Market Roundup
• US Jan Federal Budget,$, 49.00B, 51.00B forecast, -23.00B previous.
• U.S. inflation expectations dip after run-up -NY Fed survey.
• Pence raises prospect of talks with N. Korea while applying “maximum pressure”.
• Bank of England's Vlieghe says further rate rise likely.
• Merkel, SPD under renewed fire over German coalition deal.
Looking Ahead - Economic Data (GMT)
• 12 Feb 23:50 Japan Jan Corp Goods Price MM, 0.2% forecast, 0.2% previous
• 12 Feb 23:50 Japan Jan Corp Goods Price YY, 2.7% forecast, 3.1% previous
• 13 Feb 00:30 Australia Jan NAB Business Conditions, 13 previous
• 13 Feb 00:30 Australia Jan NAB Business Confidence, 11 previous
Looking Ahead - Events, Other Releases (GMT)
• 13:00 Federal Reserve Bank of Cleveland President Loretta Mester speaks on the economic outlook at the Dayton Area Chamber of Commerce Government Affairs Breakfast - Ohio
• 08:00 Riksbank monetary policy meeting – Stockholm
Currency Summaries
EUR/USD is likely to find support at 1.2200 levels and currently trading at 1.2282 levels. The pair has made session high at 1.2289 and hit lows at 1.2232 levels. Euro strengthened against the dollar on Monday following its best week against the single currency in nearly 15 months, as U.S. stocks recovered a bit from the dramatic selloff that saw the S&P 500's sharpest decline in more than two years. The selloff across asset classes forced investors betting against the U.S. currency to unwind their positions. The dollar also benefited as nervous investors bought the relative safety of some U.S. assets. Speculators' net short U.S. dollar bets declined for the first time in six weeks, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The index that tracks the dollar against a basket of currencies was down 0.2 percent at 90.291, erasing some of the gains last week. The euro was up 0.25 percent from Friday's close at $1.2283, after earlier hitting a day's high of $1.2296. The euro suffered its worst week since November 2016 last week and remains almost three cents off its three year high of $1.2538 hit in January.
GBP/USD is supported in the range of 1.3765 levels and currently trading at 1.3825 levels. It reached session high at 1.3832 and dropped to session low at 1.3792 levels. Sterling edged lower against the greenback on Monday as sterling was weighed down by uncertainty among investors over whether Britain would succeed in securing a post-Brexit transition period. The pound skidded on Friday after the EU's chief Brexit negotiator Michel Barnier warned a transition deal was far from assured. Those comments, as well as broad strength in the dollar amid a sharp stock market sell-off, handed sterling its biggest weekly falls since October, as investors worried that Britain could leave the European Union in a disorderly manner. The pound's losses came despite a surprisingly hawkish policy meeting from the Bank of England, which said interest rates could rise sooner and by a bit more than investors were expecting. Markets moved to price in a 70 percent chance of a rate hike in May after the meeting, and sterling jumped by more than 1 percent against the dollar and euro, but its gains were short-lived. The pound slipped 0.1 percent to $1.3832, close to Friday's three-week low of $1.3764. It was also 0.3 percent weaker against the euro at 88.82 pence.
USD/CAD is supported at 1.2552 levels and is trading at 1.2602 levels. It has made session high at 1.2621 and lows at 1.2553 levels. The Canadian dollar was little changed on Monday against its U.S. counterpart after hitting a six-week low at the end of last week, helped by higher oil and stock prices. The price of oil, one of Canada's major exports, recovered some of last week's steep losses as global equities steadied after their largest one-week slide in two years. The Canadian dollar was trading 0.1 percent lower at C$1.2590 to the greenback, or 79.43 U.S. cents. The currency traded in a range of C$1.2556 to C$1.2607. On Friday, it touched its weakest since Dec. 27 at C$1.2690 after domestic data showed the biggest decline in jobs since January. Commodity-linked currencies, such as the Canadian dollar tend to underperform when stocks fall. Still, speculators raised bullish bets on the Canadian dollar for the fifth straight week, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Feb. 6, net long positions had risen to 40,164 contracts from 33,465 a week earlier. The Canadian Real Estate Association will release its monthly home sales report on Thursday. Canada's manufacturing sales report for December is due on Friday.
AUD/USD is supported around 0.7800 levels and currently trading at 0.7843 levels. It hit session high at 0.7847 and made session lows at 0.7820 levels. The Australian dollar strengthened against US dollar on as a rebound in equity markets restored risk appetite, though sentiment was still jittery ahead of U.S. inflation data. It also helped higher-yielding emerging market currencies as well as commodity-linked currencies like the Australian and Canadian dollars. Worries about inflation in the United States surfaced after data this month showed jobs growth surged and wages rose, bolstering expectations that the U.S. labor market would hit full employment this year. U.S. inflation data for January is due on Wednesday and the U.S. Federal Reserve next meets on March 20-21. World shares rallied on Monday in a broad advance that brushed off fresh rises in global bond yields that have been driven by inflation fears as investors shifted asset allocations after the worst week in global markets in the past two years. The Australian dollar was last up 0.4 percent at $0.7844, after falling as deep as $0.7759 on Friday which was the lowest since late December. The Aussie has slipped in eight of the last 10 sessions amid a financial market rout which saw a rapid flight to safer assets such as the yen and cash.
Equities Recap
European shares rebounded from six-month lows on Monday as jitters over a sudden spike in volatility that wiped off $1 trillion in market capitalisation last week appeared to ease.
UK's benchmark FTSE 100 closed up 1.2 percent, FTSEurofirst 300 ended the day up by 1.33 percent, Germany's Dax ended up by 1.7 percent and France’s CAC finished the day down by 1.5 percent.
Technology and financial shares led Wall Street's main indexes higher for a second straight session on Monday, with steady bond yields and volatility also helping the stock market bounce back from its worst week in two years.
Dow Jones closed down by 0.02 percent, S&P 500 ended down 0.35 percent, Nasdaq finished the day down by 0.50 percent.
Treasuries Recap
U.S. Treasury yields rose on Monday, with benchmark 10-year yields hitting a four-year high and those on 30-year bonds climbing to an 11-month peak, as a stock rally and improving risk appetite diminished the safe-haven appeal of government debt.
In late trading, U.S. 10-year yields were up at 2.851 percent, from 2.831 percent late on Friday. Earlier in the session, 10-year yields hit 2.902 percent, the highest since January 2014.
U.S. 30-year bond yields rose to 3.145 percent , from Friday's 3.139 percent. The yield on this maturity touched an 11-month peak of 3.139 percent earlier in the session.
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Commodities Recap
Gold prices rose on Monday as the dollar eased, but gains are expected to be muted ahead of inflation data from the United States later this week that could mean U.S. interest rates rise faster than expected.
Spot gold was up 0.5 percent at $1,323.16 an ounce by 2:26 p.m. EST (1926 GMT). It has fallen more than 3 percent since hitting a 17-month peak at $1,366.07 in January. U.S. gold futures settled up 0.8 percent at $1,326.40.
Oil rose on Monday, as it began to recoup some of last week's steep losses as global equities steadied after their biggest one-week decline in two years.
Brent crude futures rose 67 cents, or 1.1 percent, to $63.46 a barrel by 10:55 a.m. EST [1555 GMT].
U.S. West Texas Intermediate crude futures for March delivery rose 77 cents to $59.97 a barrel, a 1.3 percent gain. Earlier in the session, U.S. crude rallied to $60.83.
