strategic policy forum pushed the dollar from its previous gains. The dollar fell to session lows against the Japanese yen. The dollar index, which tracks the greenback against six major currencies, also hit a session low at 109.99.
Equities Recap
Miners and oil stocks led Europe's major share indexes higher on Wednesday on the back of higher metals prices and improved euro zone GDP figures.
UK's benchmark FTSE 100 closed up by 0.7 percent, the pan-European FTSEurofirst 300 ended the day up by 0.70 percent, Germany's Dax ended up by 0.7 percent, France’s CAC finished the day up by 0.8 percent.
U.S. stocks ended up slightly on Wednesday, but off the day's highs, as worries mounted over President Donald Trump's agenda and minutes from the latest Federal Reserve meeting suggested policymakers are worried about weak inflation.
Dow Jones closed up by 0.12 percent, S&P 500 ended up 0.14 percent, Nasdaq finished the day up by 0.19 percent.
Treasuries Recap
U.S. Treasury yields fell on Wednesday, with benchmark yields retreating from one-week highs as U.S. President Donald Trump's dissolving of two business advisory groups and the Federal Reserve's record of its July policy meeting raised economic worries.
The benchmark 10-year Treasury note yield was 2.227 percent, down 4 basis points from late Tuesday, while the 30-year bond yield was 2.811 percent, nearly 3 basis point lower from Tuesday's close.
Commodities Recap
Oil prices fell more than 1 percent on Wednesday even though U.S. crude stockpiles declined by the most in a year, as data suggesting domestic production was edging higher stoked worries about the global crude glut.
Brent crude futures settled down 53 cents, or about 1 percent, at $50.27 per barrel. U.S. West Texas Intermediate (WTI) crude futures settled at $46.78 a barrel, down 77 cents, or 1.6 percent.
Gold rose about 1 percent on Wednesday, shaking off two days of losses, as the dollar edged lower after the release of the minutes from Federal Reserve's July meeting at which policymakers voted unanimously to keep U.S. interest rates unchanged.
Spot gold was up 0.8 percent to $1,281.15 per ounce by 2:49 p.m. EDT (1849 GMT), after rising as much as 1 percent to a session high of $1,283.90.U.S. gold futures for December delivery rose 0.3 percent to settle at $1,282.90 an ounce.
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