Market Roundup
• Fed's Powell says jobs market not too tight, repeats case for gradual rate hikes.
• US May Existing Home Sales, 5.43 mln, 5.52 mln forecast, 5.46 mln previous.
• US May Exist. Home Sales % Chg, -0.4%, 1.5% forecast, -2.5% previous.
• US Q1 Current Account, -124.1 bln, -129.0 bln forecast, -128.2 bln previous.
• US w/e MBA Mortgage Applications, 5.1%, -1.5% previous.
• US w/e Mortgage Market Index, 384.1, 365.3 previous.
• US w/e MBA Purchase Index, 259.6, 249.0 previous.
• Iran signals compromise for modest rise in OPEC oil output.
• EU to impose duties on U.S. imports Friday after Trump tariffs.
• U.S. Commerce Dept probing 'profiteering' in steel after tariffs –Ross.
• German finance minister defends euro reforms against conservative attack.
• IMF board approves $50 bln financing deal for Argentina.
• May faces down pro-EU rebel lawmakers to win Brexit vote.
Looking Ahead - Economic Data (GMT)
• 20 Jun 22:45 New Zealand Q1 GDP Production QQ, 0.5% forecast, 0.6% previous
• 20 Jun 22:45 New Zealand Q1 GDP - Anni-Avg, Prod-Bas, 2.8% forecast, 2.9% previous
• 20 Jun 22:45 New Zealand Q1 GDP - Annual, 2.7% forecast, 2.9% previous
• 20 Jun 22:45 New Zealand Q1 GDP Expenditure QQ, 0.1% forecast, 0.4% previous
• 20 Jun 23:50 Japan w/e Foreign Bond Investment, -488.5 bln previous
• 20 Jun 23:50 Japan w/e Foreign Invest JP Stock, -108.5 bln previous
Looking Ahead - Events, Other Releases (GMT)
• N/A Participation by the ECB President Mario Draghi and ECB executive board member Benoit Coeure in the Eurogroup meeting in Luxembourg
• 07:30 Swiss National Bank (SNB) Monetary policy assessment with news conference, in Bern
• 07:15 Speech by Member of the Board of the Deutsche Bundesbank Joachim Wuermeling, title: "Financial markets in the name of monetary policy normalization" at the Conference of the Ministry of Economic Affairs Baden-Wurttemberg, in Stuttgart, Germany
• 08:00 Norway Central Bank holds Announcement of the Executive Board's interest rate decision and publication of Monetary Policy followed by press conference, in Oslo
• 09:45 Keynote Speech by Member of the Board of the Deutsche Bundesbank Jens Weidmann at Bank of France and Bundesbank joint conference "Monetary policy challenges for the euro after teenage" in Paris
• 11:00 Bank of England announces rate decision and publishes the minutes of the meeting, after the rate decision, in London
• 20:15 Governor of the Bank of England, Mark Carney: Speech at the Lord Mayor’s Bankers and Merchants Dinner, Mansion House, London
Currency Summaries
EUR/USD is likely to find support at 1.1507 levels and currently trading at 1.1581 levels. The pair has made session high at 1.1600 and hit lows at 1.1585 levels. The euro remained slightly lower against the dollar on Wednesday as European Bank President Mario Draghi said the factors holding back local wages are subsiding and the ECB is confident that inflation in the euro zone would move toward its 2-percent goal. The European Central Bank will be patient in tightening policy further, ECB President Mario Draghi said on Tuesday, adding that market pricings for its first post-crisis rate hike were consistent with its aim to move gradually. The ECB decided last week to end its 2.6 trillion euro bond purchase programme by the close of the year but said interest rates would stay unchanged at least through next summer, a wording that pushed back rate hike expectations by three months to September 2019.But uncertainty is rising as the threat of a global trade war looms, while a rise in inflation is still far from certain as higher wages may not translate into faster price growth, Draghi told the ECB's hallmark policy forum in Sintra, Portugal. Federal Reserve Chairman Jerome Powell said as much on Wednesday, noting that the Fed should continue with a gradual pace of rate increases given that the labor market does not seem to be overly tight. World markets recovered from a recent selloff on the trade tensions, while Treasury yields rose after the Federal Reserve chairman said the U.S. central bank should continue with a gradual pace of interest rate increases.The euro was down 0.05 percent at $1.1582, holding above an over two-week low of $1.1528 reached on Tuesday.
GBP/USD is supported in the range of 1.3143 levels and currently trading at 1.3184 levels. It reached session high at 1.3216 and dropped to session low at 1.3168 levels. Sterling rebounded from a seven-month low against the dollar on Wednesday after Prime Minister Theresa May won a crucial Brexit vote in parliament, averting a rebellion that could have undermined her authority. The pound's gains were limited, however, with traders divided as to whether May's victory would boost her chances of securing a more favourable Brexit deal with the European Union given how many more months of negotiations remain. Investors were also reluctant to take out big positions before a Bank of England monetary policy meeting on Thursday. May needed the lower House of Commons to pass her Brexit blueprint, or EU withdrawal bill - legislation that will prepare Britain for a divorce next March that will end its more than four-decade-old trading and political partnership with the rest of Europe. Her deeply divided party was conflicted over the role of parliament in deciding a final Brexit deal. The vote was expected to be extremely close until a pro-European Union lawmaker leading rebels threatening to vote against May said on Wednesday he had changed his mind and would now support the government. Sterling, gained 0.3 percent to trade at $1.3184. Earlier in the day the pound had hit its lowest since mid-November 2017, of $1.3145.
