Market Roundup
• Every Fed policymaker was on board for Sept rate hike –minutes.
• Policymakers cited economic, policy divergence with other countries as a downside risk as it could further strengthen the U.S. dollar.
• US Sep Housing Starts Number, 1.201M, 1.220M forecast, 1.282M previous, 1.268M revised.
• US Sep House Starts m/m Change, -5.3%, 9.2% previous, 7.1% revised.
• US Sep Building Permits Number, 1.241M, 1.278M forecast, 1.249M previous.
• US Sep Building Permits Change, m/m, -0.6%, -4.1% previous.
• US 12 Oct w/e Mortgage Market Index, 322.1, 346.7 previous.
• US 12 Oct w/e MBA Purchase Index, 224, 238 previous.
• US 12 Oct w/e MBA 30-Yr Mortgage Rate, 5.10%, 5.05% previous.
• Trump turns attention to budget cutting after slashing taxes.
• White House's Kudlow says Trump not demanding Fed policy change.
• Brief hiatus in U.S.-China trade talks, commerce secretary tells CNBC.
• CA Aug Manufacturing Sales m/m, -0.4%, -0.6% forecast, 0.9% prev, 1.2% revised.
• UK's May had nothing new on Brexit for summit, but tone calm -EU’s Tajani.
• Brexit deal will need clear approval by UK parliament –Raab.
• EU likely to reject Italy's budget, but no decision yet – Oettinger.
Looking Ahead - Economic Data (GMT)
• 17 Oct 23:50 Japan 13 Oct w/e Foreign Bond Investment, -200.5B previous
• 17 Oct 23:50 Japan Sep Exports y/y, 1.9% forecast, 6.6% previous
• 17 Oct 23:50 Japan Sep Imports y/y, 13.7% forecast, 15.4% previous
• 17 Oct 23:50 Japan Trade Balance Total Yen, -50.0B forecast, -444.6B previous, 438.4B revised
• 18 Oct 00:30 Australia Sep Employment, 15K forecast, 44k previous
• 18 Oct 00:30 Australia Sep Participation Rate, 65.7% forecast, 65.7% previous
• 18 Oct 00:30 Australia Sep Unemployment Rate, 5.3% forecast, 5.3% previous
Looking Ahead - Events, Other Releases (GMT)
• N/A ECB's Benoit Coeure and Mario Draghi participate in the Euro Summit in Brussels
• 08:00 Special event held to mark the launch of the Series VIII 50-krone and 500-krone banknotes in Horten, Norway
• 08:00 ECB's Ewald Nowotny speaks on "the future of financing and currencies"
• 13:15 St. Louis Fed's James Bullard gives presentation on the U.S. economy and monetary policy before the Economic Club of Memphis in Memphis
• 13:30 Latvia's Dana Reizniece-Ozola, Lithuania’s Finance Minister Migle Tuskiene and Estonia's Deputy Secretary-General for Financial Policy Marten Ross speak alongside European Commission's Valdis Dombrovskis on financial stability and capital markets in the Baltics
• 16:15 Fed's Randal Quarles speaks before an Economic Club of New York luncheon in New York
Currency Summaries
EUR/USD is likely to find support at 1.1476 levels and currently trading at 1.1499 levels. The pair has made session high at 1.1547 and hit lows at 1.1499 levels. The euro declined against US dollar on Wednesday after minutes from the Federal Reserve’s September meeting affirmed expectations that the U.S. central bank is likely to continue raising interest rates. Every Federal Reserve policymaker backed raising interest rates last month in a meeting where they also generally agreed borrowing costs were set to rise further, according to minutes from the meeting released on Wednesday. The hike was the third of this year and the display of unanimity at the Sept. 25-26 meeting could bolster expectations the central bank's rate-setting committee will raise rates again in December. The minutes also showed some members seeing further indications of strength in the U.S. economy. Interest rate futures are now pricing in a 78 percent likelihood that the U.S. central bank raises rates in December for the fourth time this year, up from 77 percent before the minutes, according to the CME Group's FedWatch Tool. The dollar index hit session highs after the minutes were released, although the bulk of Wednesday’s rally came before the news. The euro fell 0.64 percent to $1.1499.
GBP/USD is supported in the range of 1.3080 levels and currently trading at 1.3099 levels. It reached session high at 1.3146 and dropped to session low at 1.3094 levels. Sterling dipped against the dollar on Wednesday after data showed inflation fell more than expected in September and before a European Union summit at which Britain will try to unblock stalled negotiations for a Brexit deal. Economic data had briefly redirected traders' attention towards the British economy and away from Brexit this week after figures on Tuesday showed the strongest wage growth for workers in a decade. But weaker-than-expected consumer price inflation, which came in at an annual rate of 2.4 percent in September versus forecasts of 2.6 percent, pushed down a pound already weakened by a BBC report that Britain would not seek to extend the Brexit transition period. The pound has largely shrugged off deterioration in the Brexit talks in recent days and remained calm, but traders say it remains at the mercy of the negotiations. The pound, trading down 0.3 percent at close to $1.3150 before the data was released, fell further and hit a day's low of $1.31, down more than half a percent on the day .Against the euro, sterling dropped to 88.06 pence, down 0.3 percent on the day before recovering as a broad dollar rally hit demand for euros.
