Market Roundup
• US December Employment Trends, 107.1, 135.9 previous, 106.4 revised.
• Fed's Williams says price-level targeting has benefits.
• Williams paints the benign picture of Fed rate hikes, strong U.S. economy.
• Bostic: Fed should be cautious if yield curve continues to flatten.
• Fed's Bostic says three rate hikes in 2018 may be too much.
• Mueller's team, lawyers discuss possible Trump interview –NBC.
• Bank of Canada sees capacity pressure, setting up another rate hike.
• Britain pledges to ease business fears over Brexit import tax.
• Eurozone confidence at multi-year high, but inflation expectations fall.
• EU's Juncker says next EU budget has to be bigger despite Brexit.
• Bitcoin slides as website drops S.Korea prices from virtual currency rates.
• Investors poured $235 bln into emerging stocks, bonds in 2017-IIF.
Looking Ahead - Economic Data (GMT)
• 00:00 Japan Nov Overtime Pay, 0.2% previous
• 00:30 Australia Nov Building Approvals, -1.3% forecast, 0.9% previous
• 00:30 Australia Nov Private House Approvals, 1.5% previous
Looking Ahead - Events, Other Releases (GMT)
• N/A ECB Governing Council meeting. No interest rate announcements scheduled - Frankfurt
• 15:00 Fed's Neel Kashkari participates in a moderated question-and-answer session hosted by Cargill - Wayzata, Minnesota
Currency Summaries
EUR/USD is likely to find support at 1.1873 levels and currently trading at 1.1963 levels. The pair has made session high at 1.1982 and hit lows at 1.1955 levels. Euro strengthened against the dollar on Monday as investors took profits on euro’s recent rally as the outlook for the single currency remained bullish on the backdrop of a strengthening economic recovery. The euro, which has rallied in recent weeks on expectations for a shift in European Central Bank monetary policy this year, suffered a little after a cooler-than-expected reading of the euro zone's December consumer price index on Friday. Lackluster inflation pressure in Europe has been accompanied by a strengthening economic recovery across the continent and solid economic growth in China and the United States, fueling risk appetite. The dollar index, which fell to a more than three-month low early last week, has found some support after generally solid U.S. economic data last week. Friday’s headline U.S. nonfarm payrolls increased by 148,000 jobs last month, against broader expectations of an increase of 190,000 jobs, though an unchanged unemployment rate holding stable at a decade low of 4.1 percent pointed to a solid jobs market. The euro slipped 0.55 percent to $1.1963 after rising more than 2 percent over the last three months. It wasn't far away from a four-month high of $1.2092 hit in September.
GBP/USD is supported in the range of 1.3488 levels and currently trading at 1.3566 levels. It reached session high at 1.3583 and dropped to a session low at 1.3534 levels. Sterling strengthened against the dollar on Monday as a cabinet reshuffle removed some political uncertainty that has pressured the British currency in recent months. Prime Minister Theresa May named a new head of her ruling Conservatives on Monday, among other changes aimed at handing her government a new start after months of divisions over Brexit, scandals and an ill-judged election, which have all weighed on the pound. Having earlier traded down on the day against the dollar, sterling recovered to trade flat at $1.3565, around a cent away from last week's 3-1/2-month high. The currency has been trading between $1.30 and $1.36 since September, and traders say it will take major new developments in Brexit discussions or a run of strong economic data that brings the timing of the next Bank of England interest rate hike forward - for the currency to break out of that range. A market gauge measuring expected volatility in sterling was trading at a more than a three-year low, with investors seeing risks around Brexit as fading and betting, therefore, that big price swings would be unlikely in the coming months.
USD/CAD is supported at 1.2350 levels and is trading at 1.2415 levels. It has made session high at 1.2448 and lows at 1.2378 levels. The Canadian dollar weakened against its U.S. counterpart on Monday as investors were cautious on making new bullish bets on Canadian dollar following the release of Bank of Canada business outlook report, while greenback strengthened across the board. Canadian companies remain optimistic about future sales despite some moderation from highs, and signs of capacity pressures and labor shortages have picked up, the Bank of Canada said on Monday, reinforcing expectations for an interest rate hike. Little economic slack remains, with companies expected to expand operations to accommodate demand as the job market tightens and expectations for U.S. demand remain firm, the central bank said in its quarterly Business Outlook Survey. The business survey added to evidence of a tightening job market after back-to-back employment reports showed strong hiring, boosting expectations the bank will continue to raise interest rates to head off inflation after two hikes in 2017. Oil prices ended up slightly as protests in Iran and the arrests of 11 princes in Saudi Arabia offset projections for higher U.S. oil production. The Canadian dollar was last trading down 0.2 percent at C$1.2426 to the greenback. The currency traded in a range of C$1.2378 to C$1.2437.
AUD/USD is supported around 0.7812 levels and currently trading at 0.7839 levels. It hit session high at 0.7841 and made session lows at 0.7829 levels. The Australian dollar was little changed against the US dollar on Monday as greenback recovered ground against most of its major’s peers as traders bet that Federal Reserve will further hike U.S. interest rate after Friday's payrolls data. The dollar rose against the basket of currencies on Monday. After mixed U.S. payrolls data on Friday, traders of U.S. short-term interest rate futures continued to bet that the Federal Reserve will hike U.S. interest rates at least twice in 2018. Comments by some Fed officials on Friday and over the weekend suggested the U.S. central bank remained on track to raise interest rates in 2018.San Francisco Fed President John Williams said on Saturday that the Fed should raise rates three times this year, given that the already strong economy would gain a boost from tax cuts, and could tighten more or less aggressively if needed. Market participants are awaiting U.S. Consumer Price Index (CPI) data later this week, which are expected to show inflation likely increased 0.2 percent in December after rising 0.1 percent in November.
Equities Recap
European shares hit their highest level in more than two years on Monday as confidence over global economic growth and mergers and acquisitions continued to boost investor appetite for stocks.
UK's benchmark FTSE 100 closed down by 0.4 percent, the pan-European FTSEurofirst 300 ended the day up by 0.26 percent, Germany's Dax ended up by 0.4 percent, France’s CAC finished the day up by 0.4 percent.
U.S. equities edged higher on Monday as investors took stock after the strong rally that marked the start of 2018, but healthcare and bank shares weighed on Wall Street's three major indexes.
Dow Jones closed down by 0.07 percent, S&P 500 ended up 0.15 percent, Nasdaq finished the day up by 0.28 percent.
Treasuries Recap
U.S. bond yields were little changed on Monday after a boost from stronger German government debt and a Federal Reserve official's remarks that the U.S. central bank may only raise rates two times this year.
The U.S. 10-year note yielded 2.478 percent at 2:44 p.m. (1744 GMT). The benchmark government bond last closed at 2.476 percent.
The three-year note yield, which is sensitive to traders' views on Fed policy, stayed near the decade high of 2.07 percent reached earlier in the day.
Commodities Recap
Gold edged lower on Monday, retreating further from last week's 3-1/2-month high as the U.S. dollar regained some ground against the buoyant euro and traders bet on further U.S. interest rate hikes after Friday's payrolls data.
Spot gold was down 0.1 percent at $1,318.84 an ounce by 1:41 p.m. EST (1841 GMT), while U.S. gold futures for February delivery settled down $1.90, or 0.1 percent, at $1,320.40 per ounce.
Oil prices were little changed on Monday, trading near their highest since May 2015, as political concerns in some OPEC nations offset projections for higher U.S. oil production.
Brent futures gained 16 cents, or 0.2 percent, to settle at $67.78 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 29 cents, or 0.5 percent, to settle at $61.73.
