Market Roundup
• Fed raises interest rates, keeps 2018 policy outlook unchanged.
• Fed's Yellen says if there were a negative shock to the economy, there is a scope to cut rates as well as other tools like asset purchases.
• Yellen says she is personally concerned with U.S. debt situation.
• Yellen says will do atmost to ensure a smooth transition to Powell.
• Yellen says stock valuation are at high end of historical levels.
• Traders keep bets on two 2018 Fed rate hikes under Powell.
• U.S. Congress secures tax deal, Trump backs 21-pct corporate rate.
• US Nov CPI MM SA, 0.4%, 0.4% forecast, 0.1% previous.
• US Nov CPI YY NSA, 2.2%, 2.2% forecast, 2.0% previous.
• US Nov Core CPI MM SA, 0.1%, 0.2% forecast, 0.2% previous.
• US Nov Core CPI YY NSA, 1.7%, 1.8% forecast, 1.8% previous.
• US Nov CPI Index NSA, 246.669, 246.805 forecast, 246.663 previous.
• US Nov Core CPI Index SA, 253.72, 253.43 forecast.
• US w/e MBA Mortgage Applications, -2.3%, 4.7% previous.
• WTO to end meeting with no deals after U.S. rebukes.
• Alabama win thrills Democrats as Republicans point fingers.
• White House says not the right time for N.Korea talks, despite Tillerson overture.
• Merkel courts Germany's skittish SPD as talks open on government.
• Britain's May defeated in parliament over Brexit blueprint.
• OPEC sees balanced oil market by late 2018 as cuts erode glut.
Looking Ahead - Economic Data (GMT)
• 13 Dec 23:50 Japan w/e Foreign Bond Investment, -208.1 bln previous
• 13 Dec 23:50 Japan w/e Foreign Invest JP Stock, -167.1 bln previous
• 14 Dec 00:00 New Zealand Jul Net Debt Forecast, 22.5% previous
• 14 Dec 00:00 Japan Jul Budget Cash Balance, 1.50 bln previous
• 14 Dec 00:30 Japan Dec Nikkei Mfg PMI Flash, 53.6 previous
• 14 Dec 00:30 Australia Nov Employment, 18.0k forecast, 3.7k previous
• 14 Dec 00:30 Australia Nov Participation Rate, 65.1% forecast, 65.1% previous
• 14 Dec 00:30 Australia Nov Unemployment Rate, 5.4% forecast, 5.4% previous
• 14 Dec 02:00 China Nov Urban investment (YTD)yy, 7.2% forecast 7.3% previous
• 14 Dec 02:00 China Nov Industrial Output, 6.0% forecast, 6.2% previous
• 14 Dec 02:00 China Nov Retail Sales YY, 10.2% forecast, 10.0% previous
Looking Ahead - Events, Other Releases (GMT)
• 12:00 BoE announces rate decision
• 13:30 ECB's Draghi speaks in Frankfurt
• 17:25 BoC's Poloz speaks in Toronto
Currency Summaries
EUR/USD is likely to find support at 1.1715 levels and currently trading at 1.1790 levels. The pair has made session high at 1.1800 and hit lows at 1.1746 levels. Euro strengthened against the dollar on Wednesday after the Federal Reserve raised interest rates in a widely expected move, but left its rate outlook for the coming years unchanged. Officials acknowledged in their latest forecasts that the economy had gained steam in 2017 by raising their economic growth forecasts and lowering the expected unemployment rate for the coming years. The Fed projected three more hikes in each of 2018 and 2019 before a long-run level of 2.8 percent is reached. That is unchanged from the last round of forecasts in September. The dollar index against a basket of six major currencies dropped as low as 93.596, the lowest level since Dec. 7, before rising back to 93.683, down 0.44 percent on the day. The greenback had weakened earlier on Wednesday after core consumer price data showed slowing inflation, raising concerns the Fed will be less able to execute multiple rate increases next year. Excluding the volatile food and energy components, consumer prices ticked up 0.1 percent in November, with the annual increase in the core CPI slowing to 1.7 percent in November from 1.8 percent in October.
GBP/USD is supported in the range of 1.3300 levels and currently trading at 1.3376 levels. It reached session high at 1.3385 and dropped to session low at 1.3333 levels. Sterling rose against the dollar on Wednesday ahead of Bank of England policy meeting, which will be closely watched for clues on the future path of UK monetary policy. Bank of England is widely expected to keep interest rates on hold at 0.5 percent on Thursday, after raising rates for the first time since 2007 last month, there are questions over whether rates will be hiked again next year and if so, at what pace. The Bank said in November that inflation was near its peak and would then fall slowly over the next three years to just above 2 percent. It also said a long-awaited pick-up in wage growth was likely next year. But inflation data released on Tuesday exceeded expectations, coming in at 3.1 percent annually more than 1 percent above the BoE's 2 percent target. Numbers released on Wednesday showed workers' total earnings, excluding bonuses, rose by an annual 2.3 percent during that period, compared with 2.2 percent in the three months to September. That beat economists' expectations for no improvement, but was still well below the inflation rate.
