Market Roundup
• China may be mulling Treasuries slowdown, but options limited.
• US Dec Import Prices MM, 0.1%, 0.5% forecast, 0.7% previous, 0.8% revised.
• US Dec Export Prices MM, -0.1%, 0.3% forecast, 0.5% previous.
• US Nov Wholesale Invt(y), R MM, 0.8%, forecast, 0.7%, 0.7% previous.
• US Nov Wholesale Sales MM, 1.5%, 0.7% forecast, 0.7% previous.
• US w/e MBA Mortgage Application, 8.3%, 0.7% previous, -1.6% revised
• US w/e MBA Mortgage Market Index, 390.2, 368.6 previous, 360.4 revised.
• US w/e MBA Purchase Index, 242.7, 236.9 previous, 231.1 revised.
• US w/e Mortgage Refinance Index, 1,259.2, 1,151.9 previous, 1,130.4 revised.
• US w/e MBA 30-Yr Mortgage Rate, 4.23%, 4.25% previous, 4.22% revised.
• Fed's Bullard says inflation miss "cost" nearly $1 trillion in nominal growth.
• Fed's Evans says wanted to wait until midyear for rate hike.
• U.S. Democrats target Russia, Trump on election meddling.
• Trump says U.S. open to talks with North Korea -White House.
• Bank of England's Broadbent on a 2018 rate hike: "Who knows?".
• Industry gives Brexit-bound UK economy a shot in the arm.
• Canada Nov Building Permits MM, -7.7%, -0.3% forecast, 3.5% previous, 4.4% revised.
• Canada increasingly sure Trump to pull plug on NAFTA: sources.
• Canada takes U.S. to WTO, U.S. says case helps China.
Looking Ahead - Economic Data (GMT)
• 10 Jan 23:50 Japan Foreign Reserves, 1,261.2 billion
• 11 Jan 00:30 Australia Nov Retail Sales MM, 0.4% forecast, 0.5% previous
• 11 Jan 05:00 Japan Nov Coincident Indicator MM, 0.3% previous
• 11 Jan 05:00 Japan Nov Leading Indicator MM, 0.4% previous
Looking Ahead - Events, Other Releases (GMT)
• 18:30 Eurogroup President Jeroen Dijsselbloem speaks about the future of the euro zone at LSE – London
• 20:30 Fed's William Dudley gives a keynote speech before the event organized by the Securities Industry and Financial Markets Association – New York
Currency Summaries
EUR/USD is likely to find support at 1.1875 levels and currently trading at 1.1954 levels. The pair has made session high at 1.2007 and hit lows at 1.1929 levels. The euro initially edged higher on Wednesday against the greenback as euro benefitted from dollar selling after a report that China was ready to slow or halt its U.S. treasury purchases, but gave up some of the ground as investors adjusted positions on concerns about upcoming Italian elections. The U.S. dollar fell against a basket of major currencies after a report that China was ready to slow or halt its U.S. treasury purchases, with the greenback on track to post its biggest single-day drop against the Japanese yen in seven weeks. Officials reviewing China's foreign-exchange holdings have recommended slowing or halting purchases of U.S. government bonds, Bloomberg News reported, citing people familiar with the matter. The dollar has had a torrid start to the year after weakening around 10 percent against a basket of major currencies last year as the economic outlook in other parts of the world, particularly Europe, improved, while expectations of a major boost to U.S. growth from domestic tax reforms fizzled. The dollar's weakness also underlines the greenback's vulnerability to other central banks' moves towards normalizing monetary policy, a feature of 2017 that has continued to weigh on the dollar in the opening weeks of the year.
GBP/USD is supported in the range of 1.3478 levels and currently trading at 1.3506 levels. It reached session high at 1.3561 and dropped to session low at 1.3479 levels. Sterling declined against the dollar on Wednesday as investors booked profits on recent rally and avoided large new positions until major new catalysts. The pound climbed to a 3-1/2-month high at the start of the month, continuing an optimistic mood late last year after Britain successfully reached a deal with the European Union for exit talks to move on to discussions of a transition period and post-Brexit trade. But it has since struggled, with investors saying that for the currency to break out of the $1.30-$1.36 range that it has traded in for the past few months, it would need significant new developments be they political or economic. It edged down 0.1 percent on Wednesday to $1.3506, having earlier fallen to as low as $1.3482 but having recovered as the dollar weakened across the board. Against the euro, it has been a more mixed picture, with sterling oscillating around the 88 cents line over the past month as the pound regained some momentum against the single currency. On the data front, British industrial output rose by a monthly 0.4 percent in November, compared with 0.2 percent in October, spurring an annual rise of 2.5 percent, but that had little effect on the pound.
