Market Roundup
• US Fed Funds Target Rate N/A, 1.00-1.25%, 1.125% forecast 1.125% previous.
• US Existing Home Sales Aug, 5.35M, 5.46M forecast, 5.44M previous.
• US Existing Home Sales % Change Aug, -1.7%, 0.3% forecast, -1.3% previous.
• US MBA Mortgage Applications w/e, -9.7%, 9.9% previous.
• US Mortgage Market Index w/e, 417.5, 462.1 previous.
• US MBA Purchase Index w/e, 224.7, 252.0 previous.
• Japan's Abe promises 'daring policies' to boost economy.
• Iran says it does not expect the US to leave nuclear deal.
• US allies say sanctions the key to ending North Korea standoff.
• Argentina plans two more bond issues in 2017 -finance minister.
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand GDP Production QQ Q2, 0.8% forecast, 0.5% previous
• 22:45 New Zealand GDP-Annual-Avg, Prod-Bas Q2, 2.8% forecast, 3.0% previous
• 22:45 New Zealand GDP-Annual Q2, 2.5% forecast, 2.5% previous
• 22:45 New Zealand GDP Expenditure QQ Q2, 1.2% forecast, 0.2% previous
Looking Ahead - Events, Other Releases (GMT)
• 09:30 ECB’s Praet chairing the policy panel at the ECB conf. in Frankfurt
• 13:15 ECB’s Draghi gives welcome remarks at the 2nd ESRB annual conf. in Frankfurt
• N/A ECB general council meeting in Frankfurt
Currency Summaries
EUR/USD is likely to find support at 1.1840 levels and currently trading at 1.1897 levels. The pair has made session high at 1.2032 and hit lows at 1.1860 levels. The euro declined against the dollar on Wednesday as the dollar gained strength after the U.S. Federal Reserve signaled it expects one more rate hike by the end of the year. In its statement, the Fed, as expected, left rates unchanged and also said it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities. New economic projections released after the Fed's two-day policy meeting showed 11 of 16 officials see the "appropriate" level for the federal fund's rate, the central bank's benchmark interest rate, to be in a range between 1.25 percent and 1.50 percent by the end of 2017. The Fed, as expected, also said it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities by initially cutting up to $10 billion each month from the amount of maturing securities it reinvests. That action will start a gradual reversal of the three rounds of quantitative easing the Fed pursued between 2008 and 2014 to stimulate the economy after the 2007-2009 financial crisis and recession. The dollar index rose 0.75 percent, while euro down 0.83 percent to $1.1892.
GBP/USD is supported in the range of 1.3375 levels and currently trading at 1.3493 levels. It reached session high at 1.3654 and dropped to session low at 1.3445 levels. Sterling initially strengthened against the U.S. dollar on Wednesday but gave up some ground as U.S. dollar gained sharply after the release of the Fed's policy statement. Sterling had been creeping higher before the Fed released a statement about its latest two-day policy meeting, then reversed course and fell. It briefly sank below the $1,3500 mark that traders had viewed as psychological support. Sterling was trading lower 0.10 percent at 1,3493 against the dollar in the late US session. The pound rose by almost 4 percent on a trade-weighted basis last week, after the BoE said it was likely to raise interest rates in the "coming months" if the economy and inflation pressures strengthen as anticipated. Policymakers from the Bank have reinforced that message in subsequent comments. But market players still saw political headwinds for the currency and said a speech Prime Minister Theresa May was to give in Italy on Friday about the outlook for Britain's planned exit from the European Union could knock sterling back.
USD/CAD is supported at 1.2190 levels and is trading at 1.2324 levels. It has made session high at 1.2388 and lows at 1.2191 levels. The Canadian dollar weakened against its U.S. counterpart on Wednesday as the greenback rose across the board against a basket of major currencies after U.S. central bank signaled it expects one more interest rate hike by the end of the year. The dollar rose after the Fed, as expected, left rates unchanged and also said it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities. Oil prices were higher. They earlier pared gains after data showed a bigger-than-expected build in U.S. crude inventories. U.S. crude oil stockpiles jumped last week as imports and production increased, the U.S. Energy Information Administration said, as operations resumed from the impact of Hurricane Harvey which hit the Gulf Coast on Aug. 25.On Monday, the loonie touched its weakest in nearly two weeks at C$1.2338 after a Bank of Canada policymaker said the currency's strength will be a factor in future interest rate decisions. The Canadian dollar was trading at C$1.2257 to the greenback, or 81.59 U.S. cents, up 0.3 percent. The currency traded in a range of C$1.2236 to C$1.2302.
USD/JPY is supported around 111.00 levels and currently trading at 112.11 levels. It peaked to hit session high at 112.53 and made session lows at 111.10 levels. The U.S. dollar rose sharply against the yen on Wednesday after the Federal Reserve signaled that it expects another rate hike by year-end and disclosed timing for reducing its balance sheet. The Fed left interest rates unchanged on Wednesday but signaled it still expects one more increase by the end of the year despite recent weak inflation readings. As expected, it said it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities by initially cutting up to $10 billion each month from the amount of maturing securities it reinvests. That should shed nearly $300 billion in bonds over the first 12 months, and nearly $500 billion over the second, according to analysts' projections. Fed officials have predicted the overall portfolio could shrink to between $2.5 trillion to $3.5 trillion by early next decade, though they have stressed there is no need to decide anytime soon. The U.S. currency was steady on the day against its Japanese counterpart at 112.11 yen JPY, moving above the psychological barrier of 112.00 yen.
Equities Recap
Deal-making and political turmoil in Spain livened up a flat session in Europe' stock markets on Wednesday as investors awaited pointers from the Federal Reserve on the U.S. interest rate outlook.
UK's benchmark FTSE 100 closed down by 0.11 percent, the pan-European FTSEurofirst 300 ended the day down by 0.14 percent, Germany's Dax ended up by 0.06 percent, France’s CAC finished the day up by 0.06 percent.
The S&P 500 ended slightly higher on Wednesday after the Federal Reserve signaled that it expects another rate hike by year-end and said it would begin reducing its balance sheet.
Dow Jones closed up by 0.17 percent, S&P 500 ended up 0.05 percent, Nasdaq finished the day up by 0.09 percent.
Treasuries Recap
Benchmark U.S. Treasury yields jumped to their highest levels in six weeks on Wednesday after the Federal Reserve’s statement from its September meeting was interpreted as keeping a December interest rate hike on the table.
Benchmark 10-year notes in price to yield 2.29 percent, up from 2.24 percent before the Fed’s statement and the highest level since Aug. 8.
Commodities Recap
Gold prices fell 1 percent on Wednesday after the U.S. Federal Reserve left interest rates unchanged but signaled it still expected to tighten credit by year-end.
Spot gold was down 1 percent at $1,298.1 an ounce by 2:37 p.m. EDT (1837 GMT)). It retraced losses and within about 15 minutes was back above the $1,300 level. The most active U.S. gold futures for December delivery settled up $5.80, or 0.44 percent, at $1,316.40 per ounce.
Oil prices rose nearly 2 percent on Wednesday, despite a rise in U.S. crude inventories, with the market heading for its largest third-quarter gain in 13 years after the Iraqi oil minister said OPEC and its partners were considering extending or deepening output cuts.
Brent crude futures rose $1.06, or 1.9 percent, to $56.20 a barrel by 12:19 p.m. EDT (1619 GMT), while U.S. West Texas Intermediate (WTI) crude futures gained 91 cents, or 1.8 percent, to $50.39.
