Market Roundup
• Fed raises rates, sees at least three more years of economic growth.
• Fed's Powell says he thinks monetary policy is still accommodative.
• US Aug New Home Sales-Units, 0.629M, 0.627M previous, 0.608M revised.
• US Aug New Home Sales Chg m/m, 3.5%, -1.7% previous, -1.6% revised.
• US 21 Sep w/e Mortgage Market Index, 352.5, 342.7 previous.
• US Aug Build Permits R Chg m/m, -4.1%, -5.7% previous.
• US Sep Rich Fed Comp. Index, 29, 24 previous.
• US Sep Rich Fed, Services Index, 18, 31 previous.
• Canada PM shrugs off U.S. NAFTA pressure, says new deal not guaranteed.
• Trump accuses China of 2018 election meddling; Beijing rejects charge.
• U.S. has most to lose from trade war, China would benefit: ECB.
• Argentine peso weakens as investors await IMF deal.
• Oil eases, but Iran sanctions keep Brent above $80 a barrel.
• Brazil opinion poll shows Bolsonaro leads Haddad but loses runoff.
Looking Ahead - Economic Data (GMT)
• Sep 26 21:00 New Zealand Cash Rate, 1.75% previous, 1.75% forecast
• Sep 27 01:30 China Aug Turnover/sales cum y/y, 17.1% previous
Looking Ahead - Events, Other Releases (GMT)
• N/A General Council meeting of the ECB in Frankfurt.
• N/A ECB President Mario Draghi, Bank of England Governor Mark Carney, Bank of France Governor Francois Villeroy de Galhau and Irish Central Bank chief Philip Lane speak at a conference about financial stability in Frankfurt.
• 06:30 BOJ Governor Haruhiko Kuroda will deliver a speech in Tokyo, Japan.
• 11:45 Bank of England Chief Economist Andy Haldane: Panelist at Institute for Government "In Conversation" with Bronwen Maddox in London.
• 14:00 Bank of England Governor Mark Carney: Chairing policy panel discussion on "Sustainable Finance" at the Third European Systemic Risk Board Annual Conference in Frankfurt.
• 14:00 Riksbank Governor Stefan Ingves will participate in a discussion at a conference arranged by European Systematic Risk Board in Frankfurt.
• 17:00 speech by ECB chief economist Peter Praet at Money, Macro and Finance Research Group conference in London.
• 18:00 Federal Reserve Bank of Dallas President Robert Kaplan discusses "What You Really Need to Lead: the Power of Thinking and Acting Like an Owner" at the "Banking and the Economy: a Forum for Minorities in Banking" conference in Charlotte, NC.
Currency Summaries
EUR/USD is likely to find support at 1.1684 levels and currently trading at 1.1739 levels. The pair has made session high at 1.1795 and hit lows at 1.1724 levels. The euro dipped against the U.S. dollar on Wednesday after the Federal Reserve raised interest rates as expected for the eighth time, flagged more rate hikes and signaled the end of the "accommodative" policy era. The greenback briefly fell against the euro and yen after the release of the Fed statement but slowly inched higher as market participants digested the statement. Fed policymakers lifted the benchmark overnight lending rate by a quarter of a percentage point to a range of 2.00 percent to 2.25 percent. The central bank also removed from its policy statement a description of monetary policy as remaining accommodative. Federal Reserve Chairman Jerome Powell clarified that the removal of "accommodative" in the statement is a sign that monetary policy is proceeding in line with expectations .The dollar index, which measures the U.S. unit against six major currencies, was up 0.1 percent at 94.179 .The euro briefly hit session highs versus the dollar after the decision, before falling to $1.1739, down 0.3 percent.
GBP/USD is supported in the range of 1.3100 levels and currently trading at 1.3165 levels. It reached session high at 1.3219 and dropped to session low at 1.3146 levels. Britain's pound edged lower against the dollar on Wednesday as investors remained cautious about negotiations between Britain and the EU on a Brexit deal. After suffering its biggest one-day loss since 2016 on Friday when Prime Minister Theresa May had warned that Brexit negotiations with Brussels had come to an impasse, the pound has traded higher in recent sessions, reflecting some optimism that Britain will secure a deal on its withdrawal from the European Union, due in March. On Wednesday, sterling fell 0.1 percent to $1.3165, still above the $1.3041 low hit on Friday. With little in the way of big market-moving economic data in the near-term, domestic politics and sentiment around Brexit talks remain the driver for the pound. Britain’s ruling Conservative Party hold their annual conference next week, and all eyes are on whether May can win over critics of her Brexit proposals. Opposition leader Jeremy Corbyn said on Wednesday his Labour Party would vote against a deal based on May's Brexit proposals, underlining the battle the prime minister will have in getting any agreement with Brussels through the British parliament.
