Market Roundup
• US w/e ECRI Weekly Index, 147.2, 146.5 previous, 146.7 revised.
• US w/e ECRI Weekly Annualized, 3.5%, 3.4% previous.
• Dollar share of global FX reserves shrinks to smallest since 2014 –IMF.
• Trump demands border wall, visa changes as part of immigration fix.
• After Trump criticism, China denies selling oil illicitly to North Korea.
• Spanish PM calls for Catalan parliament to be formed on Jan. 17.
Looking Ahead - Economic Data (GMT)
• 31 Dec 01:00 China Dec NBS Non-Mfg PMI, 54.80 previous
• 31 Dec 01:00 China Dec NBS Manufacturing PMI, 51.60 forecast, 51.80 previous
• 1 Jan 22:30 Australia Dec AIG Manufacturing Index, 0.5% previous
• 2 Jan 01:45 China Dec caixin Mfg PMI Final, 50.60 forecast, 50.80 previous
Looking Ahead - Events, Other Releases (GMT)
• N/A Jan 1 Thomas Barkin begins his tenure as president of the Federal Reserve Bank of Richmond
Currency Summaries
EUR/USD is likely to find support at 1.1930 levels and currently trading at 1.2007 levels. The pair has made session high at 1.2028 and hit lows at 1.1982 levels. Euro strengthened against the dollar on Friday as the dollar eased as doubts over the durability of a pickup in U.S. economic growth in wake of last week's tax overhaul weighed on the greenback. The dollar slid toward its worst year since 2003, damaged by tensions over North Korea, the Russian scandal surrounding U.S. President Donald Trump's election campaign, and persistently low U.S. inflation. The greenback may lag further against its peers in 2018 as investors expected other major central banks to reduce their stimulus while the Federal Reserve has signalled it would raise interest rates further. Bets the European Central Bank might consider raising interest rates by the end of 2018 due to evidence of higher inflation and business activity in the euro have lifted the euro, which was poised for its best yearly performance versus the greenback in 14 years. The euro hit a three-month peak at $1.2013, bringing its annual gain to 14.1 percent. It was last up 0.68 percent at $1.2022.Euro's rally was a drag on the greenback in 2017. The index that tracks the dollar versus the euro and five other major currencies fell as low as 92.169, which the lowest since Sept. 22. It was on track for its steepest annual decline since 2003. The dollar index at a 14-year peak at the start of 2017 on hopes for U.S. President Donald Trump's pro-growth economic agenda. Barring the most dramatic rewrite of the U.S. tax code in 30 years enacted last week, Trump and Republican lawmakers have struggled to pass legislation.
GBP/USD is supported in the range of 1.3456 levels and currently trading at 1.3519 levels. It reached session high at 1.3542 and dropped to session low at 1.3485levels. Sterling strengthened against the dollar on Friday as the euro and sterling climbed, putting the greenback on track for an almost 10 percent fall over the year its worst showing since 2003.The dollar started 2017 on a high, with the index that tracks it against a basket of six major currencies hitting its strongest in 14 years on hopes that new U.S. president Donald Trump would implement pro-growth, pro-inflation measures. But it has fallen back on doubts about Trump's ability to push through those policies. And it has also lost out as growth has picked up outside the United States, with other countries' central banks moving towards tighter monetary policy, lessening the gap between the Federal Reserve and others. Yet even though the Fed delivered on its three promised hikes and a tax bill was signed into law last week, the currency has failed to benefit. Measured against its major peers the dollar has shed nearly 10 percent this year, putting it on track for its biggest annual loss since 2003. The dollar index fell 0.44 percent for the day. Among the winners have been emerging markets and the euro, which is ahead almost 14 percent for the year and has turned in its best annual performance since 2003.