USD/CAD is supported at 1.2426 levels and is trading at 1.2537 levels. It has made session high at 1.2582 and lows at 1.2462 levels. The Canadian dollar declined to its lowest this year against its U.S. counterpart on Wednesday as Canadian dollar extended losses after a Reuters report said Canada increasingly believes that U.S. President Donald Trump will soon announce his intention to withdraw from the NAFTA trade treaty. Canada is increasingly convinced that U.S. President Donald Trump will soon announce that the United States intends to pull out of the North American Free Trade Agreement, two government sources said. Chances of the Bank of Canada raising rates next week slipped to 64 percent, the overnight index swaps market indicated. They had climbed to nearly 90 percent after much stronger-than-expected domestic jobs data on Friday and a business survey on Monday that showed optimism. The price of oil, one of Canada's major exports, was buoyed by a fall in U.S. crude inventories. U.S. crude oil futures settled nearly 1 percent higher at $63.57 a barrel. The Canadian dollar was last trading at C$1.2538to the greenback, down 0.7 percent. The currency touched its weakest since Dec. 29 at C$1.2583, extending its retreat from a three-month high on Friday at C$1.2355.
USD/JPY is supported around 111.00 levels and currently trading at 111.42 levels. It peaked to hit session high at 111.88 and made session lows at 111.24 levels. The U.S. dollar declined against the Japanese yen on Wednesday after a report showed that China may slow or halt its purchases of U.S. Treasury bonds, with the greenback on track to post its biggest single-day drop against the Japanese yen in seven weeks. The Chinese officials, who were not named, said the market for U.S. government bonds is becoming less attractive relative to other assets, Bloomberg said. They also cited trade tensions with the United States as a reason to slow Treasury purchases, the report said. The dollar, already under pressure versus the Japanese yen after the Bank of Japan moved to trim its long-dated government bond purchases this week, was on track to post its biggest single-day drop against the yen in seven weeks. The greenback also lost ground against a basket of major currencies. The dollar was last trading down 1.07 percent at 111.38 yen, after earlier falling to 111.27 yen, its weakest since late November.
Equities Recap
European shares pulled back on Wednesday, with most sectors except rate-sensitive banks in the red as concerns grew over the direction of the bond market.
UK's benchmark FTSE 100 closed up by 0.01 percent, the pan-European FTSEurofirst 300 ended the day down by 0.23 percent, Germany's Dax ended down by 0.8 percent, France’s CAC finished the day down by 0.4 percent.
Wall Street's major stock indexes ended lower on Wednesday after a choppy trading session as investors worried that China would slow U.S. government bond purchases and that U.S. President Donald Trump would end a key U.S. trade agreement.
Dow Jones closed down by 0.06 percent, S&P 500 ended down 0.12 percent, Nasdaq finished the day down by 0.17 percent.
Treasuries Recap
U.S. Treasury yields jumped to 10-month highs on Wednesday after Bloomberg News reported that Chinese officials have recommended the country slow or halt its purchases of the U.S. bonds.
Benchmark 10-year note yields were last down to 2.564 percent, after peaking at 2.597 percent, the highest since March 15.
The yield curve between two-year notes and 10-year notes was last flatter at 58.6 basis points, after steepening to 62.4 basis points earlier Wednesday.
Commodities Recap
Gold rose on Wednesday, hitting its highest in nearly four months as the dollar swooned after a report that Chinese officials had recommended slowing or halting purchases of U.S. Treasury securities.
Spot gold was up 0.5 percent at $1,318.67 an ounce by 1:41 p.m. EST (1841 GMT). Its session high of $1,326.56 was its highest since Sept. 15. U.S. gold futures for February delivery settled up $5.60, or 0.4 percent, at $1,319.30 per ounce.
Crude oil prices jumped on Wednesday and settled near three-year highs after U.S. government data showed a drop in crude inventories and production, even as fuel inventories rose.
U.S. West Texas Intermediate (WTI) crude futures settled at $63.57 a barrel, up 61 cents, or 1 percent, their highest settlement since December of 2014. Earlier in the session, prices hit $63.67, their highest since Dec. 9, 2014.
Brent crude futures settled at $69.20 a barrel, up 38 cents. The session high for the global benchmark was $69.37, highest since May 2015.
