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Asia Roundup: Antipodeans ease to 1-week lows, dollar index rallies as Fed minutes support more U.S. rate hikes, Asian shares slump - Thursday, February 22nd, 2018

Market Roundup

  • Fed policymakers show rising confidence on inflation, economic outlook -minutes
     
  • Fed's Kashkari unsure if tax cuts will lift investment
     
  • Japan PM Abe advisor Hamada – BoJ should consider buying foreign bonds
     
  • MoF flow data week-ended Feb 17 – Japanese sell foreign stocks, bonds
     
  • Net Y587.1 bln, Y553.1 bln sold, net Y50.9 bln foreign bills bought
     
  • Foreigners buy Y127.1bln Japan stocks, sell Y789.5bln JGBs, Y768.5bln bills
     
  • Bank of England rate rises could come faster than expected, chief economist warns
     
  • Leaders to discuss EU money, top jobs after Brexit
     
  • UK improves offer to return devolved powers after Brexit, Scotland wants more
     
  • Australian leader to raise China, Trans-Pacific trade deal in Trump talks
     

Economic Data Ahead

  • (0245 ET/0745 GMT) France Feb Business Climate, 113 f'cast, 113 prev
     
  • (0245 ET/0745 GMT) France Jan CPI (EU Norm) final, -0.1% m/m, 1.5% y/y eyed; 0.4%, 1.5% prev
     
  • (0400ET/0900 GMT) Germany Feb Ifo Business Climate, 117.0 f'cast, 117.6 prev
     
  • (0400ET/0900 GMT) Germany Feb Ifo Current conditions, 127.0 f'cast, 127.7 prev
     
  • (0400ET/0900 GMT) Germany Feb Ifo Expectations, 107.9 f'cast, 108.4 prev
     
  • (0430 ET/0930 GMT) Great Britain Q4 GDP, 0.5% q/q, 1.5% y/y eyed; 0.5%, 1.5% prev
     
  • (0430 ET/0930 GMT) Great Britain Q4 Business investment prelim, 0.5% q/q, 2.4% y/y eyed; 0.5%, 1.7% prev

Key Events Ahead

  • (0430 ET/0930 GMT) ECB board member Yves Mersch speaks in Frankfurt
     
  • (0730 ET/1230 GMT) ECB releases minutes of January meeting
     
  • (1000 ET/1500 GMT) NY Fed President William Dudley speaks in New York
     
  • N/A Bank of England USD 3-year benchmark
     
  • N/A IFC US$300m Global SEC-exempt bond maturing 1 Mar 2019

FX Beat

DXY: The dollar index rallied to a 1-week peak after the minutes of the Federal Reserve's January 30-31 policy meeting showed policymakers were more confident of the need to keep raising interest rates. The greenback against a basket of currencies traded flat at 90.12, having touched a high of 90.17, its highest since Feb. 13. FxWirePro's Hourly Dollar Strength Index stood at 88.46 (Slightly Bullish) by 0500 GMT.

EUR/USD: The euro declined to a 10-day low as the uncertainty surrounding the Italian elections and German SPD vote weakened the euro bulls’ sentiment. The European currency traded 0.1 percent down at 1.2275, having touched a low of 1.2265 earlier, its lowest since Feb. 14. FxWirePro's Hourly Euro Strength Index stood at -116.06 (Highly Bearish) by 0400 GMT. Investors’ attention will remain on series of economic data from the Eurozone economies, ahead of U.S. unemployment benefit claims. Immediate resistance is located at 1.2353 (10-DMA), a break above targets 1.2400. On the downside, support is seen at 1.2245 (Feb 7 Low), a break below could drag it lower 1.2205 (Feb 9 Low).

