Market Roundup
• US Nov PPI Final Demand YY, 3.1%, 2.9% forecast, 2.8% previous.
• US Nov PPI Final Demand MM, 0.4%, 0.3% forecast, 0.4% previous.
• US Nov NFIB Business Optimism Idx, 107.50, 103.80 previous.
• US w/e Redbook MM, -0.7%, -0.9% previous.
• US w/e Redbook YY, 3.3%, 3.0% previous.
• US Nov Federal Budget $, -63.00 bln, -134.00 bln.
• EU, US, Japan to slam WTO countries flooding global markets.
• EU ups pressure on US over tax reform with the second letter to Treasury Secy.
• Bitcoin slips to around $16,300, futures volumes drop
• Alabama voters choose senator in race with high stakes for Trump
• EU readies "David Davis-proof" Brexit summit
Looking Ahead - Economic Data (GMT)
• 12 Dec 21:45 New Zealand Nov Food Price Index, -1.1% previous
• 12 Dec 23:30 Australia Dec Consumer Sentiment, -1.7% previous
• 12 Dec 23:50 Japan Oct Machinery Orders MM, 3.0% forecast, -8.1% previous
• 12 Dec 23:50 Japan Oct Machinery Orders YY, -2.8% forecast, -3.5% previous
Looking Ahead - Events, Other Releases (GMT)
• 09:00 BOJ' Kuroda speaks in Tokyo
• 19:00 FOMC announces its decision on interest rates, followed by a statement
• 19:30 Fed's Yellen holds a news conference in Washington
• 23:00 Fed's Brainard speaks in Rochester, New York
Currency Summaries
EUR/USD is likely to find support at 1.1712 levels and currently trading at 1.1739 levels. The pair has made session high at 1.1772 and hit lows at 1.1716 levels. Euro declined against the dollar on Tuesday as the dollar strengthened as the Federal Reserve began a two-day policy meeting where it is widely expected to raise interest rates for the fifth time since 2015.Investors will be watching for any signals that Fed officials are more optimistic on the prospect of faster growth as lawmakers appear close to passing a large overhaul of the tax code for clues on how many further rate increases are likely next year. The dollar index hit 94.219, the highest since Nov. 14, before falling back to 94.138. The greenback rose more than 1 percent last week, its biggest weekly rise since the end of October, but is down around 9 percent this year. Investors will also be watching the Fed’s statement at the conclusion of the meeting on Wednesday for concern about tepid inflation. On the data front, U.S. producer price data on Tuesday showed an increase in wholesale inflation, increasing hopes that price pressures may be rising from sluggish levels. The Labor Department said its producer price index for final demand increased 0.4 percent last month. In the 12 months through November, the PPI shot up 3.1 percent. That was the biggest gain since January 2012 and followed a 2.8 percent rise in October. Consumer Price Index (CPI) data on Wednesday will be a key data focus for further clues on price pressures.
GBP/USD is supported in the range of 1.3276 levels and currently trading at 1.3316 levels. It reached session high at 1.3347 and dropped to session low at 1.3301 levels. Sterling declined against the dollar on Tuesday as the stronger dollar offset upbeat UK economic data. British inflation unexpectedly nearly hit a six-year high in November, with investors betting it would have little effect on how soon the Bank of England would raise interest rates again. Consumer price inflation hit an annual rate of 3.1 percent in November, the data showed, above economists' average expectations in a poll for another 3.0 percent rise. As that is more than a percentage point above the BoE's 2 percent target, Governor Mark Carney will have to write a letter to finance minister Philip Hammond to explain what the BoE is doing in response. But because one of the main reasons behind the surge in inflation has been the pound's plunge since last June's vote for Brexit about 12 percent on a trade-weighted basis. The BoE has said it expects it to fall slowly over the next three years to just above 2 percent as sterling steadies. The pound climbed to the day's high $1.3380 after the data, but later slipped to $1.3319 as the dollar strengthened ahead of Wednesday's expected U.S. interest rate hike, leaving sterling down 0.2 percent on the day. Against the euro, sterling strengthened to 87.90 pence. The next point of focus for traders is wages data due on Wednesday.
