Market Roundup
- US official - US Navy strike group to move toward Korean peninsula – Reuters.
- US UN Ambassador Haley – Prepared to do more in Syria, hopes not necessary - Reuters.
- Progress cited at China-US summit but details lacking – Various media.
- CFTC IMM CTA data – USD net longs lowest since late February, JPY net shorts 45.8k contracts, lowest since December, EUR shorts up to 11.4k, GBP shorts down touch to 99.6k, CHF too to 13.8k, CAD shorts up, AUD longs off.
- Reuters poll – Wall St sees Fed balance sheet normalization plan by December.
- Investors flock to macro hedge funds but not only the old guard – Reuters.
- St Louis Fed Bullard (in Melbourne, non-voter, dove) – No rush to raise rates – Reuters.
- BoJ Gov Kuroda repeats resolve to maintain massive stimulus via QQE, YCC and monetary base rise, inflation to remain around zero for now, economy in moderate expansion, won’t hesitate to adjust policy as needed – Reuters.
- MoF March flow data – Japanese buy net Y586.2 bln foreign stocks, sell Y2.1164 trln bonds, Y30.8 bln bills; foreign investors sell net Y205.9 bln Japanese stocks, buy Y1.1892 trln JGBs, Y319.8 bln bills.
- Japan Feb current account balance Y2.8136 trln surplus, Y2.6156 trln forecast, surplus largest since March ’16, trade surplus +79% y/y to Y1.013 trln.
- Australia Feb owner-occupied housing finance -0.5% m/m, as forecast, value of investment housing finance -5.9%.
- ECB Mersch – Ultra-easy monetary policy cannot continue forever – Reuters.
- EU Dombrovskis – Italy extra moves likely to hit EU fiscal targets in ’17 – Reuters.
- Italy FinMin Padoan – Offloading of bank bad loans should not be too fast – Reuters.
Economic Data Ahead
- (0400 ET/0800 GMT) Italy Feb industrial output, +1.5% m/m, +2.7% y/y forecast; last -2.3%, -0.5%.
- (0430 ET/0830 GMT) Eurozone Apr Sentix index, 21.0 forecast; last 20.7.
- (1000 ET/1400 GMT) United States Mar employment trends index; last 131.4.
Key Events Ahead
- N/A Austria National Bank ViceGov Ittner speaks to business reporters.
- (0530 ET/0930 GMT) Germany E2 bln 6-month Bubill auction.
- (0850 ET/1250 GMT) France 3/6/12-month BTF note auctions.
- (1610 ET/2010 GMT) FOMC Chair Yellen in discussion at University of Michigan, Ann Arbor.
FX Beat
DXY: The dollar greenback rose to near four-week highs after a key U.S. Federal Reserve official reinforced the central bank's commitment to interest rate hikes. The dollar against a basket of currencies traded 0.1 percent up at 101.20, having hit a high of 100.34 earlier, its highest since Mar. 15. FxWirePro's Hourly Dollar Strength Index stood at 61.06 (Bullish) by 0500 GMT.
EUR/USD: The euro tumbled to a 1-month low as the greenback strengthened after a Federal Reserve policymaker reinforced the central bank's commitment to interest rate hikes. New York Fed President William Dudley stated the central bank might avoid raising interest rates at the same time that it begins shrinking its $4.5 trillion bond portfolio. The European currency traded 0.1 percent down at 1.0581, having touched a low of 1.0570 earlier, its lowest since Mar. 9. FxWirePro's Hourly Euro Strength Index stood at -48.93 (Neutral) by 0400 GMT. Investors now await Eurozone Sentix Investor Confidence ahead of U.S. Labour market conditions index and FOMC member Yellen's speech. Immediate resistance is located at 1.0600, a break above targets 1.0641 (78.6% retrace of 1.0905 and 1.0570). On the downside, support is seen at 1.0570 (Session Low), a break below could drag it near 1.0550.
USD/JPY: The dollar rose to a 1-week high as comments from New York Fed President William Dudley bolstered U.S. Treasury yields and expectations for more Fed interest rate hikes. However, geopolitical tensions in Asia triggered a fresh bout of risk aversion, which limited the upside in the major. The major traded 0.3 percent up at 111.42, rebounding from a low of 110.09 touched on Friday, its lowest since Nov. 18. FxWirePro's Hourly Yen Strength Index stood at 46.83 (Neutral) by 0400 GMT. Investors’ will continue to digest Feb policymaker's remarks, ahead of U.S. labor market condition index and Fed Chair Janet Yellen's speech. Immediate resistance is located at 111.70 (23.6 % retrace of 112.19 and 110.09), a break above targets 112.20 (Mar 31 High). On the downside, support is seen at 110.90, a break below could take it near 110.50.