USD/CAD is supported at 1.2913 levels and is trading at 1.3021 levels. It has made session high at 1.3023 and lows at 1.2973 levels. The Canadian dollar lost ground against its U.S. counterpart on Wednesday as downbeat domestic data and strong greenback weighed on Canadian dollar. Canadian factory sales fell by 0.4 percent in August from July on lower motor vehicle sales as a result of atypical assembly plant shutdowns, Statistics Canada said. Analysts had forecast a decrease of 0.6 percent. The U.S. dollar rose to a one-week high against a basket of major currencies. Minutes of the Fed's September meeting, due for release later on Wednesday, could help guide expectations for the number of additional interest rate hikes to expect from the central bank over the coming months. The Bank of Canada has also been hiking interest rates. Economists expect the central bank to hike next week for the fifth time since July 2017. They say that the country's economy will continue to grow faster than its potential over the coming quarters as U.S. fiscal stimulus boosts demand for its exports. The Canadian dollar was last trading 0.4 percent lower at 1.2986 to the greenback, or 77.01 U.S. cents. The currency, which touched on Tuesday its strongest level since Oct. 5 at 1.2915, traded in a range of 1.2933 to 1.2989.
USD/JPY is supported around 111.60 levels and currently trading at 112.66 levels. It peaked to hit session high at 112.70 and made session lows at 112.00 levels. The dollar strengthened against the Japanese yen on Wednesday as greenback firmed against a basket of peers after Federal Reserve's minutes on its meeting last month showed all policy makers agreed to raise key interest rates for a third time in 2018 with many open to further rate hikes. Fed officials have signaled they may increase short-term rates at their Dec. 18-19 meeting, which would lift their target range on key borrowing costs to 2.25-2.50 percent. U.S. homebuilding dropped more than expected in September as construction activity in the South fell by the most in nearly three years, likely held down by Hurricane Florence. Other details of the report published by the Commerce Department on Wednesday were also soft. On the data front, Building permits declined to their lowest level in almost 1-1/2 years and homebuilding completions were the fewest since November 2017.The housing market, which has been a weak spot in a robust economy, has been hobbled by an acute shortage of properties for sale, higher home prices and rising mortgage rates. Housing starts fell 5.3 percent to a seasonally adjusted annual rate of 1.201 million units last month. Data for August was revised down to show starts rising to a rate of 1.268 million units instead of the previously reported pace of 1.282 million units.
Equities Recap
European shares lost some ground on Wednesday as upbeat results from the technology sector failed to lift investor morale in a corporate earnings season seen as key if bourses on the continent are to end 2018 in positive territory.
UK's benchmark FTSE 100 closed down by 0. 2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.34 percent, Germany's Dax ended down by 0.4 percent, France’s CAC finished the day down by 0.5 percent.
Wall Street's major indexes edged lower after a choppy session on Wednesday after the Federal Reserve showed broad agreement on the need to raise borrowing costs further, cementing investor concerns that had helped cause a major sell-off the week before.
Dow Jones closed down by 0.35 percent, S&P 500 ended down by 0.03 percent, Nasdaq finished the day down by 0.04 percent.
Treasuries Recap
U.S. Treasury yields rose on Wednesday as the Federal Reserve's minutes on its meeting last month showed all policy makers agreed to raise key interest rates for a third time in 2018 with many open to further rate hikes.
The benchmark 10-year Treasury yield was 3.184 percent, up near 3 basis points from late Tuesday. The 30-year yield was 3.354 percent, up 2 basis points.
Commodities Recap
Gold prices edged lower on Wednesday as the U.S. dollar strengthened after minutes from the Federal Reserve's September meeting cemented expectations for more interest rate hikes by the U.S. central bank.
Spot gold was down 0.1 percent at $1,222.56 per ounce at 3:09 p.m. EDT (1909 GMT).U.S. gold futures settled down $3.6, or 0.29 percent, at $1,227.4 an ounce.
Oil prices fell on Wednesday, with U.S. futures settling below $70 a barrel for the first time in a month, after U.S. crude stockpiles rose 6.5 million barrels, almost triple what analysts had forecast, while exports dropped.
U.S. crude oil slumped $2.17, or 3 percent, to settle at $69.75 a barrel.
