Market Roundup
• Fed hikes rate 25bps as expected vote was 9-1 Kashkari voted to hold, signal total 3 hikes in 2017.
• Fed: Consensus firms for 3 hikes in 2017 sees faster pace of increases in 2019, 2018 and longer-run unchanged.
• Fed’s Yellen: basis for hike is progress of economy, says monetary policy is currently accommodative.
• Fed’s Yellen: Economic outlook is highly uncertain, Additional gradual rate hikes are likely to be appropriate over next few years.
• US retail sales 0.1% v 0.1% forecast 0.6% previous, weakest in 6-mos; Retail control 0.1% v 0.2% forecast, 0.8% previous
• US consumer prices rise marginally CPI y/y NSA 2.7% v 2.5% previous, core CPI y/y NSA 2.2% v 2.3% previous
• US Business inventories +0.3% v 0.3% forecast, 0.4% , Retail inventories unchanged at 0%
• US NAHB housing market Index 71 v 65 forecast 65 previous.
• Atlanta Fed’s GDPNow forecast for Q1 2017 GDP is 0.9%, down from 1.2% on March 8.
• Dutch vote in a test of anti-immigrant sentiment in Europe, Anti-Islam Wilders seen as the main challenger to PM Rutte; Polls close at 2000 GMT.
• German economy likely to grow at accelerated pace in Q1, relative to Q4 2016 – EconMin.
• EU warns banks may face higher bad loan risk when ECB tightens; EUR 1Tr of bad loans hampers EU bank lending.
• UK wage growth weakens but jobless rate lowest since 2005.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand GDP Production QQ Q4 forecast 0.7%, 1.10%-previous
• 21:45 New Zealand GDP - Annual Q4 forecast 3.1%, 3.50%- previous
• 21:45 New Zealand GDP Expenditure QQ Q4 forecast 0.6%, 1.40%- previous
• 23:50 Japan Foreign Bond Investment w/e -1130.6b- previous
• 23:50 Japan Foreign Invest JP Stock w/e -167.1b- previous
• 00:30 Australia Employment* Feb forecast 16.0k, 13.5k- previous
• 00:30 Australia Full Time Employment* Feb -44.8k- previous
• 00:30 Australia Participation Rate* Feb forecast 64.6%, 64.60%- previous
• 00:30 Australia Unemployment Rate Feb forecast 5.7%, 5.70%- previous
Looking Ahead - Events, Other Releases (GMT)
• -:-- Japan- Bank of Japan monetary policy meeting (ends March 16).
• 04:00 Japan- BOJ Rate Decision* N/A forecast -0.1%, -0.10%-previous
Currency Summaries
EUR/USD is likely to find support at 1.0645 levels and currently trading at 1.0687 levels. The pair has made session high at 1.0718 and hit lows at 1.0611 levels. Dollar posted steep losses against euro on Wednesday after the Federal Reserve raised interest rates as expected but signaled a more gradual pace of monetary tightening this year than many in the market anticipated. Prior to the Fed's decision, investors had been pricing at least four rate hikes this year.The greenback fell to a five-week low against the euro, a four-week trough versus the Swiss franc and a two-week low against the yen and sterling. The Fed on Wednesday lifted the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent. But further rate increases would only be "gradual," the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018. The Fed lifted rates once in 2016. The greenback fell to a five-week low against the euro, a four-week trough versus the Swiss franc and a two-week low against the yen and sterling. In mid-afternoon trading, the dollar index fell to two-week lows and was last 100.9, down 0.7 percent.
GBP/USD is supported in the range of 1.2131 levels and currently trading at 1.2277 levels. It reached session high at 1.2300 and dropped to session low at 1.2188 levels. Britain's pound rose against the dollar on Wednesday after the Federal Reserve raised interest rates as expected but signaled a more gradual pace of monetary tightening this year than many in the market anticipated. But the Fed's policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. Although inflation is "close" to the Fed's 2-percent target, it noted that goal was "symmetric," indicating a possible willingness to allow prices to rise at a slightly faster pace. Fed Chair Janet Yellen said in a press conference following the decision that risks to the global economy were more balanced, but that she expected policy to remain accommodative for some time. Sterling gained to a week's high of $1.2310, rebounding from the previous day's eight-week low hit on worries of a painful and prolonged Brexit. The pound was last trading at $1.2288, although it dipped earlier below $1.22 after UK data showed wage growth slowed in the three months to January.
