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Americas roundup: Dollar up on talk Trump might pick policy hawk for Fed, Sterling sinks as rate-setters talk,Wall Street ends little changed, Oil falls as U.S. production offsets Iraq output concerns-October 17th 2017

Market Roundup

• US Import Prices MM Sep, 0.7%, 0.5% forecast, 0.6% previous.

• US Export Prices MM Sep, 0.8%, 0.4% forecast, 0.6% previous.

• US Industrial Production MM Sep, 0.3%, 0.2% forecast, -0.9% previous.

• US Capacity Utilization MM Sep, 76%, 76.2% forecast, 76.1% previous.

• US NAHB Housing Market Index Oct, 68%, 64% forecast, 64% previous.

• Oil falls as US production offsets Iraq output concerns.

• Republican senator says bipartisan deal reached to stabilize Obamacare.

• Trump likely to name Fed chair by early November –source.

• Mexico, Canada poised to push back over US NAFTA demands.

Looking Ahead - Economic Data (GMT)

• No significant events

Looking Ahead - Events, Other Releases (GMT)

• 08:10 Mario Draghi to speak at the ECB Conference in Frankfurt, Germany

• 11:30 ECB’s Ignazio Angeloni participates in a panel discussion in Berlin

• 11:45 ECB’s Peter Praet will take part in a panel discussion in Frankfurt 

• 12:00 Fed’s William Dudley Robert Kaplan to attend a discussion in New York

• 14:15 ECB’s Benoit Coeure will chair a panel discussion in Frankfurt

• N/A Fed’s Stanley Fischer at the Money Marketeers of NY University

Currency Summaries

EUR/USD is likely to find support at 1.1693 levels and currently trading at 1.1766 levels. The pair has made session high at 1.1772 and hit lows at 1.1734 levels. The euro slipped lower against the U.S. dollar on Tuesday as the dollar rose on speculation that U.S. President Donald Trump was leaning towards nominating a Federal Reserve head who would be more inclined to raise interest rates at a faster pace. The greenback was also supported by U.S. two-year Treasury yields hitting nine-year highs on Tuesday. Yields climbed as well on growing expectations that Trump favored Stanford economist John Taylor to head the U.S. central bank. The dollar index, which measures the greenback against a basket of six major peers, rose on the report hit a one-week high of. The index was last up 0.4 percent at 93.695. Trump's shortlist also includes Jerome Powell, a Fed governor; Trump's top economic adviser Gary Cohn; Yellen, whose term expires in February; and Kevin Warsh, a former Fed governor, sources have said, though investors say the chances of Warsh being selected have fallen. Knocked by a stronger dollar, the euro slipped to a one-week low of $1.1756, having fallen almost 3 percent since hitting a 2-1/2-year high last month. The euro was last down 0.4 percent at $1.1766.

GBP/USD is supported in the range of 1.3120 levels and currently trading at 1.3184 levels. It reached session high at 1.3209 and dropped to session low at 1.3153 levels. Sterling declined to hit a five-day low against the dollar on Tuesday after comments by Bank of England policymakers were interpreted by markets as dovish despite newly published inflation data in line with expectations. Members of the Bank of England's interest rate-setting committee were speaking to parliament's Treasury Committee. British inflation rose to its highest level in more than five years in September, official data showed on Tuesday, adding to the likelihood that the Bank of England will raise interest rates next month. Consumer prices last month were 3.0 percent higher than a year ago, the Office for National Statistics said, matching economists' average expectation in a poll and marking the fastest rise since April 2012. Rising inflation - driven largely by the pound's fall since last year's vote to leave the European Union - has squeezed household incomes, causing broader economic growth to slow. Wages have failed to keep pace with the rising cost of living. Sterling dipped against the dollar declined to hit daily lows at 1.3150 but slightly recovered to trade last at 1.3179. Traders will keep an eye on labour market data due on Wednesday and retail sales numbers on Thursday.