USD/CAD is supported at 1.2940 levels and is trading at 1.3017 levels. It has made session high at 1.3026 and lows at 1.2953 levels. The Canadian dollar weakened against its U.S. counterpart on Wednesday as oil prices fell and the U.S. dollar climbed after U.S. Federal Reserve raised interest rate. Concerns that Canada would be left out of a trade deal with its NAFTA counterparts also weighed Canadian dollar.The U.S. dollar rose against a basket of major currencies after the Fed raised interest rates as expected for the eighth time, flagged more rate hikes and signaled the end of the "accommodative" policy era. The Canadian dollar was last trading 0.5 percent lower at 1.3018 to the greenback, or 76.82 U.S. cents. The currency, which last Thursday touched its strongest level in more than three months at 1.2885, was last trading down at 1.2966. The price of oil, one of Canada's major exports, eased but was still heading for a fifth consecutive quarter of gains, driven by an impending drop in Iranian exports in the last three months of the year when global demand heats up. Bank of Canada Governor Stephen Poloz is due to speak on Thursday, while Canadian gross domestic product data for July is due on Friday.
USD/JPY is supported around 112.35 levels and currently trading at 112.75 levels. It peaked to hit session high at 113.12 and made session lows at 112.65 levels. The dollar declined against the Japanese yen on Wednesday as the Federal Reserve, as expected, raised key overnight borrowing costs for a third time in 2018 and signaled it would increase rates further. The U.S. Federal Reserve raised interest rates on Wednesday, as expected, and left its monetary policy outlook for the coming years largely unchanged amid steady economic growth and a strong job market. In a policy statement that marked the end of the era of "accommodative" monetary policy, Fed policymakers lifted the benchmark overnight lending rate by a quarter of a percentage point to a range of 2.00 percent to 2.25 percent. It still foresees another rate hike in December, three more next year, and one increase in 2020.That would put the U.S. central bank's benchmark overnight lending rate at 3.4 percent, roughly half a percentage point above its estimated "neutral" rate of interest, at which rates neither stimulate nor restrict the economy. That tight policy stance is projected to stay level through 2021.
Equities Recap
European shares held their ground near 4-week highs on Wednesday before a widely expected rate hike by the U.S. Federal Reserve.
The UK's benchmark FTSE 100 closed up by 0.04 percent, FTSEurofirst 300 ended the day up by 0.28 percent, Germany's Dax ended up by 0.11 percent, and France’s CAC finished the up by 0.6 percent.
A Wall Street rally collapsed late on Wednesday as investors reduced their risk, following a widely expected interest rate hike by the U.S. Federal Reserve.
Dow Jones closed down by 0.38 percent, S&P 500 ended down 0.30 percent, Nasdaq finished the day down by 0.20 percent.
Treasuries Recap
U.S. Treasury yields fell on Wednesday with the yield curve hitting its flattest levels in over a week as the Federal Reserve signaled it would remain a gradual rate-hike path in response to solid economic growth.
The 30-year yield was over 5 basis points lower at 3.180 percent after hitting a four-month peak of 3.249 percent on Tuesday.
Two-year yields slipped more than 2 basis points to 2.819 percent after touching 2.847 percent on Tuesday, which was last seen in June 2008.
The spread between two-year and 10-year yields shrank to less than 23 basis points, the tightest level in a over week.
Commodities Recap
Gold prices held onto earlier losses on Wednesday as the U.S. dollar trimmed gains after the Federal Reserve raised U.S. interest rates as expected and forecast three more years of economic growth.
Spot gold lost 0.3 percent at $1,197.21 per ounce by 2:16 p.m. EDT (1816 GMT), while the greenback gave up earlier gains, though remained positive against a basket of major currencies. U.S. gold futures for December delivery settled down $6, or 0.5 percent, at $1,199.10 per ounce.
Oil prices eased on Wednesday after U.S. data showed a surprise build in domestic crude inventories, but an impending drop in Iranian exports kept Brent futures above $80 a barrel and on track for a fifth straight quarterly gain.
Global benchmark Brent fell 53 cents to settle at $81.34 a barrel. On Tuesday, Brent rose as high as $82.55, the highest since November 2014.U.S. West Texas Intermediate (WTI) crude futures lost 71 cents to settle at $71.57 a barrel.
