Market Roundup
• US MBA Mortgage application -4.1%, 2.4% -previous (biggest weekly drop since Dec.).
• US MBA 30-Yr Mortgage rate 4.23%, 4.23% - previous.
• UK Weekly earnings ex-bonuses falls in real terms by 0.2% YY in Q1, first decline since Q3 2014.
• Fed's Kashkari: Rate hikes to address asset bubbles should only be used as last resort.
• Markets spooked by reports of Comey memo about Trump interference with the federal investigation.
• Morgan Stanley: Approaching peak in PMIs and EPS momentum in Europe.
• US Senator Wyden: Trump administration considering currency clause in NAFTA renegotiations.
• SNB Chairman Thomas Jordan: Still ready to intervene in forex market.
• Germany's Spahn: ECB should ensure exit from extraordinary monetary policy does not occur too late.
• Real Brexit transition period is now, before withdrawal, and all economic players should prepare -EU's Barnier.
• UK PM May endorses Fin Min Hammond after reports of rift.
• Puerto Rico creditors open to mediation in bankruptcy court.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan GDP QQ 0.4% forecast, 0.3% -previous
• 23:50 Japan GDP QQ Annualised 1.7% forecast, 1.2% - previous
• 01:30 Australia Unemployment rate 5.9% forecast, 5.9% - previous
• 01:30 China-China house prices YY* 11.3% - previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.1045 levels and currently trading at 1.1157 levels. The pair has made session high at 1.1159 and hit lows at 1.1098 levels. Euro rose against the dollar on Wednesday as euro was boosted by political turmoil and weak economic data in the United States reduced expectations of aggressive interest rate rises this year. U.S. President Donald Trump is under pressure to explain whether he tried to interfere with a federal investigation after reports that he asked then-FBI Director James Comey to end a probe into his former national security adviser Michael Flynn. The tumult at the White House prompted currency traders to ditch the dollar to favour a broad range of currencies, most notably against the yen, to which investors often turn as a safe haven when there are problems in the United States. The dollar index, which tracks the U.S. currency against six peers and had scaled a 14-year peak of 103.82 on Jan. 3, fell 0.6 percent to its lowest level since Nov. 9, surrendering all of its "Trump bump" gains. The euro climbed above $1.11 overnight and hit $1.1157, its highest level since Nov. 9.
GBP/USD is supported in the range of 1.2902 levels and currently trading at 1.2967 levels. It reached session high at 1.2989 and dropped to session low at 1.2931 levels. Sterling gained against the dollar on Wednesday as doubts about U.S. President Donald Trump's political future weighed on the dollar. The pound rose back to the top of the past month's range versus the dollar, bouncing to as high as $1.2991 as risk aversion intensified in the early US session. It spent most of the day hovering near $1.2950 after an initial dip following UK wage and jobs numbers before retreating to $1.2942 by 1600 GMT, still up 0.2 percent on the day. The dollar has weakened on reports that Donald Trump disclosed classified information to Russia's foreign minister and asked then-FBI Director James Comey to end his agency's investigation of former National Security Advisor Michael Flynn. Both cast doubt on how effective his administration could be now and spurred investors to rein in the expectations for higher inflation and a stronger dollar with which they greeted the new administration last year.
USD/CAD is supported at 1.3569 levels and is trading at 1.3606 levels. It has made session high at 1.3640 and lows at 1.3569 levels. The Canadian dollar pared some of this week's gains on Wednesday against its U.S. counterpart as political uncertainty in Washington supported safe-haven currencies, while domestic manufacturing sales rose in line with economists' expectations. Manufacturing sales rebounded 1.0 percent in March, driven by gains in the motor vehicle sector and record sales in the food industry, data from Statistics Canada showed. Losses for the loonie came even as prices of oil, one of Canada's major exports, climbed. U.S. crude prices were up 1.1 percent at $52.21 a barrel after of U.S. crude inventory data. The U.S. Energy Information Administration said U.S. crude inventories fell 1.8 million barrels for the week to May 12, less than the 2.4 million barrels that had been forecast. Gasoline and distillate stocks also dropped. A more uncertain trade outlook with the United States and troubles at an alternative mortgage lender had helped pressure the Canadian dollar to a 14-month low at C$1.3793 earlier this month. The Canadian dollar was last trading at C$1.3606 to the greenback, or 73.39 U.S. cents, down 0.1 percent. The currency, which has gained 0.6 percent this week, traded in a range of C$1.3580 to C$1.3638.
USD/JPY is supported around 110.57 levels and currently trading at 110.94 levels. It hit session high at 112.51 and made session lows at 110.88 levels. The U.S. dollar declined sharply against the Japanese yen on Wednesday as investors sought safety as talk that U.S. President Donald Trump could face the threat of impeachment boosted safe-haven Japanese yen. News emerged on Tuesday that Trump had asked his now-dismissed FBI chief James Comey to end the agency's investigation into ties between former White House national security adviser Michael Flynn and Russia. That raised questions about whether Trump tried to interfere with a federal investigation, spurring speculation over the likelihood of an early exit from office for the former businessman. While Wednesday's price action showed traders were losing faith in Trump's ability to push through his campaign trail promises of tax reform and fiscal stimulus, there was limited expectation that he would realistically face impeachment. The dollar fell by as much as 1.45 percent against the yen, beaching through the 112 yen level to last trade at 111.00 yen.
Equities Recap
European shares suffered their worst day since September on Wednesday as political turmoil in the United States pushed investors into safe havens following a strong run that sent regional benchmarks to record highs.
UK's benchmark FTSE 100 closed down by 0.25 percent, FTSEurofirst 300 ended the day down by 1.36 percent, Germany's Dax ended down by 1.4 percent, France’s CAC finished the day down by 1.8 percent.
The S&P 500 on Wednesday suffered its biggest one-day fall since September as hopes for tax cuts and other pro-business policies faded after reports that President Donald Trump tried to interfere with a federal investigation.
Dow Jones closed up by 1.76 percent, S&P 500 up down 1.80 percent, Nasdaq finished the day up by 2.56 percent.
Treasuries Recap
U.S. Treasury yields were on track on Wednesday for their biggest daily percent drop since July as concerns grew that allegations against U.S. President Donald Trump would delay his efforts to cut taxes and increase infrastructure spending.
Benchmark 10-year notes gained a full point in price to yield 2.22 percent, the lowest level since April 21, and down from 2.33 percent late on Tuesday.
The yield curve between two-year notes and 10-year notes flattened to the lowest level since Nov. 3 as investors reached for longer duration bonds.
Commodities Recap
Oil prices settled at a two-week high on Wednesday after U.S crude inventories declined for the sixth straight week, a positive sign for markets ahead of next week's OPEC meeting, where major oil producers are expected to extend supply cuts.
Brent crude settled 56 cents firmer at $52.21, a 1.1 percent gain, while U.S. light crude closed 41 cents higher at $49.07, its highest close since April 28.
Gold rose to a two-week high on Wednesday as political turmoil in the United States reduced expectations of aggressive interest rate rises this year, pushed down U.S. bond yields and drove the dollar to its lowest in six months.
Spot gold rose for the fifth day and was up 1.8 percent at $1,258.28 an ounce by 2:40 p.m. EDT (1840 GMT), after hitting $1.260.20, the highest since May 1. It was on track for its biggest one-day gain since June 2016.U.S. gold futures settled up 1.8 percent at$1,258.70.
