Market Roundup
• US Current Account Q1 -116.8b vs -123.8b forecast, -114.0b.
• US Redbook MM w/e +0.7%, 0.5% previous.
• US Redbook YY +2.8%, 2.1% previous.
• CA Wholesale Trade MM Apr +1.0% vs 0.5%, +1.2% previous.
• Fed's Evans: He's 'nervous' about recent soft inflation, challenging to get back to 2%.
• Evans says probably 'pretty close' to point where Fed will begin reducing balance sheet.
• Fed’s Rosengren: Low-interest rates do pose financial stability issues.
• Philly Fed's regional price gauges plummet in June.
• House Speaker Ryan says various probes won't hurt tax reform effort – CNBC.
• Speaker Ryan says cannot get to 3% growth without tax reform- CNBC.
• Bank of England's Carney says now not the time to raise rates.
• Another election could be negative for Britain's rating, S&P warns.
• Drop in Brazil's monthly tax haul casts shadow on economic recovery.
• S&P warns South Africa over meddling with central bank independence.
Looking Ahead - Economic Data (GMT)
• No significant data
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.1084 levels and currently trading at 1.1124 levels. The pair has made session high at 1.1153 and hit lows at 1.1116 levels. The euro declined against the U.S. dollar on Tuesday as the greenback strengthened for the second day as Federal Reserve officials maintained a hawkish tone on hiking interest rates. The greenback grinded higher following comments from New York Fed President William Dudley on Monday who said further improvement in the U.S. labor market would kindle inflation, which has shown signs of flagging in recent months. If it were to rebound, this would leave the door open for the possibility of another rate hike by year-end after two hikes so far this year. The U.S. central bank as expected raised key overnight borrowing costs by a quarter-point to 1.00-1.25 percent last Wednesday. The dollar also received support on remarks from top Republicans who spoke of completing U.S. tax reform in 2017, widely seen as a likely boost to economic growth. The index that tracks the greenback versus six currencies was up 0.3 percent at 97.800 after touching 97.871 earlier Tuesday, which was the highest since May 18.The euro fell to a three-week low of $1.1117.
GBP/USD is supported in the range of 1.2600 levels and currently trading at 1.2620 levels. It reached session high at 1.2655 and dropped to session low at 1.2600 levels. Sterling declined against the dollar on Tuesday as sterling came under selling pressure following dovish comments from Bank of England Governor Mark Carney. The British pound fell almost a cent against its U.S. counterpart after BoE Governor Mark Carney said now was not the time to raise UK interest rates. Sterling sank to a one-week low of $1.2603 from $1.2758 after the text of Carney's Mansion House speech was released. It was last trading at $1.2627. Investors also kept a wary eye on politics, with the dual uncertainty of having no government at home 12 days after a parliamentary election and talks, which began on Monday, on Britain's exit from the European Union also added pressure on the pound. Prime Minister Theresa May is still in talks with Northern Ireland's Democratic Unionist Party (DUP) to form a government after her gamble on a snap election backfired, eroding her majority in parliament.
USD/CAD is supported at 1.3206 levels and is trading at 1.3251 levels. It has made session high at 1.3285 and lows at 1.3248 levels. The Canadian dollar declined against its U.S. counterpart on Tuesday as Canadian dollar was pressured by lower oil prices and broader gains for the greenback. The U.S. dollar reached a three-week high against a basket of major currencies, boosted by comments from the U.S. Federal Reserve bolstering expectations that it would keep raising interest rates. Prices of oil, one of Canada's major exports, fell to seven-month lows on news of boosted supply by several key producers. On the data front, Canadian wholesale trade rose 1.0 percent in April from March, led by higher sales in the machinery, equipment and supplies subsector, Statistics Canada said. Analysts surveyed had forecast a 0.5 percent increase. The Canadian dollar was last trading at C$1.3263 against the greenback, or 75.40 U.S. cents, down 0.3 percent. The loonie traded in a range of C$1.3205 to C$1.3284. Last week, it touched its strongest in 3-1/2 months at C$1.3165.
AUD/USD is supported around 0.7565 levels and currently trading at 0.7580 levels. It hit session high at 0.7601 and made session lows at 0.7570 levels. The Australian dollar declined against the greenback in the US session on Tuesday as firmer dollar and lower oil prices pushed Australian dollar lower. Australian dollar earlier in the Asian session powered up to daily high as the Australian central bank reaffirmed the long-term outlook for steady interest rates. Minutes of the Reserve Bank of Australia's (RBA) June policy meeting showed a heightened sense of concern over financial stability as households struggle with record levels of debt. The central bank has repeatedly warned that cutting rates further would only stoke the borrowing binge in housing. Yet neither is it in any position to tighten as household incomes are already being squeezed by paltry wages growth. The Reserve Bank of Australia (RBA) last cut interest rates in August 2016. It has since stood pat, juggling the risks of record household debt, tepid inflation and weak consumer spending. Aussie was last trading down 0.24 percent against the greenback at $0.7582. It reached a 10-week top of $0.7636 last week but has since failed repeatedly to sustain a breach of resistance above $0.7630.
Equities Recap
Stocks sensitive to the price of oil fell on Tuesday, putting pressure on European shares, with the pan-European benchmark ending lower after a strong start to the session.
UK's benchmark FTSE 100 closed down by 0.5 percent, FTSEurofirst 300 ended the day down by 0.54 percent, Germany's Dax ended down by 0.5 percent, France’s CAC finished the day down by 0.2 percent.
U.S. stocks fell from record levels on Tuesday as a sharp drop in oil prices hurt energy stocks and some investors were wary of a congressional election in Georgia.
Dow Jones closed down by 0.29 percent, S&P 500 ended down 0.67 percent, Nasdaq finished the day down by 0.82 percent.
Treasuries Recap
The U.S. Treasury yield curve flattened to its lowest levels since December 2007 as more hawkish Federal Reserve officials led intermediate-dated notes to underperform long-term bonds, which are being supported by falling inflation.
The yield curve between five-year notes and 30-year bonds flattened to 96 basis points on Tuesday, the lowest since December 2007.
Benchmark 10-year notes were last up 8/32 in price to yield 2.16 percent, down from 2.19 percent late on Monday.
Commodities Recap
Gold inched down to a five-week low on Tuesday as the dollar rose following hawkish comments from an influential U.S. Federal Reserve official and dovish remarks from the Bank of England governor.
Spot gold was down 0.03 percent at $1,242.36 an ounce by 2:35 p.m. EDT (1835 GMT), after touching a low of $1,241, the weakest since May 17.U.S. gold futures settled down 0.3 percent at $1,243.50.
Oil fell about 2 percent on Tuesday, with Brent settling at seven-month lows and U.S. crude at its cheapest since September, after increased supply from several key producers overshadowed high compliance by OPEC and non-OPEC oil producers with a deal to cut global output.
Brent ended 89 cents lower at $46.02 a barrel, its lowest settlement since Nov. 15, two weeks before the Organization of the Petroleum Exporting Countries and other producers agreed to cut output by 1.8 million barrels per day (bpd) for six months from January.
The U.S. crude futures contract for July, due to expire later on Tuesday, settled down 97 cents at $43.23, the lowest since Sept. 16.