USD/CAD is supported at 1.2805 levels and is trading at 1.2835 levels. It has made session high at 1.2875 and lows at 1.2818 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday as the greenback turned lower against a basket of major currencies after Fed statement. Federal Reserve raised key interest rates by a quarter percentage point as expected, and kept policy outlook unchanged for 2018. The U.S. dollar also weakened after data showed a rise in core inflation that was short of economists' forecasts. The Labor Department said its Consumer Price Index excluding the volatile food and energy components ticked up 0.1 percent also as prices for airline fares and household furnishing fell. The so-called core CPI advanced 0.2 percent in October. On Tuesday, the loonie touched its weakest since Dec. 1 at C$1.2893. It had been pressured by the Bank of Canada's dovish tone last week after it left its benchmark interest rate steady at 1 percent. Bank of Canada Governor Stephen Poloz is due to speak on Thursday. Canadian home prices fell again in November, the third straight monthly decline and the largest November drop outside of a recession, as Toronto prices fell for the fourth month and Vancouver prices were flat, data showed on Wednesday. The Canadian dollar was last trading at C$1.2832 to the greenback, up 0.26 percent. The currency traded in a range of C$1.2822 to C$1.2882.
AUD/USD is supported around 0.7551 levels and currently trading at 0.7619 levels. It hit session high at 0.7627 and made session lows at 0.7596 levels. The Australian dollar surged against US dollar on Wednesday as Australian dollar was boosted by talk of future flows related to multi-billion dollar M&A deals and weaker dollar across the board. The Australian dollar climbed as far as $0.7639, a level not seen since Dec. 6. It was last up 0.95 percent at $0.7630.The Aussie hit a six-month trough of $0.7501 last week but has recovered steadily. The latest lurch higher came after Europe's biggest property firm Unibail-Rodamco said it will buy mall operator Westfield for $16 billion in what would be the biggest takeover on record of an Australian company. In a separate deal, Zurich Insurance agreed to buy Australia and New Zealand Banking Group's life insurance arm for A$2.85 billion, its biggest foray into Australia and its third in the last two years. The U.S. currency extended its weakness after the release of Federal Reserve’s policy statement. Federal Reserve raised interest rates by a quarter of a percentage point, as anticipated, but left its rate outlook for the coming years unchanged.
Equities Recap
Political jitters hit Italian stocks on Wednesday and the broader European market slipped lower before a Federal Reserve meeting that could provide more clues on future interest rate moves in the United States next year.
UK's benchmark FTSE 100 closed up by 0.02 percent, the pan-European FTSEurofirst 300 ended the day down by 0.27 percent, Germany's Dax ended down by 0.41 percent, France’s CAC finished the day down by 0.52 percent.
The S&P 500 dipped on Wednesday under pressure from the financial sector after the Federal Reserve made a widely expected interest rate hike but kept its rate outlook for coming years even as it projected faster U.S. economic growth.
Dow Jones closed up by 0.35 percent, S&P 500 ended down 0.03 percent, Nasdaq finished the day up by 0.21percent.
Treasuries Recap
U.S. Treasury yields fell after the Fed's announcement. Yields had fallen earlier in the day as well after an increase in core consumer prices in November fell short of analysts' expectations.
Benchmark 10-year notes last rose 16/32 in price to yield 2.3457 percent, compared with 2.403 percent late on Tuesday.
The 30-year bond last rose 1-2/32 in price to yield 2.7285 percent, compared with 2.781 percent late on Tuesday.
Commodities Recap
Oil prices slipped for a second straight day on Wednesday, as a slump in U.S. crude stockpiles was offset by a larger-than-forecast rise in gasoline inventories and as U.S. crude output continued to grow to record highs.
U.S. West Texas Intermediate crude settled down 54 cents at $56.60 a barrel, a 1 percent decline. Brent crude ended down 1.4 percent, or 90 cents, at $62.44 a barrel.
Gold prices moved higher after the Federal Reserve made a widely expected interest rate hike but kept its rate outlook for coming years even as it projected faster U.S. economic growth.
Spot gold was up 0.29 percent at $1,247.11 an ounce by 1:36 p.m. EST (1836 GMT). On Tuesday it touched $1,235.92, the lowest since July 20.
U.S. gold futures for February delivery settled up $6.90, or 0.6 percent, at $1,248.60 per ounce.
