Market Roundup
• US data signals strengthening domestic demand & inflation, Jan retail sales +0.4% v forecast 0.1%, core +0.4 as well.
• US Jan Industrial Output -0.3% v R0% forecast, 0.6% previous, Capacity Utilization 75.3% v 75.5% forecast, 75.6% previous, Manufacturing Output steady at 0.2%.
• US Business inventories 0.4% v 0.4% forecast, 0.8% previous, retail inventories 0.4% v 0.2% previous.
• Fed’s Yellen: Fed quite close to achieving labor market objectives, decision to reduce balance sheet depends on how strong the economy is and what risks it faces.
• Fed’s Yellen: No unique level of how high rates must be before Fed starts reducing balance sheet.
• Fed’s Harker: Three rate hikes fitting for 2017 as economy back to full health.
• Fed’s Rosengren: Market skepticism will not delay Fed rate hikes.
• Yields jump after data shows surging consumer prices, US 2-yr yield highest since Dec 28, Bund yields up as well.
• EU preparing China summit in message to Trump, China/EU to pull closer if US turns inward, protectionist- sources.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e -126.6b-previous
• 23:50 Japan Foreign Invest JP Stock w/e -248.0b- previous
• 00:30 Australia Employment* Jan forecast 10.0k, 13.5k- previous
• 00:30 Australia Full Time Employment* Jan 9.3k- previous
• 00:30 Australia Participation Rate* Jan forecast 64.7%, 64.70%- previous
• 00:30 Australia Unemployment Rate* Jan forecast 5.8%, 5.80%- previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.0510 levels and currently trading at 1.0591 levels. The pair has made session high at 1.0612 and hit lows at 1.0517 levels. Euro declined against the dollar on Wednesday as the euro was weighted down after upbeat US economic data and on uncertainties about France's presidential election and Greek bailout talks. U.S. retail sales rose more than expected in January, while other data showed consumer prices recorded their biggest increase in nearly four years last month and manufacturing output steadily rising. Federal Reserve Chair Janet Yellen, in testimony before the House Financial Services Committee, stood by the stance she took on Tuesday that the U.S. central bank was on track to raise interest rates at an upcoming policy meeting. The U.S. dollar reversed course after touching a one-month high in the wake of the U.S. data and was last down 0.06 percent against a basket of major currencies. The greenback had advanced for eleven straight session before weakening on Wednesday. The euro rebounded from an one-month low against the greenback, while the dollar hovered near a two-week high versus the yen, last at 114.08.
GBP/USD is supported in the range of 1.2346 levels and currently trading at 1.2451 levels. It reached session high at 1.2479 and dropped to session low at 1.2382 levels. Sterling initially declined against the U.S. dollar but rebounded strongly after investors took profits on dollar’s initial rally after U.S. data showed robust growth in retail sales and consumer prices in January. After falling as low as $1.2386 after the U.S. numbers, the pound recovered ground to trade just 0.1 percent lower on the day at $1.2457 and 84.93 pence per euro respectively. UK labour data released early in the European session had knocked sterling back, showing a slowing of wage growth in the fourth quarter that was bad news for British consumers facing a surge in inflation in the months ahead. The UK jobs report showed a 2.6 percent rise in average weekly earnings year-on-year in the fourth quarter of 2016, below a consensus forecast of 2.8 percent. Unemployment fell and the number of people in work rose by 37,000 but the slowdown in wages growth spoke to growing concerns about how much consumers will support economic growth. Investors will now look to British retail data due on Friday to see how sentiment is holding up and whether an expected weakness in December was temporary or the start of a weakening trend for consumer spending ahead.
USD/CAD is supported at 1.3000 levels and is trading at 1.3081 levels. It has made session high at 1.3188 and lows at 1.3065 levels. The Canadian dollar weakened slightly against its U.S. counterpart on Wednesday as a drop in oil prices and gains for the greenback offset stronger-than-expected domestic manufacturing data. Canadian manufacturing sales jumped for the second month in a row in December as firms sold higher amounts of transportation equipment and petroleum products at the end of the year, data from Statistics Canada showed. The loonie got a boost on Monday after U.S. President Donald Trump said he only wants to tweak trade ties with Canada. Still, Trump's pledge to renegotiate the North American Free Trade Agreement (NAFTA) to focus on Mexico is almost impossible and Canada will not emerge unscathed. U.S. crude edged down 0.04 percent at $53.18 and Brent shed 0.23 percent to $55.84 a barrel as record-high U.S. crude and gasoline inventories fed concerns about a glut. The Canadian dollar traded at C$1.3074 to the greenback, or 76.30 U.S. cents, weaker than Tuesday's close of C$1.3070, or 76.51 U.S. cents.
AUD/USD is supported around 0.7616 levels and currently trading at 0.7706 levels. It hit session high at 0.7708 and made session lows at 0.7635 levels. The Australian dollar rose against the greenback on Wednesday after dollar reversed course as investors took profits on dollars initial rally and Federal Reserve’s chief Yellen offered no additional insight on the timing of the central bank's next rate hike. The Australian dollar broke above 77 U.S. cents for the first time in 3-months and was last trading at 0.7716. The Aussie has traded in a sideways direction since the beginning of the month. Meanwhile, Aussie kept its winning streak elsewhere, rising to a two-year high on the euro as traders pressured the single currency on uncertainties about France's presidential election and Greek bailout talks. Traders await Australia's employment report for January due Thursday. Data so far has shown jobs growth skewed toward part-time work while unemployment is near a 6-month high. Some economist believe the slack in the labour market may force the Reserve Bank of Australia (RBA) to ease again, after cutting interest rates twice last year. The RBA has a neutral policy bias.
Equities Recap
European shares ended higher on Wednesday in another session dominated by earnings, as French lender Credit Agricole led banking stocks to a three-week high.
UK's benchmark FTSE 100 closed up by 0.6 percent, the pan-European FTSEurofirst 300 ended the day up by 0.51 percent, Germany's Dax ended up by 0.3 percent, France’s CAC finished the day up by 0.7 percent.
Wall Street pushed further into record-high territory on Wednesday, with the S&P 500 notching a seven-session winning streak, helped by a round of robust economic data and ongoing optimism that President Donald Trump will cut corporate taxes.
Dow Jones closed up by 0.52 percent, S&P 500 ended up 0.49 percent, Nasdaq finished the day up by 0.63 percent.
Treasuries Recap
Benchmark U.S. Treasury yields rose to 2-1/2-week highs on Wednesday after data showing surging consumer price inflation in January bolstered expectations that the Federal Reserve is closer to raising interest rates.
Benchmark 10-year notes were last down 11/32 in price to yield 2.51 percent. Those yields earlier rose as high as 2.52 percent, the highest since Jan. 27.
Commodities Recap
Gold rose as the dollar came off its highs on Wednesday, shrugging off earlier pressure from stronger-than-forecast U.S. inflation and retail sales that added to expectations for near-term U.S. interest rate rises.
Spot gold was up 0.2 percent at $1,231.06 an ounce by 3:14 p.m. EST (2014 GMT).U.S. gold futures for April delivery settled up 0.6 percent at $1,233.10.
Oil prices eased slightly on Wednesday in choppy trade as record-high U.S. crude and gasoline inventories fed concerns about a global glut.
Prices had whipsawed after the EIA data, but at settlement, Brent futures ended down 22 cents, or 0.4 percent, at $55.75 a barrel and U.S. crude fell 9 cents, or 0.2 percent, to $53.11 a barrel.