USD/CAD is supported at 1.2500 levels and is trading at 1.2527 levels. It has made session high at 1.2563 and lows at 1.2511 levels. The Canadian dollar was little changed against the greenback on Friday as data showed bullish bets on the currency have been slashed, but the loonie posted a two-month high earlier in the session and scored its biggest yearly advance since 2009. Domestic data before the Christmas break, which showed acceleration in inflation and strength in retail sales, has helped underpin the loonie by increasing prospects of further interest rate hikes from the Bank of Canada. Money markets expect Canada's central bank to raise rates three times in 2018, which is more than is expected from the U.S. Federal Reserve. U.S. oil prices have rebounded to reach their highest since mid-2015. They were up 0.8 percent at $60.33 a barrel on Friday as an unexpected fall in American output and a decline in commercial crude inventories stoked buying. The loonie has climbed 7.3 percent in 2017, its second straight year of gains as Canada's economy recovered following a plunge in oil prices. The currency broke out on Thursday from a range roughly between 1.26 and 1.29 over the past two months. On Friday, it touched its strongest since Oct. 20 at C$1.2515. The Canadian dollar was nearly unchanged at C$1.2569 to the greenback or 79.56 U.S. cents. It touched its strongest level since Oct. 20 at C$1.2511.
AUD/USD is supported around 0.7784 levels and currently trading at 0.7812 levels. It hit session high at 0.7824 and made session lows at 0.7801 levels. The Australian dollar was on track for a third straight week of gains against the greenback on Friday, and its best annual performance in seven years, as optimism for global growth and strong commodity prices boosted Australian dollar. The Australian dollar was was last trading at $0.7806, having touched a 10-week top of $0.7823. That left the commodity currency with gains of more than 8 percent for the year, its best showing since 2010.That performance would be a surprise to many given that a global poll of analysts at the start of the year found the Aussie would 2017 at 72 U.S. cents. Surprising resilience in Chinese demand for commodities, including iron ore, Australia's biggest export earner -- has certainly helped. The mineral currently fetches more than $70 a tonne after having been down around $50 a few months ago. Industrial bellwether copper was also on a tear, hitting a four-year peak to be up 30 percent for 2017.Yet some wonder how long the Aussie could defy gravity given official U.S. interest rates were almost certain to move above Australia's next year.
Equities Recap
European stocks inched lower on Friday, the final trading day of 2017, scoring their strongest year of gains since 2013 thanks to a surge among tech stocks and a robust resources sector.
UK's benchmark FTSE 100 closed up by 0.9 percent, the pan-European FTSEurofirst 300 ended the day down by 0.09 percent, France’s CAC finished the day down by 0.32 percent.
There were no fireworks on Wall Street for the last trading day of the year, as U.S. stocks closed out their best year since 2013 on a down note, with losses in technology and financial stocks keeping equities in negative territory for the session.
Dow Jones closed down by 0.38 percent, S&P 500 ended down 0.46 percent, Nasdaq finished the day down by 0.65 percent.
Treasuries Recap
Year-end demand helped U.S. Treasuries prices end the year stronger on Friday, before a heavy week of data, though volumes were light before Monday's New Year's Day holiday.
Five-year note yields posted their largest annual increase since 2013 with a 15 percent rise to 2.21 percent.
Two-year note yields have risen 58 percent during the year, their largest increase since 2014, to 1.89 percent.
The yield curve between two-year and 10-year notes fell to 50 basis points on Wednesday, the flattest level since Oct. 2007.
Commodities Recap
Gold extended its rally to a three-month high on Friday, leaping toward its biggest one-year rise in seven years as a wilting U.S. dollar, political tensions and receding concerns over the impact of U.S. interest rate hikes fed into its rally.
Spot gold prices were up 0.67 percent at $1,303.37 per ounce by 2:05 p.m. EST (1905 GMT), poised to finish 2017 up 13 percent.
Benchmark U.S. gold futures settled up $12.1, or 0.93 percent, at $1,309.30 per ounce, finishing the year 12 percent higher.
U.S. oil prices closed above $60 a barrel on the final trading day of the year, the first time since mid-2015, as the commodity ended 2017 with a 12 percent gain spurred by strong demand and declining global inventories.
U.S. West Texas Intermediate (WTI) crude futures settled at $60.42, the highest close since June 2015. Brent crude futures were last up 45 cents at $66.62 a barrel at 1932 GMT. Brent broke through $67 this week for the first time since May 2015.
