Market Roundup
• US Jan NY Fed Manufacturing, 17.70, 18.00 forecast, 18.00 previous, 19.60 revised.
• U.S. government shutdown looms amid harsh immigration exchange.
• U.S. judge delays setting trial date for Trump ex-aide Manafort.
• U.S.-led meeting urges N.Korea pressure despite North-South détente.
• Special counsel subpoenas former Trump aide Bannon – report.
• ECB unlikely to ditch bond-buying pledge next week: sources.
• ECB's Weidmann says analysts right to expect mid-2019 rate hike: FAZ.
• Split Social Democrats could sink Merkel's coalition plans.
• Germany trumps Asia with world's largest current account surplus.
• EU still open to Britain changing mind on Brexit.
• Eurogroup head hails German coalition blueprint for eurozone reform.
• Bitcoin, other cryptocurrencies tumble on govt crackdown worries.
Looking Ahead - Economic Data (GMT)
• 16 Jan 23:30 Australia Jan Consumer Sentiment, 3.6% previous
• 16 Jan 23:50 Japan Jan Machinery Orders MM, -1.4% forecast, 5.0% previous
• 16 Jan 23:50 Japan Jan Machinery Orders YY, -0.7% forecast, 2.3% previous
• 17 Jan 00:30 Australia Nov Housing Finance, -0.2% forecast, -0.6% previous
Looking Ahead - Events, Other Releases (GMT)
• 15:00 Senate Banking Committee holds a vote on the nomination of Jerome Powell to be chairman of the Federal Reserve – Washington
• 15:00 The Bank of Canada issues its monetary policy report - Ottawa
• 16:15 BoC Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins will hold a press conference to discuss the contents of the monetary policy report – Ottawa
• 20:00 Fed's Charles Evans and Fed's Robert Kaplan participate in a moderated discussion - Palm Beach
Currency Summaries
EUR/USD is likely to find support at 1.2100 levels and currently trading at 1.2264 levels. The pair has made session high at 1.2280 and hit lows at 1.2193 levels. Euro held close to a three-year high against the dollar on Tuesday, as the common currency recovered from earlier losses tied to doubts that the European Central Bank would back away from its pledge to keep buying bonds at next week's meeting. Sources close to the ECB told that the central bank was unlikely to tweak its policy message so soon, as rate-setters need more time to assess the outlook for the economy and the euro. After its best three-day performance in nearly two years, the euro fell as low as $1.2208 on the report. It was already pressured by anxiety over whether German Chancellor Angela Merkel would manage to form a "grand coalition" to govern. Members of the centre-left Social Democrats (SPD) in one of Germany's regions voted against talks with Merkel's conservative Christian Democrats (CDU) on Monday, and fresh headlines on that development triggered a fall in the euro in early European trading on Tuesday. The euro was up 0.06 percent at $1.2268.The euro had climbed 2.7 percent between Thursday and Monday, making gains not seen since February 2016, and hit as high as $1.2296, its strongest since December 2014.
GBP/USD is supported in the range of 1.3685 levels and currently trading at 1.3793 levels. It reached session high at 1.3799 and dropped to session low at 1.3740 levels. The British edged lower against the greenback on Tuesday after data showed softening U.K. inflation in December, although following a recent rally the pound remained close to its highest levels since the vote to leave the European Union in 2016.The latest figures showed UK consumer prices rose 3 percent in December year-on-year, in line with expectations and down from 3.1 percent in November, marking the first drop in inflation since June. Sterling has rallied in recent days as hopes grew that some European Union member states are prepared to offer Britain more favourable terms when it leaves the bloc, and traders increasingly downplay political risks and instead focus on the better-than-expected performance of the UK economy. Sterling was trading at $1.3793 in the late US session. The dollar's index against a basket of six major currencies was down 0.05 percent at 90.398. It was up from Monday's three-year low of 90.279.