USD/CAD is supported at 1.2468 levels and is trading at 1.2527 levels. It has made session high at 1.2590 and lows at 1.2516 levels. The Canadian dollar firmed against its U.S. counterpart on Tuesday after NAFTA trade ministers spoke of some progress in talks about the trade deal. Trade ministers from the United States, Mexico and Canada agreed on Tuesday to extend talks on the North American Free Trade Agreement renegotiation into the first quarter of 2018, they said in a statement. The talks had been scheduled to conclude this year, but the three sides remain far apart on key issues. On Monday, the loonie touched a one-week low at C$1.2558. It has also been pressured recently by reduced expectations for another Bank of Canada interest rate hike over the coming months. Chances of a rate hike at next week's rate decision have fallen to around 20 percent from nearly 50 percent in mid-September, the overnight index swaps market shows. Prices of oil, one of Canada's major exports, were steady as fighting between Iraqi and Kurdish forces threatened supplies from northern Iraq. the Canadian dollar was trading at C$1.2524 to the greenback, or 79.75 U.S. cents. The currency traded in a range of C$1.2514 to C$1.2589.

NZD/USD is supported around 0.7100 levels and currently trading at 0.7168 levels. It peaked to hit session high at 0.7172 and made session lows at 0.7143 levels. The New Zealand dollar briefly rose to a two-week high on Tuesday after inflation surpassed the central bank's forecasts in the third quarter, while its Australian cousin hovered around a recent three-week high. The New Zealand dollar climbed 0.4 percent to $0.7217 after official data showed the consumer price index (CPI) picked up 0.5 percent in the three months to the end of September, after a flat reading the previous quarter. The annual pace of growth was 1.9 percent, beating analysts' expectations for a 1.8 percent rise. The kiwi was, however, unable to sustain those gains and was last down 0.1 percent at $0.7163 as the uptick in consumer prices was driven largely by housing and food costs while signs of inflation were evasive elsewhere. That means the data is unlikely to waver the Reserve Bank of New Zealand's (RBNZ) determination to keep interest rates at record lows for some time yet, economists said. Added to that was intense uncertainty about the country's next government after an inconclusive election last month left New Zealand in a political limbo. Analysts cautioned the kiwi would struggle to make ground beyond $0.7200.

Equities Recap

European shares dipped on Tuesday, falling from a four-month peak as weakness among commodities stocks outweighed gains spurred by results from companies including food group Danone and education firm Pearson.

UK's benchmark FTSE 100 closed up by 0.1 percent, the Europe’s Stoxx 600 ended the day down by 0.1 percent, Germany's Dax ended up by 0.1 percent, France’s CAC finished the day up by 0.2 percent.

The Dow Jones Industrial Average briefly ticked above the 23,000 point mark for the first time on Tuesday, driven by strong earnings from UnitedHealth and Johnson & Johnson, though it finished the session just below that level.

Dow Jones closed up by 0.17 percent, S&P 500 ended down by 0.06 percent, Nasdaq finished the day down by 0.01 percent.

Treasuries Recap

The U.S. Treasury yield curve flattened on Tuesday as 2-year yields rose to their highest level since November 2008 and yields on longer-dated maturities declined.

Yields on 5-year notes touched their highest level since Oct. 6 while 30-year yields fell to the lowest since Sept. 27. That pushed the yield spread between 5- and 30-year maturities to 83.94 basis points, the lowest since November 2007.

Commodities Recap

Gold prices fell to a one-week low on Tuesday on speculation that the eventual successor to U.S. Federal Reserve Chair Janet Yellen will favor higher interest rates.

Spot gold was down 0.6 percent at $1,286.74 an ounce by 2:16 p.m. EDT (1816 GMT), after dipping to $1,281.31, while U.S. gold futures for December delivery settled down $16.80, or 1.3 percent at $1,286.20 per ounce, hitting a one-week low of $1,283.20.

Oil prices reversed course after Monday's gains as expectations of high U.S. production and exports offset concerns that fighting between Iraqi and Kurdish forces could threaten the country's crude output. 

U.S. crude oil futures settled up 1 cent, or 0.02 percent, at $51.88 per barrel. Brent was last at $58.03, up 0.36 percent on the day.


 

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