Market Roundup
• Trump, Senate Republicans prepare for showdown over tax cuts.
• Fed's Kaplan says rate hike appropriate in "near future".
• US Oct New Home sales (Units), 0.685 mln, 0.625 mln forecast, 0.667 mln previous 0.645 mln revised.
• US Oct New Home sales change m/m, 6.2%, -6.0% forecast, 18.95 prev 14.2% revised.
• US Nov Dallas Fed Mfg Business index, 19.40, 27.60 previous.
• $10,000 in sight for bitcoin as it rockets to new record high.
• Directors duel over control of U.S. consumer protection agency.
• Merkel presses cautious SPD over joining new German coalition.
• Irish leaders seek compromise to head off snap election.
• China, wary of market risks, likely to keep GDP target in 2018 - policy sources.
Looking Ahead - Economic Data (GMT)
• No major economic events are scheduled
Looking Ahead - Events, Other Releases (GMT)
• 14:15 New York Fed President Dudley speaks in New York
• 15:00 Senate Banking Committee holds hearing on the nomination of Powell to be Fed chairman
• 15:15 Philadelphia Fed President Harker speaks in Philadelphia
• 16:15 Bank of Canada Gov Poloz and Senior Deputy Gov Wilkins speak in Ottawa
Currency Summaries
EUR/USD is likely to find support at 1.1860 levels and currently trading at 1.1901 levels. The pair has made session high at 1.1960 and hit lows at 1.1896 levels. The euro edged lower against the greenback on Monday as the dollar gained as traders braced for the resumption of deliberations on the U.S. tax plan and the confirmation hearing for Federal Reserve Governor Jerome Powell as the central bank's next chair. The dollar index, which measures the greenback against a basket of six major currencies, was trading slightly higher at 92.89. The index, which last week fell nearly 1 percent, was also supported by data which showed U.S. new home sales surged to their highest in 10 years, reinforcing expectations the Federal Reserve will raise interest rates next month and a few more times in 2018.Worries about potential delays in the implementation of tax cuts and the possibility of proposals being weakened have weighed on the dollar in recent weeks. President Donald Trump was to meet with Senate Republican tax-writers on Monday at the White House to scope out an end-game strategy for sweeping tax legislation, ahead of a crucial vote on the Senate floor that could come as early as Thursday. Traders were focusing on the upcoming change of guard at the Fed as Powell appears before the Senate Banking Committee on Tuesday. Outgoing Chair Janet Yellen appears before the Joint Economic Committee on Wednesday.
GBP/USD is supported in the range of 1.3277 levels and currently trading at 1.3322 levels. It reached session high at 1.3382 and dropped to session low at 1.3316 levels. Sterling briefly hit an eight-week high against the dollar on Monday but reversed most of the ground as investors consolidated bets ahead of a key EU summit and against the backdrop of a brewing political crisis in Ireland. A deal on the Northern Ireland border, a key part of Brexit talks has suddenly become trickier as the Dublin government looked set to fall. Sterling briefly touched a near two-month high of $1.3383, and is on track to post its first monthly rise in three months. But it gave up most of its early gains and traded back down to be flat against the dollar at $1.3321.Last week, the pound rose more than a percent, its biggest weekly rise since Oct. 15 in a holiday-shortened week in the United States and Japan. While sterling currency markets, including derivatives, have been largely quiet in the run-up to a crunch EU summit on Brexit in mid-December, investors worry the pound will become more vulnerable to political headlines as the date nears. Irish Prime Minister Leo Varadkar, who has warned of vetoing progress on Brexit without big British moves on the border issue, may call a snap election next week over a separate issue.