USD/JPY: The dollar eased, reversing most of its previous session gains, as rising bond yield-led risk aversion in the equity markets. The major rallied to a 1-week high on Wednesday on speculation that the Federal Reserve is prepping for aggressive rate hikes. The major was trading 0.4 percent down at 107.35, having hit a high of 107.90 the day before, its highest since Feb.14. FxWirePro's Hourly Yen Strength Index stood at 110.64 (Highly Bullish) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. unemployment benefit claims. Immediate resistance is located at 108.59 (38.2% retracement of 110.48 and 105.74), a break above targets 109.30 (23.6% retracement). On the downside, support is seen at 106.81  (5-DMA), a break below could take it lower 106.09.

GBP/USD: Sterling slumped to a 1-week low on subdued UK job data coupled with ongoing Brexit worries. The major traded 0.1 percent down at 1.3907, having hit a low of 1.3897 earlier, it’s lowest since Feb 14. FxWirePro's Hourly Sterling Strength Index stood at 25.17 (Neutral) by 0400 GMT. Investors’ focus will remain on the UK preliminary gross domestic product, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.4008 (5-DMA), a break above could take it near 1.4144 (Feb 16 High). On the downside, support is seen at 1.3845 (Feb 8 Low), a break below targets 1.3800. Against the euro, the pound was trading 0.05 percent down at 88.25 pence, having hit a high of 88.05 pence on Tuesday, it’s highest since Feb. 9.

AUD/USD: The Australian dropped to a 1-week low earlier in the session on bolstered expectations of at least three rate hikes in the United States this year. The Aussie trades down at 0.7801, having hit a low of 0.7790; it’s lowest since Feb 14. FxWirePro's Hourly Aussie Strength Index stood at -107.04 (Highly Bearish) by 0400 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7773, a break below targets 0.7758. On the upside, resistance is located at 0.7889 (5-DMA), a break above could take it near 0.7936 (21-DMA).

NZD/USD: The New Zealand dollar fell for the fifth straight sessions, as the minutes of the January Fed meeting revealed that many policymakers believe the stronger growth has increased the chance of future rate hikes. The Kiwi trades 0.1 percent down at 0.7310, having touched a low of 0.7307 earlier, its lowest level since Feb. 14. FxWirePro's Hourly Kiwi Strength Index was at 69.70 (Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7366 (5-DMA), a break above could take it near 0.7400. On the downside, support is seen at 0.7295 (Feb. 2) a break below could drag it below 0.7256.

Equities Recap

Asian shares declined, following S&P 500 futures lower as speculation of faster hikes in U.S interest rates weakened risk appetite globally.

MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.8 percent.

Tokyo's Nikkei fell 1.2 percent to 21,718.99 points, Australia's S&P/ASX 200 index slumped 0.2 percent to 5,950.90 points and South Korea's KOSPI slumped 0.7 percent to 2,412.37 points.

Hong Kong’s Hang Seng was trading 1.3 percent lower at 31,126.91 points. Taiwan shares added 0.6 percent to 10,653.22 points.

Commodities Recap

Crude oil prices declined as a stronger dollar outweighed a report of a decrease in U.S. crude inventories. International benchmark Brent crude was trading 0.3 percent down at $64.90 per barrel by 0358 GMT, having hit a high of $65.86 on Monday, its highest since Feb. 8. U.S. West Texas Intermediate was trading 0.5 percent down at $61.31 a barrel, after rising as high as $62.62 on Tuesday, its strongest since Feb. 8.

Gold prices hovered towards a 1-week low hit in the previous session on minutes from the last U.S. Federal Reserve meeting that showed policymakers confident in the need to keep raising interest rates. Spot gold was flat at $1,324.24 an ounce at 0413 GMT, having fallen to its lowest level since Feb. 14 at $1,322.27 the day before. U.S. gold futures were down 0.3 percent at $1,328.1 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.940 percent lower by 0.001 bps, while 5-year yield was 0.005 bps up at 2.678 percent.

The Australian government bond futures were mixed, with the three-year bond contract up 1 tick at 97.865. The 10-year contract fell 1.5 ticks to 97.1300.

The New Zealand government bonds eased, sending yields 2.5 basis points higher at the long end of the curve.

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