Market Roundup
• US PPI rises broadly +2.2% y/y, core +1.8% y/y, points to firming inflation.
• US Redbook +1.3% y/y v 1.0% previous.
• IMF: global economy showing more positive momentum w/cyclical upturn in manufacturing, trade; advanced economic outlook improved.
• OPEC says oil stocks still increasing, Saudi figures suggest it eased cuts in February.
• May wins right to launch EU divorce talks, Queen expected to sign off on Brexit bill in coming days.
• German FinMin Schaeuble: Eurozone interest rates are too low, would like to see them higher.
• Bund yield touches 14-month peak as Dutch election nears.
• Brexit gloom drives GBP to 8-wk low, Scottish referendum call underlines Brexit risks.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand Current Account - Qtrly Q4 forecast -2.543b, -4.891b-previous
• 21:45 New Zealand Current Account- Annual Q4 forecast -7.25b, -7.48b- previous
• 21:45 New Zealand Current Balance To GDP Q4 forecast -2.8%, -2.90%- previous
• 00:00 Australia Consumer Sentiment Mar 2.30%- previous
• 00:30 Australia New Motor Vehicle Sales m/m Feb 0.60%- previous
• 04:30 Japan Industrial Output Rev* Jan -0.80%- previous
• 04:30 Japan Capacity Utilization Index Change MM Jan 0.60%- previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- Japan Bank of Japan starts its two-day monetary policy meeting (to March 16).
Currency Summaries
EUR/USD is likely to find support at 1.0570 levels and currently trading at 1.0609 levels. The pair has made session high at 1.0646 and hit lows at 1.0604 levels. Euro declined against the dollar on Tuesday as the dollar extended its gains from a day earlier as investors fixed their sights on the outcome of a meeting where the Federal Reserve is widely expected to raise interest rates for the first time this year. The Fed starts a two-day monetary policy meeting on Tuesday. Fed funds futures have priced in a 95 percent chance the Fed will nudge rates higher on Wednesday. With a rate increase by the Federal Reserve seen as a done deal, investor focus is shifting to what message the U.S. central bank will deliver when it concludes its meeting on Wednesday. In December the Fed forecast three rate rises this year. The euro, which hit a five-week high on Monday above $1.07 on expectations the European Central Bank is moving towards winding back its stimulus program, fell 0.3 percent to $1.0602 ahead of Fed meeting.
GBP/USD is supported in the range of 1.2062 levels and currently trading at 1.2157 levels. It reached session high at 1.2171 and dropped to session low at 1.2137 levels. Sterling declined against dollar on Tuesday as sterling came under selling pressure on worries about a possible second Scottish independence referendum and the triggering of Article 50, which will formally begin the negotiations that will take Britain out of the EU. British Prime Minister Theresa May won parliamentary backing on Monday to begin the process of leaving the EU and start two years of talks that will shape the future of Britain and Europe. May said she would notify parliament this month when she has triggered Article 50 of the EU's Lisbon Treaty to begin the formal process, after her spokesperson dismissed media reports she would launch the talks on Tuesday as speculation. Sterling traded hit low at $1.2110 before recovering to $1.2151 by 20:20 GMT. It fell as much as 0.7 percent against the euro to 87.85 pence, it was last trading at 87.48 pence per euro.
USD/CAD is supported at 1.3439 levels and is trading at 1.3488 levels. It has made session high at 1.3494 and lows at 1.3454 levels. The Canadian dollar declined against its U.S. counterpart on Tuesday as prices of oil, one of Canada's major exports, fell and the greenback climbed broadly ahead of an expected interest rate rise by the U.S. Federal Reserve. Oil prices slid to three-month lows after OPEC reported a rise in global crude stocks and a surprise jump in production from its biggest member, Saudi Arabia, which came despite output curbs by the group. Investors were awaiting the Fed's latest policy decision at the close of its two-day meeting on Wednesday. While a rate increase from the U.S. central bank was largely anticipated, whether policymakers would signal a more aggressive pace of monetary tightening remained less certain. The Canadian dollar was last trading at C$1.3481 to the greenback, or 74.15 U.S. cents, weaker than Monday's close of C$1.3444, or 74.38 U.S. cents.
AUD/USD is supported around 0.7546 levels and currently trading at 0.7565 levels. It hit session high at 0.7579 and made session lows at 0.7551 levels. Australian dollar declined against US dollar on Tuesday as U.S. dollar was bolstered by the Fed's expected interest rate increase and by political risks in Europe amid Dutch and French elections that have pressured European currencies. Also supporting the upbeat dollar sentiment was a report that showed US Producer prices increased in February. Data showed U.S. producer prices increased more than expected in February as the cost of services such as hotel accommodation pushed higher and the year-on-year gain was the largest in nearly five years, pointing to steadily rising inflation pressures. The Labor Department said on Tuesday that its producer price index for final demand increased 0.3 percent last month after rising 0.6 percent in January. Trading volume was light ahead of a Federal Reserve statement due on Wednesday in which the U.S. central bank is expected to raise interest rates by 25 basis points. The Australian dollar was last trading at $0.7558 in lackluster trade but avoided another test of the recent seven-week low of $0.7491.
Equities Recap
European shares dipped on Tuesday, weighed down by bank and energy stocks, as well as uncertainty over elections in the Netherlands and a U.S. interest rate decision.
UK's benchmark FTSE 100 closed down by 0.1 percent, the pan-European FTSEurofirst 300 provisionally closes down by 0.34 percent, Germany's Dax ended flat, France’s CAC finished the day down by 0.6 percent.
U.S. stocks fell on Tuesday as oil prices dropped to their lowest since November and airlines pulled industrial stocks down as a blizzard hit the U.S. Northeast.
Dow Jones closed down by 0.21 percent, S&P 500 ended down by 0.34 percent, Nasdaq finished the day down by 0.33 percent.
Treasuries Recap
U.S. long-dated and benchmark Treasury yields edged lower on Tuesday after a drop in oil prices was viewed as a deflationary sign, but the drop in yields was limited as investors awaited the Federal Reserve's policy statement on Wednesday.
U.S. two-year notes, which are considered most vulnerable to Fed policy, were last down slightly in price to yield 1.380 percent, from a yield of 1.372 percent late Monday.
U.S. 30-year Treasury bond yields, which are sensitive to inflation expectations, were last down about 3 basis points at 3.167 percent, from 3.192 percent late Monday.
Benchmark 10-year yields were down about 2 basis points at 2.591 percent, from 2.607 percent late Monday. Two-year notes edged slightly higher to exhibit a "curve flattener" trade ahead of the Fed statement.
Commodities Recap
Oil tumbled on Tuesday after OPEC reported a rise in global crude stocks and a surprise output jump from its biggest member, Saudi Arabia, further pressuring prices that have now erased nearly all gains since OPEC announced output cuts in November.
Brent futures dropped below their 200-day moving average for the first time since late November during the session. Brent settled down 43 cents, or 0.8 percent, at $50.92 a barrel.
U.S. West Texas Intermediate crude lost 68 cents, or 1.4 percent, to settle at $47.72 per barrel for the seventh daily decline in a row, the longest losing streak since January 2016. It is down almost 11 percent since March 3.
Gold prices were little changed on Tuesday as an expected U.S. interest rate hike boosted the dollar and weighed on the precious metal, but political risks in Europe provided safe-haven support.
Spot gold was down 0.2 percent at $1,201.54 an ounce by 2:59 p.m. EST (1859 GMT), as investors took a wait-and-see approach ahead of the Fed meeting. U.S. gold futures settled down 0.04 percent at $1,202.60.
