Market Roundup
• US ISM-NY Biz Conditions Jun 55.5, 46.7 previous.
• US Durable Goods, R MM May -0.8%, -1.1% previous.
• US Factory orders MM May -0.8% vs -0.5% forecast, -0.3% previous.
• US Redbook YY w/e 2.7%, 2.2% previous
• Fed minutes suggest increasing tensions on inflation shortfall.
• Fed policymakers discussed possible reasons why financial conditions had not tightened following hikes in Fed funds rate.
• Several Fed policymakers wanted to announce the start of balance-sheet trimming within a 'couple of months’.
• Pentagon: US defenses can counter threat from any N.Korean ICBM.
• IMF: Policy uncertainty, financial sector weakness, sudden tightening in global financial conditions are risks to the outlook.
• IMF urges G20 countries to avoid 'myopic pursuit of zero-sum policies.
• ECB's Coeure: Some steepening at long end of curve reflects views that growth will be solid.
• ECB: Global use of euro declines further on political risk.
• Mexico: Trump-Pena Nieto meet unlikely to lead to big deals.
• Fitch: Lower Brazil inflation target helps anchor expectations
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e, 321.8b previous
• 23:50 Japan Foreign Invest JP Stock w/e, -26.3b previous
• 01:30 Australia Trade Balance G&S (A$) May 1100m forecast, 555m previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.1300 levels and currently trading at 1.1346 levels. The pair has made session high at 1.1353 and hit lows at 1.1316 levels. The euro was little changed against the U.S. dollar on Wednesday as dollar briefly trimmed earlier gains versus a basket of currencies on Wednesday as the minutes on the Federal Reserve's June 13-14 policy meeting showed a growing split among policy-makers on their inflation outlook and how it might affect the pace of future interest rate hikes. The details of the meeting, at which the U.S. central bank voted to raise interest rates, also showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year. The dollar index was flat at 96.237 after touching a one-week high. In the second quarter, this gauge tracking the greenback against six currencies fell 4.71 percent, its biggest quarterly drop since the third quarter of 2010. The euro was little changed at $1.1348, below its highest levels in over a year reached last week. Trading was also affected on Wednesday by lighter participation the day after the U.S. July 4 Independence Day holiday and ahead of the U.S. jobs report due on Friday.
GBP/USD is supported in the range of 1.2875 levels and currently trading at 1.2930 levels. It reached session high at 1.2936 and dropped to session low at 1.2900 levels. Sterling fell against the dollar on Wednesday as a survey of Britain's services businesses added to a string of weak-looking data that could deter the Bank of England from raising interest rates for the first time in 10 years. A number of central bank policymakers, including Governor Mark Carney, have spoken in favour of soon reversing last year's interest rate cut, which followed Britain's vote to leave the European Union. The hawkish remarks have helped the pound to reverse the 2 percent drop against the dollar that came after a snap election on June 8 left no party with a clear majority. But readings of Britain's economy as it negotiates its exit from the EU could bolster arguments against raising rates too soon, even though inflation is well above the Bank's 2 percent target. Data on Wednesday showed growth across British services companies fell to a four-month low in June, with companies at their least optimistic in nearly a year. Sterling dip hit low at $1.2899 a before recovering to trade flat on the day at $1.2929 by 1935 GMT.
USD/CAD is supported at 1.2915 levels and is trading at 1.2972 levels. It has made session high at 1.3010 and lows at 1.2960 levels. The Canadian dollar lost ground against its U.S. counterpart on Wednesday as oil fell and the dollar firmed pressuring oil-correlated Canadian dollar. Oil prices fell sharply after their longest rally in more than five years while the dollar was higher and Treasury yields were near recent peaks after minutes from the U.S. Federal Reserve's last meeting showed contrasting opinions. The dollar edged up against a basket of currencies and was last up 0.1 percent. It briefly pared gains after the Fed minutes. On Tuesday, the loonie touched its strongest since September at C$1.2912 as Bank of Canada Governor Stephen Poloz added more support to the view the central bank will raise interest rates as early as next week. Chances of a rate hike on July 12 have increased to nearly 80 percent from less than 5 percent before top Bank of Canada officials asserted in June that a pair of 2015 interest rate cuts had done their job in cushioning the economy from collapsing oil prices, data from the overnight index swaps market showed. The Canadian dollar was trading at C$1.2971 to the greenback, or 77.12 U.S. cents, down 0.2 percent. The currency traded in a range of C$1.2930 to C$1.3010.
AUD/USD is supported around 0.7558 levels and currently trading at 0.7599 levels. It hit session high at 0.7602 and made session lows at 0.7570 levels. The Australian dollar declined against US dollar on Wednesday as Aussie bulls were upset as the country's central bank had resisted pressure to turn hawkish on interest rates. The Australian dollar was last trading at $0.7600, not far from a low of $0.7591 hit just after the Reserve Bank of Australia(RBA) ended its Tuesday meeting with rates unchanged at a record low 1.50 percent. Investors had bid the currency up on speculation the central bank would hint at policy tightening like its counterparts in Europe and Canada. But the RBA stayed resolute to its balanced view on both rates and economic growth. Fall in oil prices and concerns about rising tensions between the United States and North Korea also pressured the currency.Oil prices ended their longest bull run in more than five years, as climbing Organization of the Petroleum Exporting Countries' exports and a stronger dollar turned sentiment more bearish.
Equities Recap
European shares rose on Wednesday at the end of a volatile session with gains among consumer stocks, led by Adidas on optimism over its upcoming earnings.
The UK's benchmark FTSE 100 closed up by 0.11 percent, FTSEurofirst 300 ended the day up by 0.16 percent, Germany's Dax ended up 0.18, and France’s CAC finished the day up by 0.16 percent.
A steep drop in oil prices dragged the energy sector lower and kept the Dow and S&P 500 in check on Wednesday, while the Nasdaq was buoyed by gains in the technology sector.
Dow Jones closed flat, S&P 500 ended up 0.14 percent, Nasdaq finished the day up by 0.67 percent.
Treasuries Recap
U.S. Treasury yields edged lower on Wednesday as traders remained concerned about weak U.S. factory orders data, reversing a jump on Federal Reserve meeting minutes, while holding near recent peaks on views that global central bank policy was turning more hawkish.
Three-year yields hit a roughly 3-1/2-month high of 1.598 percent before the release of the factory orders data. U.S. two-year yields were at 1.414 percent, near Monday's more than eight-year peak of 1.426 percent.
Commodities Recap
Oil prices retreated about 4 percent on Wednesday, ending their longest bull-run in more than five years, as climbing OPEC exports and a stronger dollar turned sentiment more bearish.
Brent crude futures ended the session down $1.82, or 3.7 percent, at $47.79 a barrel. Prices had climbed for eight straight sessions to Monday.
U.S. West Texas Intermediate crude fell $1.94, or 4.12 percent, to settle at $45.13 a barrel.
Gold steadied on Wednesday after Federal Reserve minutes showed a growing split among policymakers on the inflation outlook and the dollar pared gains, lifting the precious metal above an eight-week low reached earlier in the session.
Spot gold was down 0.02 percent at $1,223.37 an ounce by 3:08 p.m. EDT (1908 GMT), after touching $1,217.14, the lowest since May 10.
U.S. gold futures for August delivery settled at $1,221.70, up 0.2 percent from Monday's settlement following a U.S. holiday on Tuesday.