USD/CAD is supported at 1.2808 levels and is trading at 1.2872 levels. It has made session high at 1.2891 and lows at 1.2842 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as the dollar strengthened ahead of an outcome from the U.S. Federal Reserve's policy meeting this week. The U.S. dollar also strengthened across the board after data showed that U.S. producer prices rose in November at the fastest annual pace in nearly six years. The Fed is widely expected to raise interest rates for the fifth time since late 2015. Investors will be watching for the Fed's assessment of the health of the economy as that might change the market's views on the future path of borrowing costs. Bond markets anticipate two further rate hikes next year but Fed forecasters expect three. The loonie has been on back foot since last week as the Bank of Canada struck a more dovish tone than investors had expected as it left its benchmark interest rate steady at 1 percent. Bank of Canada Governor Stephen Poloz is due to discuss the issues that keep him awake at night in a speech on Thursday. The Canadian dollar was last trading slightly weaker at C$1.2872 to the greenback.The currency traded in a narrow range of C$1.2815 to C$1.2891.
USD/JPY is supported around 113.24 levels and currently trading at 113.53 levels. It peaked to hit session high at 113.73 and made session lows at 113.54 levels. The U.S. dollar edged higher against the Japanese yen on Tuesday as investors bet on strong economic growth a day ahead of the U.S. Federal Reserve's widely-expected hike in interest rates. The Fed is widely expected to raise its benchmark interest rate for third time this year on Wednesday. Traders see an 87.6-percent chance of a 25-basis-point rate hike, according to the CME Group's Fedwatch tool. Investors will watch for the central bank's forecast on future rate hikes and its view on the health of the economy. On the data front, U.S. producer prices rose in November as gasoline prices surged and the cost of other goods increased, leading to the largest annual gain in nearly six years. The fairly strong report from the Labor Department on Tuesday suggested a broad acceleration in wholesale price pressures, which could assuage concerns among some Federal Reserve officials over persistently low inflation. The dollar index hit 94.219, the highest since Nov. 14, before falling back to 94.138.
Equities Recap
Mergers and acquisitions dominated European share trading on Tuesday, while strength in oil stocks after a pipeline shutdown helped lift a key regional benchmark index to five-week highs.
UK's benchmark FTSE 100 closed up by 0.63 percent, the pan-European FTSEurofirst 300 ended the day up by 0.69 percent, Germany's Dax ended up by 0.41 percent, France’s CAC finished the day up by 0.66 percent.
The S&P 500 and the Dow registered record closing highs on Tuesday with a boost from bank stocks as investors eyed a potential cut in U.S. corporate taxes and continued economic growth after strong inflation data.
Dow Jones closed up by 0.51 percent, S&P 500 ended up 0.17 percent, Nasdaq finished the day down by 0.17 percent.
Treasuries Recap
U.S. Treasury yields rose on Tuesday as stronger-than-forecast data on producer prices in November offset average demand at a $12 billion auction of 30-year bonds.
The 10-year Treasury yield was 2.407 percent, up 2.2 basis points from late on Monday, while the 30-year yield increased 1.5 basis points to 2.787 percent.
Two-year yields edged up 0.8 basis point at 1.831 percent after touching 1.847 percent which was the highest since October 2008, data showed.
Commodities Recap
Gold prices retreated to a near five-month low on Tuesday as investors braced for a widely expected U.S. interest rate increase this week and looked for clues about further hikes from the Federal Reserve.
Spot gold fell 0.1 percent to $1,240.64 an ounce by 1:36 p.m. EST (1836 GMT), after hitting its lowest since July 20 at $1,235.92.
U.S. gold futures for February delivery settled down $5.20, or 0.4 percent, at $1,241.70 per ounce.
Oil prices fell sharply on Tuesday, as traders took profits after prices surged early to a two-year high on an unplanned closure of the pipeline that carries the largest North Sea crude oil grade.
Brent crude lost $1.58, or 2.4 percent, to $63.09 as of 2:11 p.m. EST (1911 GMT). U.S. crude fell $1.08 a barrel to $56.91
