Market Roundup
• US Dec CPI +0.3% v 0.3% forecast, 0.2% previous, rise on higher gasoline, rent costs.
• US Dec real weekly earnings m/m +0.1% v -0.6% previous.
• US Dec Industrial Production 0.8% v 0.6% forecast, -0.7% previous; Cap U 75.5% v 75.4% forecast, 74.9% previous.
• US Dec Manufacturing output m/m 0.2% v 0.4% forecast, -0.1% previous.
• US Commerce nominee Ross says NAFTA is Trump's first trade priority.
• USD edges up after hitting nearly 6-wk low, US inflation data suggests Fed still on pace for 2017 hikes.
• OPEC sees smaller oil glut in 2017 but flags US shale recovery, crude dips 2.6%.
• EU leaders welcome Brexit clarity, Merkel: EU united ahead of talks, Best approach is "solidarity and friendship" -Italian PM.
• ECB's Nouy: Regulation should not squeeze life out of EZ banks.
• Bank of Canada holds rate steady at 0.5%.
• BoC’s Poloz: until we have actual downside risks being realized then its appropriate to reach conclusion its not time to add more stimulus.
• Yellen sees further gradual rate increases likely.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e 206.5b-previous
• 23:50 Japan Foreign Invest JP Stock w/e 346.8b- previous
• 00:30 Australia Employment* Dec forecast 10.0k, 39.1k- previous
• 00:30 Australia Full Time Employment* Dec 39.3k- previous
• 00:30 Australia Participation Rate* Dec forecast 64.6%, 64.60%- previous
• 00:30 Australia Unemployment Rate* Dec forecast 5.7%, 5.70%- previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.0500 levels and currently trading at 1.0532 levels. The pair has made session high at 1.0672 and hit lows at 1.0500 levels. Euro declined against the dollar on Wednesday as the dollar strengthened on upbeat US economic data and Federal Reserve Chair Janet Yellen's remarks supported the view the central bank will increase borrowing costs gradually if the economy shows further improvement. U.S. consumer prices rose in December as households paid more for gasoline and rental accommodation, leading to the largest year-on-year increase in 2-1/2 years. Consumer Price Index rose 0.3 percent last month after gaining 0.2 percent in November. In the 12 months through October, the CPI increased 2.1 percent, the biggest year-on-year gain since June 2014. The CPI rose 1.7 percent in the year to November. Rising inflation comes against the backdrop of a strengthening economy and tightening labor market, which raises the specter of a faster pace of interest rate increases from the Federal Reserve than currently anticipated. The U.S. dollar was up 0.9 percent against a basket of major currencies. It hit a nearly six-week low the previous day after Trump complained that dollar strength was hurting trade relations with China.
GBP/USD is supported in the range of 1.2500 levels and currently trading at 1.2549 levels. It reached session high at 1.2724 and dropped to session low at 1.2526 levels. Sterling declined against the U.S. dollar on Wednesday as investors booked profits after its biggest one-day rise since 1998 yesterday when Prime Minister Theresa May outlined Britain's hopes for its exit from the European Union. Sterling sliced 1 percent off the 3-percent gain it had made against the dollar on Tuesday, leaving it back at $1.2265 after a brief afternoon dip below $1.23.On the data front, British workers saw their pay grow at the fastest pace in more than a year in the three months to November, official data showed on Wednesday, adding to signs that the country's economy ended 2016 strongly despite the shock of the Brexit vote. The jobless rate remained at an 11-year low of 4.8 percent and the employment rate stayed at all-time record high, the Office for National Statistics said. The number of people in work fell for a second time in a row, the first back-to-back fall since the middle of 2015. And the number of hours worked edged down. But the number of jobless benefit claimants unexpectedly fell by 10,100 in December, another sign of the overall resilience in the jobs market.
USD/CAD is supported at 1.3232 levels and is trading at 1.3273 levels. It has made session high at 1.3293 and lows at 1.3081 levels. The Canadian dollar declined against its U.S. counterpart on Wednesday as Canadian dollar was pressured by lower oil prices and Bank of Canada Governor Stephen Poloz kept alive prospects of an interest rate cut. At a press conference following the central bank's interest rate announcement, Poloz said a rate cut would remain on the table for as long as downside risks are still present. The remark pressured the loonie to its weakest since Jan. 11 at C$1.3235 to the greenback. It was at C$1.3090 before the press conference began. The loonie reached a nearly three-month high at C$1.3019, helped by recent data that showed a surge in jobs in December and the first trade surplus in more than two years in November, while a Bank of Canada survey last week pointed to improving business conditions. Meanwhile, oil prices fell on dollar strength and expectations U.S. producers would boost output, while OPEC signaled a global supply-reduction deal would shrink the oil surplus. The Canadian dollar was last trading at C$1.3264, much weaker than Tuesday's close of C$1.3058.
AUD/USD is supported around 0.7458 levels and currently trading at 0.7537 levels. It hit session high at 0.7563 and made session lows at 0.7530 levels. The Australian dollar held near two-month highs on Wednesday as traders unwound their long positions in the greenback after U.S. president-elect Donald Trump expressed concerns at the currency's strength. The Australian hit high at $0.7565, a level not seen since Nov.14. It shot past a key resistance of $0.7525 in the previous session when it posted its biggest daily percentage gain since early September. The Aussie is now up nearly 5 percent so far in January, making it one of the best performing major currencies this year. Locally, investors will keep a close eye on jobs data for December due on Thursday to take the pulse of the Australian economy, which contracted in the third quarter of last year. While unemployment has been steady at three-year lows, jobs have been heavily skewed toward part-time work.
Equities Recap
European shares ended little changed on Wednesday with investors looking at corporate earnings for market direction as more doubts emerged that a rally triggered by Donald Trump's U.S. presidential election win would continue.
UK's benchmark FTSE 100 closed up by 0.4 percent, the pan-European FTSEurofirst 300 ended the day up by 0.18 percent, Germany's Dax ended up by 0.5 percent, France’s CAC finished the day down by 0.2 percent.
The S&P 500 and the Nasdaq ended a choppy session slightly higher on Wednesday as gains in tech stocks offset a weakness in the retail sector, while the Dow was pulled lower by healthcare shares.
Dow Jones closed down by 0.11 percent, S&P 500 ended up by 0.17 percent, Nasdaq finished the day up by 0.29 percent.
Treasuries Recap
U.S. Treasury yields rose to session highs on Wednesday after Federal Reserve Chair Janet Yellen made comments supporting further, gradual interest rate increases.
Benchmark 10-year notes fell 24/32 in price to yield 2.41 percent, up from 2.33 percent late Tuesday.
Commodities Recap
Gold retreated on Wednesday from the previous day's eight-week high as data showing the biggest pick-up in U.S. consumer prices in 2-1/2 years lifted the dollar and U.S. Treasury yields.
Spot gold was down 0.6 percent at $1,209.34 an ounce by 2:45 p.m. EST (1945 GMT), after hitting its highest since mid-November on Tuesday.
U.S. gold futures for February delivery settled down 0.07 percent at $1,212.10.
Oil prices fell on Wednesday to their lowest in a week, on a strong dollar and expectations that U.S. producers would boost output even as OPEC's output fell from a record high.
Brent crude ended the session at $53.92 per barrel, down $1.55 or 2.79 percent, while U.S. crude settled at $51.08, down $1.40, or 2.67 percent. Ahead of the settlement, both contracts sank to their lowest since Jan. 11.