GBP/USD: Sterling steadied after declining to an over 2-week low in the previous session. The major weakened below the 1.2400 handle after data showed an unexpected drop in the British industrial output, raising concerns over the outlook for the UK's economy as it prepares to leave the European Union. Sterling trades 0.1 percent up at 1.2386, having hit a low of 1.2365 on Friday, its lowest since Mar. 21. FxWirePro's Hourly Sterling Strength Index stood at -105.97 (Highly Bearish) by 0400 GMT. Investors’ attention will remain on U.S. economic and Fed Yellen's speech amid a lack of relevant data from the UK docket. Immediate resistance is located at 1.2409 (21-DMA), a break above could take it near 1.2450 (5-DMA). On the downside, support is seen at 1.2350, a break below targets 1.2300. Against the euro, the pound traded 0.1 percent up at 85.45 pence, having hit a low of 85.79 the session before.
AUD/USD: The Australian dollar tumbled to multi-week lows as risk-averse investors rushed towards safer assets, while the greenback rallied following Fed policymaker's comments on further interest rate hikes. Moreover, the geopolitical tensions in Asia and a drop in iron ore and coking coal prices continued to weigh on the major. The Aussie trades 0.2 percent down at 0.7585, having hit a low of 0.7477 earlier in the session, it’s lowest since Jan. 17. FxWirePro's Hourly Aussie Strength Index stood at -134.96 (Highly Bearish) by 0400 GMT. Investors will continue track overall market sentiment ahead of U.S. economic data and Fed Chair Yellen's speech. Immediate support is seen at 0.7477 (Session Low), a break below targets 0.7450. On the upside, resistance is located at 0.7525 (23.6% retrace of 0.7679 and 0.7477), a break above could take it near 0.7554 (38.2% retrace).
NZD/USD: The New Zealand dollar slightly rebounded after slumping to a near 4-week low earlier in the session, as the U.S. dollar remained in demand across the board. The recovery in the major was supported by higher oil prices, however, the weakness in seen its Antipodean partner after worse-than-expected Australian housing finance data and weaker copper prices limited the upside in the pair. The Kiwi trades 0.1 percent higher at 0.6938, retreating from a low of 0.6942 hit earlier, its weakest since Mar. 15. FxWirePro's Hourly Kiwi Strength Index was at 43.86 (Neutral) by 0500 GMT. Investors’ will continue to track broad based market sentiment, ahead of U.S. macro fundamental drivers and Fed Yellen speech. Immediate resistance is located at 0.6971 (5-DMA), a break above could take it near 0.6997 (21-DMA). On the downside, support is seen at 0.6920 (Session Low), a break below could drag it near 0.6900.
Equities Recap
Asian shares declined as growing geopolitical risks sent investors towards safe-haven assets, while the greenback rose to a near 4-week high boosted by Federal Reserve policy tightening expectations.
MSCI's broadest index of Asia-Pacific shares outside Japan declined for a third consecutive session.
Tokyo's Nikkei gained 0.65 percent to 18,785.29 points, Australia's S&P/ASX 200 index rose 0.68 percent to 5,902.80 points and South Korea's KOSPI fell 1.02 percent at 2,129.78 points.
Shanghai composite index edged down 0.24 percent to 3,278.90 points, while CSI300 index was trading 0.1 percent lower at 3,514.05 points.
Hong Kong’s Hang Seng was trading 0.02 percent lower at 24,262.21 points. Taiwan shares rose 0.1 percent to 9,882.54 points.
Commodities Recap
Crude oil prices steadied after rising to a 1-month high in the previous session, supported by strong demand and political uncertainty in Syria, despite another rise in U.S. drilling activity. International benchmark Brent crude was trading 0.3 percent up at $55.33 per barrel by 0413 GMT, having hit a high of $56.05 on Friday, its strongest since Mar. 7. U.S. West Texas Intermediate crude rose 0.2 percent to $52.38 a barrel, after rising as high as $52.59 the prior session, its highest since Mar. 7.
Gold edged down after hitting a 5-month peak in the previous session, as a stronger demand for the dollar weighed on the metal's safe-haven appeal. Spot gold fell 0.15 percent at $1,252.95 per ounce by 0418 GMT, having hit a high of $1,270.55 on Friday, its highest since Nov. 10. U.S. gold futures edged lower 0.3 percent to $1,253.90.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.385 percent higher by 0.013 bps, while 5-year yield was 0.014 bps up at 1.924 percent.
The Australian government bond futures slipped, with the three-year bond contract down 3 ticks at 98.16, while the 10-year contract fell 4 ticks to 97.38
The New Zealand government bonds eased, sending yields 7 basis points higher at the long end of the curve.