USD/CAD is supported at 1.3256 levels and is trading at 1.3309 levels. It has made session high at 1.3311 and lows at 1.3272 levels. The Canadian dollar weakened against its U.S. counterpart on Wednesday as rapidly escalating China-U.S. trade tensions weighed on Canadian dollar. Trade tensions between the United States and China are showing no signs of easing. On Tuesday, a White House trade adviser said Beijing had underestimated the U.S. president's resolve to impose more tariffs. That followed Washington threatening to impose tariffs on $200 billion of Chinese goods and Beijing saying it was raising tariffs on $50 billion of U.S. goods. Canada runs a current account deficit so its currency could suffer if volatility rises. The country is in a trade feud with the United States and also in slow-moving talks with the U.S. and Mexico to revamp the North American Free Trade Agreement. The Canadian government believes a deal to update the NAFTA trade pact is possible despite a U.S. move to impose tariffs on Canadian and Mexican steel and aluminum, Foreign Minister Chrystia Freeland said on Tuesday. The Canadian dollar was trading 0.26% lower at C$1.3319 to the greenback. Oil prices were mixed, with U.S. crude futures supported by a drop in domestic inventories. The currency touched its weakest level since June 22, 2017, at C$1.3320.
AUD/USD is supported around 0.7342 levels and currently trading at 0.7369 levels. It hit session high at 0.7394 and made session lows at 0.7367 levels. The Australian dollar dipped against its U.S. counterpart on Wednesday as rapidly escalating China-U.S. trade tensions weighed on commodity related Australian dollar. The Australian dollar, seen as a proxy on market sentiment toward China, fell to a 13-month low of $0.7347 on Tuesday, it was last trading at $0.7366. The currencies have taken collateral damage in recent days as U.S. President Donald Trump's plan to impose more tariffs on Chinese goods ramped up the risk of a trade war. U.S. Commerce Secretary Wilbur Ross said the White House will likely keep up pressure on Beijing in an attempt to reach a deal on greater American access to Chinese markets and narrow its trade surplus with the United States. In this climate of rising trade tensions, heads of major central banks spoke of this risk in their economic outlook at a conference in Sintra, Portugal. U.S. Federal Reserve President Jerome Powell said "in principle changes in trade policy could cause us to have to question the outlook." Still Powell and his peers at the European Central Bank and Bank of Japan, Mario Draghi and Haruhiko Kuroda, did not suggest they altered their policy stance even as trade tensions have intensified. The U.S. dollar was little changed, hovering near an 11-month peak against a basket of major currencies as China's signal of a tolerance of a stronger yuan offset anxiety about the global trade conflict.
Equities Recap
European shares climbed on Wednesday but the modest rebound failed to erase the previous session's losses as investors' fears about an ongoing trade dispute between the United States and China lingered.
UK's benchmark FTSE 100 closed up 0.5 percent, the pan-European FTSEurofirst 300 ended the day up by 0.46 percent, Germany's Dax ended up by 0.3 percent, France’s CAC finished the day down by 0.1 percent.
The Nasdaq closed at a record on Wednesday, lifted by a climb in large-cap tech and consumer discretionary names, while the Dow and S&P 500 were hemmed in as concerns over an escalation in the U.S.-China trade skirmish simmered.
Dow Jones closed down by 0.168 percent, S&P 500 ended up by 0.17 percent, Nasdaq finished the day up by 0.73percent.
Treasuries Recap
U.S. Treasury yields on Wednesday rebounded from sharp falls in the previous session, as expectations of further U.S. interest rate increases diverted the market's attention from Washington's trade conflict with China.
In afternoon trading, U.S. benchmark 10-year yields rose to 2.927 percent, from Tuesday's 2.893 percent.
U.S. 30-year yields were up at 3.063 percent, compared with 3.028 percent on Tuesday.
U.S. two-year yields were at 2.561 percent, slightly up from Tuesday's 2.545 percent.
Commodities Recap
Gold prices dropped, remaining near a six-month low on Wednesday as the U.S. dollar hovered around 11 month peaks but was offset by festering global trade tensions, while platinum hit a 2-1/2-year trough.
Spot gold lost 0.2 percent at $1,272.44 by 1:36 p.m. EDT (1736 GMT). U.S. gold futures for August delivery settled down $4.10, or 0.3 percent, at $1,274.50 per ounce.
U.S. crude futures rose nearly 2 percent on Wednesday, supported by a drop in domestic inventories, while Brent edged down ahead of an OPEC meeting later this week that may result in increased global production.
U.S. West Texas Intermediate (WTI) crude futures for July delivery, which expires on Wednesday, rose $1.15 to settle at $66.22 a barrel, a 1.8 percent gain. WTI futures for August closed 81 cents higher at $65.71.
Brent crude futures for August delivery fell 34 cents, or 0.5 percent, to end at $74.74 a barrel.
