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Americas Roundup: Dollar rises after strong U.S. data, Euro falls after Draghi press conference, then rebounds-January 20th, 2017


Market Roundup

•    US housing starts surge in Dec +11.3%; 1.226m v 1.2m forecast, 1.102m previous.

•    US initial jobless claims near 43-yr low; 234k v 254k forecast, 249k previous.

•    Philly Fed bus index 23.6 v 15.8 forecast, 21.5 previous; new orders, prices paid& employment higher.

•    USD gains, euro dips after solid U.S. data, ECB meeting, Fed-ECB monetary policy divergence again grabs investors.

•    EGB yields spike as Yellen comments add to pressure on ECB, Draghi plays down inflation pick-up, ECB divisions.

•    US TSY Sec-Nominee Mnuchin: NAFTA negotiated a long time ago should be reopened.

•    ECB: Maintains stimulus, tells critics: "Be Patient"; Rates & QE unchanged.

•    ECB: Growth improving but fraught with risk.

•    ECB’s Draghi: Inflationary pressures "subdued", key question on 2nd round effects, deflation risk disappeared.

•    ECB’s Draghi: stands ready to revise APP strategy as needed.

•    Davos: PM May unveils post-Brexit vision, Says post-Brexit UK will stay heavily engaged in Europe.

•    OPEC output cuts under scrutiny as market tightens –IEA.

Looking Ahead - Economic Data (GMT)

•    --:-- China Urban investment (ytd)yy Dec forecast 8.3%, 8.3%-previous

•    --:-- China Industrial Output YY* Dec forecast 6.1%, 6.2%- previous

•    --:-- China Retail Sales YY* Dec forecast 10.7%, 10.8%- previous

•    --:-- China GDP YY* Q4 forecast 6.7%, 6.7%- previous

•    --:-- China GDP QQ SA Q4 forecast 1.7%, 1.8%- previous

•    23:00 Japan Reuters Tankan DI Jan 16- previous

Looking Ahead - Events, Other Releases (GMT)

•    --:-- Japan BoJ Deputy Gov Nakaso to attend a meeting of the International Bankers Association of Japan

Currency Summaries

EUR/USD is likely to find support at 1.0580 levels and currently trading at 1.0660 levels. The pair has made session high at 1.0665 and hit lows at 1.0588 levels. The euro slipped against the U.S. dollar on Tuesday as euro was weighed down after European Central Bank chief Mario Draghi alluded to sagging inflation and the need for further monetary policy assistance. The ECB announced it would maintain its negative interest rate policy and maintain a record pace of asset purchases to stimulate tepid growth. Draghi described the current eurozone recovery as dampened by the sluggish pace of structural reform and said a very substantial degree of monetary policy stimulus was still needed. That helped the dollar add to Wednesday's gains that followed remarks from Federal Reserve Chair Janet Yellen who said a "few" increases in U.S interest rates could be appropriate this year. The greenback gained as much as 1 percent on Wednesday after Yellen's speech, which turned investors back to the narrative of strong growth and rising inflation in the U.S. that drove the currency higher. However, euro recovered as investors parsed Draghi's statement and noted that no changes to policy had been announced. The continental currency was last up 0.25 percent at $1.0658.

GBP/USD is supported in the range of 1.2252 levels and currently trading at 1.2336 levels. It reached session high at 1.2341 and dropped to session low at 1.2272 levels. Sterling clawed back above $1.2300 in the late US session after initially declining in the early US session as dollar rally faded as investors were cautious ahead of the inauguration on Friday of President-elect Donald Trump, who has mixed promises of tax cuts and infrastructure spending. Sterling climbed 0.5 percent to $1.2320, having been knocked as low $1.2254 overnight by comments from Federal Reserve head Janet Yellen that U.S. interest rates are likely to continue to gradually climb. The dollar index, which tracks the greenback against the euro, yen, Canadian dollar and three other major currencies, was last up 0.25 percent at 101.170. Investors were cheered by data from the U.S, but with Donald Trump set to formally assume the United States Presidency on Friday investors were largely cautious.