USD/CAD is supported at 1.3282 levels and is trading at 1.3327 levels. It has made session high at 1.3477 and lows at 1.3298 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday rose and loonie strengthened after the Federal Reserve raised interest rates for the second time in three months but did not announce any plan to speed up monetary tightening. The dollar's plunge helped fuel gains in assets denominated in the U.S. currency, including oil and gold. Investors had widely expected the central bank's rate increase, which was spurred by steady economic growth, strong job gains and confidence that inflation is rising to the Fed's target. Oil prices rose after six sessions of declines, with the greenback-denominated commodity extending gains as the dollar weakened. U.S. crude settled up 2.4 percent at $48.86 a barrel, after touching a three-month low a day earlier. Benchmark Brent settled up 1.8 percent to $51.81 a barrel. Before the decision, crude had been lifted by a surprise drawdown in U.S. crude inventories and data from the International Energy Agency suggesting OPEC cuts should create a crude deficit in the first half of 2017. The Canadian dollar was trading at C$1.3300 to the greenback, stronger than Tuesday's close of C$1.3485.
AUD/USD is supported around 0.7580 levels and currently trading at 0.7692 levels. It hit session high at 0.7703 and made session lows at 0.7587 levels. The Australian dollar strengthened against its U.S. counterpart on Wednesday as oil prices rallied and the U.S. Federal Reserve raised interest rates but signaled a cautious tone toward further increases. The FOMC made the case for higher rates due to its confidence in the "robustness of the economy," strength in the labor market, and healthy consumer spending, while still continuing a policy of "gradual" rate hikes to account for a still "uncertain" economic outlook and balanced risks to US growth projections. The 25 basis-point hike was widely expected, and investors were digesting FOMC members' economic projections that showed two more increases are seen this year, the same projections that were made in December. The Australian dollar rose to hit high at $0.7720, edging away from a daily low of $0.7587 hit early in the US session. It was last trading at 0.7704.
Equities Recap
European shares achieved their highest closing level in two weeks on Wednesday, boosted by basic resource and oil stocks, while French aero plane seat-maker Zodiac slumped after its latest profit warning.
The UK's benchmark FTSE 100 closed up by 0.2 percent, FTSEurofirst 300 ended the day up by 0.43 percent, Germany's Dax closed up 0.3, and France’s CAC finished the day up by 0.2 percent.
U.S. stocks rose sharply on Wednesday after the Federal Reserve raised interest rates for the second time in three months, as expected.
Dow Jones closed up by 0.54 percent, S&P 500 ended up 0.83 percent, Nasdaq finished the day up by 0.74 percent.
Treasuries Recap
U.S. Treasury yields plummeted on Wednesday after the Federal Reserve raised interest rates for the second time in three months as expected, but did not flag any plan to accelerate the pace of monetary tightening.
U.S. long- and medium-dated yields also fell, with 30-year and benchmark 10-year yields hitting eight-day lows of 3.094 percent and 2.497 percent, respectively. Seven- and five-year yields hit nine-day lows of 2.296 percent and 2.006 percent, respectively.
Commodities Recap
Gold rallied more than 1.5 percent to a one-week high on Wednesday, as the U.S. Federal Reserve called for gradual monetary tightening after raising interest rates by an expected 25 basis points for the second time in three months.
Spot gold was up 1.6 percent at $1,217.81 an ounce by 3:01 p.m. EDT (1901 GMT), after rising to $1,219.36, the highest since March 7. It was on track for its biggest one-day jump since September.
U.S. gold futures, which closed ahead of the Fed statement, settled down 0.2 percent at $1,200.70.
Oil prices on Wednesday climbed for the first time in more than a week on a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting OPEC cuts could create a crude deficit in the first half of 2017.
Brent futures gained 89 cents, or 1.8 percent to settle at $51.81 a barrel, their first increase in seven days. The global benchmark on Tuesday settled at its lowest level since Nov. 30.
U.S. West Texas Intermediate (WTI) crude gained $1.14, or 2.4 percent, to settle at $48.86 per barrel, its first increase in eight days.