USD/CAD is supported at 1.2376 levels and is trading at 1.2428 levels. It has made session high at 1.2449 and lows at 1.2394 levels. The Canadian dollar strengthened against its U.S. counterpart on Tuesday as investors braced for a potential interest rate hike from the Bank of Canada on Wednesday. The Bank of Canada might well hike at its next policy meeting, though the strength of its currency may act as a brake given its potential impact on exports. Oil prices eased from three-year highs as traders booked profits from the rally. U.S. crude fell 0.53 percent to $63.96 per barrel and Brent was last at $69.43, down 1.18 percent on the day. The Bank of Canada raised interest rates in July for the first time in seven years and then again in September. Its benchmark rate sits at 1 percent. Chances of another rate hike on Wednesday are around 90 percent, the overnight index swaps market indicates. The Canadian dollar was last trading 0.2 percent higher at C$1.2428 to the greenback. The currency traded in a range of C$1.2414 to C$1.2452. It touched its strongest in nearly one week at C$1.2395.
AUD/USD is supported around 0.7923 levels and currently trading at 0.7960 levels. It hit session high at 0.7966 and made session lows at 0.7934 levels. The Australian dollar gains faded against the US dollar on Tuesday as speculators took profits on short U.S. dollar positions after several sessions of heavy selling. The Aussie edged back just a touch to $0.7960, having jumped 0.7 percent on Monday to a peak of $0.7979.The U.S. currency has been under heavy pressure as markets price in the risk of policy tightening in other developed nations. In particular, speculation is growing the European Central Bank will start to slow its asset buying this year. The Reserve Bank of Australia (RBA) has repeatedly warned that a sustained rise in the local dollar would drag on economic growth, tempering speculation about an early hike in its 1.5 percent cash rate. While the futures market has narrowed the odds of a rate rise this year, a move is still not fully priced in until December with August as a 50-50 shot. Still, the central bank should have been comforted by a run of upbeat domestic data in recent weeks. The latest ANZ-Roy Morgan index of consumer confidence out on Tuesday showed an increase of 1.2 percent to reach the highest since October 2013.Notably, the survey's index of current finances rose strongly and this tends to have a better correlation with actual spending patterns than overall sentiment.
Equities Recap
European shares ended little changed on Tuesday as losses among commodity stocks more than offset initial gains due to a series of well-received trading updates.
UK's benchmark FTSE 100 closed down 0.28 percent, FTSEurofirst 300 ended the day down by 0.08percent, Germany's Dax ended up by 0.23 percent and France’s CAC finished the day down by 0.02 percent.
Wall Street paused its rally on Tuesday, weighed down by weakness in General Electric shares and as lower oil prices dragged down the energy sector.
Dow Jones closed down by 0.02 percent, S&P 500 ended down 0.35 percent, Nasdaq finished the day down by 0.50 percent.
Treasuries Recap
U.S. long-dated Treasury yields fell on Tuesday along with those of European bonds, after a report said the European Central Bank was not quite ready to put away its bond-buying scheme at next week's meeting.
In late morning trading, the benchmark 10-year Treasury yield slipped to 2.538 percent, from 2.552 percent late on Friday.
U.S. 30-year bond yields were down at 2.840 percent from Friday's 2.853 percent.
U.S. two-year yields, meanwhile, rose to 2.018 percent, from 2.002 percent on Friday. The U.S. two-year note is the maturity most sensitive to rate hike expectations.
Commodities Recap
Oil prices dropped off three-year highs on Tuesday as traders booked profits but healthy demand underpinned prices near $70 per barrel, a level not seen since the market slump in 2014.
Brent futures fell $1.11, or 1.6 percent, to settle at $69.15 a barrel after hitting a session low of $68.83. The global benchmark hit a peak of $70.37 on Monday, matching a high from December 2014 at the start of a three-year market decline.
U.S. West Texas Intermediate (WTI) crude futures ended at $63.73 a barrel, down 57 cents, or 0.9 percent. WTI hit a December 2014 peak of $64.89 earlier in the session.
Gold slipped on Tuesday from the previous day's four-month high, reflecting losses across the commodities complex as the U.S. dollar clawed back some losses the day after hitting a three-year low against a basket of currencies.
Spot gold was down 0.2 percent at $1,337.04 an ounce by 1:35 p.m. EST (1835 GMT), off Monday's $1,344.44 peak. U.S. gold futures for February delivery settled up $2.20, or 0.2 percent, at $1,337.10 per ounce.