USD/CAD is supported at 1.3180 levels and is trading at 1.3313 levels. It has made session high at 1.3353 and lows at 1.3268 levels. The Canadian dollar lost ground against its U.S. counterpart on Thursday as a batch of solid U.S. economic strengthened greenback. The dollar rose 0.5 percent against a basket of major currencies, boosted by the solid U.S. data and Federal Reserve Chief Janet Yellen comments a day ago about a path of steady interest rate increases, signaling economic strength. The dollar also was bolstered by rosy reports on U.S. jobless claims and housing starts. The Labor Department reported that the number of Americans filing for unemployment benefits last week fell to the lowest levels in decades, while the Commerce Department said homebuilding jumped more than expected in December, showing the housing market may have been a major contributor to economic growth in the fourth quarter. The Canadian dollar was last trading at C$1.3308 to the greenback, or 75.22 U.S. cents, weaker than Wednesday's close of C$1.3259, or 75.42 U.S. cents.

AUD/USD is supported around 0.7470 levels and currently trading at 0.7557 levels. It hit session high at 0.7559 and made session lows at 0.7531 levels. Australian dollar declined modestly against US dollar on Thursday as US dollar staged a rebound after upbeat US economic data and Federal Reserve Chair Janet Yellen suggested U.S. interest rates could rise quickly this year. The Australian dollar was trading at $0.7556 in the late US trading as it slightly declined from daily high of $0.7569 touched early in the European session. Australian employment data for December failed to inspire traders with the jobless rate ticking up to a six-month high even though full-time work rose for a third straight month Australian employment rose moderately in December as full-time jobs increased for a third straight month, though the unemployment rate still ticked up to its highest since June as more people went looking for work. Thursday’s data from the Australian Bureau of Statistics showed employment rose a net 13,500 in December, just topping forecasts of 10,000 and a third month of gains. The unemployment rate edged up a tenth of a percentage point to 5.8 percent, though that remains within the tight range that has held for the past year.

Equities Recap

European stocks dipped on Thursday, though Zodiac Aerospace's shares surged after a takeover offer by France's Safran and Moneysupermarket.com also jumped after it reported strong results.

The UK's benchmark FTSE 100 closed down by 0.6 percent, FTSEurofirst 300 ended the day down by 0.19 percent, Germany's Dax ended flat, and France’s CAC finished the day down by 0.4 percent.

U.S. stocks fell on Thursday, led by declines in utilities and energy shares, with investors cautious ahead of Donald Trump's inauguration on Friday.

Dow Jones closed down by 0.37 percent, S&P 500 ended down 0.37 percent, Nasdaq finished the day down by 0.29 percent.

Treasuries Recap 

U.S. Treasury yields surged to two-week highs on Thursday after data showed solid economic growth, a day after Federal Reserve Chair Janet Yellen signaled further interest rate hikes are likely.

Benchmark 10-year notes fell 23/32 in price to yield 2.47 percent, up from 2.39 percent late on Wednesday. The yields reached as high as 2.496 percent, the highest since Jan. 3, and have jumped from a low of 2.31 percent on Tuesday.

Commodities Recap

Gold steadied on Thursday, giving up earlier losses as the dollar and U.S. bond yields pared gains, following earlier pressure from strong U.S. economic data and support from Federal Reserve Chair Janet Yellen for higher U.S. interest rates.

Spot gold turned up 0.1 percent to $1,205.14 an ounce by 2:58 p.m. EST (1958 GMT), having dropped by 1.1 percent in the previous session, its biggest fall since Dec. 15.U.S. gold futures settled down 0.9 percent at $1,201.50.

Oil prices edged higher on Thursday, but swelling U.S. crude stockpiles limited the rebound from a one-week low after the International Energy Agency said oil markets had been tightening even before cuts agreed by OPEC and other producers took effect.

Brent crude ended the session at $54.16 per barrel, up 24 cents or 0.45 percent after closing down 2.8 percent in the previous session. U.S. crude settled 29 cents, or 0.57 percent, higher at $51.37 a barrel, having dropped to a one-week low on Wednesday of $50.91.
 

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