USD/CAD is supported at 1.2665 levels and is trading at 1.2756 levels. It has made session high at 1.2768 and lows at 1.2677 levels. The Canadian dollar initially strengthened against its U.S. counterpart on Monday but gave up ground as oil prices slipped and the greenback recovered from earlier losses. Oil prices have surged in recent months due to output cuts by the Organization of the Petroleum Exporting Countries, Russia and other producers. However, higher prices have encouraged greater output among U.S. producers. OPEC and its allies cut production by 1.8 million bpd in January and have agreed to hold down output until March. OPEC meets on Thursday to discuss policy and most analysts expect a deal to extend the cuts .The Canadian dollar was last trading at C$1.2764 to the greenback. its strongest level of the session was C$1.2677, its weakest level was C$1.2779.The Bank of Canada is due to release its semi-annual Financial System Review on Tuesday, while currency strategists are also looking ahead to a monthly employment report and quarterly gross domestic product data due on Friday after weak retail sales numbers last week.
USD/JPY is supported around 110.52 levels and currently trading at 111.01 levels. It peaked to hit session high at 111.71 and made session lows at 110.81 levels. The U.S. dollar declined against the Japanese yen on Monday but the downside was limited as upbeat US economic data and increasing prospects of a December rate hike by the Federal Reserve curbed appetite for safe-haven assets. U.S. new home sales surged to their highest in 10 years, reinforcing expectations the Federal Reserve will raise interest rates next month and a few more times in 2018. The report showed new home sales increased 6.2 percent to a seasonally adjusted annual rate of 685,000 units last month, the highest since October 2007. New home sales surged 18.7 percent on a year-on-year basis in October and have increased for three straight months. The Federal Reserve has raised borrowing costs twice this year and is widely anticipated to boost rates again next month. It has forecast three rate hikes in 2018. The dollar index, which measures the greenback against six rival currencies 0.10 percent at 92.89.The Japanese yen strengthened 0.45 percent versus the greenback at 111.04 per dollar.
Equities Recap
European shares fell on Monday as concerns over China weighed on mining stocks and OPEC anticipation dented the oil sector, while financials were led lower by Julius Baer, which tumbled after its chief executive unexpectedly quit to join a rival company.
UK's benchmark FTSE 100 closed down by 0.3 percent, the pan-European FTSEurofirst 300 ended the day down by 0.35 percent, Germany's Dax ended down by 0.5 percent, France’s CAC finished the day down by 0.5 percent.
Wall Street's major indexes were little changed on Monday after retreating from record highs set during the session as gains for Amazon were countered by losses in shares of chipmakers and energy companies.
Dow Jones closed down by 0. 10 percent, S&P 500 ended down 0.03 percent, Nasdaq finished the day down by 0.16 percent.
Treasuries Recap
Treasury yields rose on Monday after data showed U.S. new home sales surged to their highest in 10 years, reinforcing expectations the Federal Reserve will raise interest rates next month and a few more times in 2018.
The 10-year Treasury yield was up slightly at 2.345 percent, from 2.34 percent late on Friday.
U.S. two-year yields, which climbed to a nine-year peak last week, rose to 1.761 percent, from 1.748 percent on Friday.
U.S. 30-year bond yields rose to 2.772 percent, from Friday's 2.761 percent. Earlier in the session, 30-year yields touched 2.738 percent, the lowest since mid-November.
Commodities Recap
Gold prices rose on Monday, buoyed by a weaker dollar, as investors looked ahead to congressional testimony by the nominee to chair the U.S. Federal Reserve and a meeting between U.S. President Donald Trump and Senate Republicans on tax reform.
Spot gold was up 0.5 percent at $1,294.44 an ounce by 1:36 p.m. EST (1836 GMT), after hitting $1,299.13, its highest since Oct. 16.
U.S. gold futures for December delivery settled up $7.10, or 0.6 percent, at $1,294.40 per ounce.
Oil prices fell 1 percent on Monday, with U.S. crude easing from two-year highs on prospects of higher supply, and uncertainty about Russia's resolve to join in extending output cuts ahead of this week's OPEC meeting.
U.S. light crude was down 80 cents or 1.3 percent to $58.15 a barrel by 1:47 p.m. (18:47 GMT) Brent crude was down 10 cents or 0.2 percent to $63.76 a barrel.
