Asia Roundup: Aussie eases on weaker than expected trade balance, dollar index steadies near 7-week peak following Fed Brainard's hawkish comments, Asian shares rally – Thursday, March 2nd, 2017

Market Roundup

• Fed Gov Brainard – Rates can rise soon given improved global conditions, employment, and inflation goals nearly met, for retaining Fed balance sheet, fiscal boost could lead to higher inflation, interest rates – Reuters.
   
• Japan FinMin Aso – Wider US-Japan interest rate differential would cause USD/JPY to rise further – Nikkei.
   
• MoF flow data week ended Feb 25 – Japanese buy net Y159.5 bln foreign stocks, sell Y202.0 bln bonds, buy Y22.8 bln bills; foreign investors sell net Y261.1 bln Japanese stocks, buy Y367.9 bln JGBs, Y976.7 bln bills.
   
• Japan end-Feb monetary base Y433.6596 trln, end-Jan Y435.4926 trln.
   
• Japan dreams of windfall from US infrastructure investment - Nikkei.
   
• China CBRC Guo – Risk prevention in banking sector to be ’17 focus – Reuters.
   
• US Feb total vehicle sales 17.58 mln AR, Jan 17.61 mln – Autodata.
   
• Banxico Carstens – Denies Mexico considering request for Fed swap line.
   
• BoE’s new deputy governor must tackle conflicts of interest – Reuters.
   
• Australia Jan trade surplus A$1.302 bln, A$3.8 bln forecast, exports -3% m/m, imports +4%, set back seen temporary.
   
• Australia Jan bldg approvals +1.8% m/m, unch forecast, priv-sector houses -3.0%.
   
• RBNZ Gov Wheeler – US protectionism greatest source of uncertainty - Reuters.
   
• Emerging market non-resident inflows hit estimated $17.1 bln in Feb – IIF.
  ​

Economic Data Ahead

• (0245 ET/0645 GMT) Switzerland Q4  GDP, +0.5% q/q forecast; last unch q/q, +1.3% y/y.
   
• (0300 ET/0700 GMT) Germany Jan import prices, +0.4% m/m, +5.5% y/y forecast; last +1.9%, +3.5%.
   
• (0300 ET/0700 GMT) Norway Jan retail sales ex-autos, +1.4% forecast; last -2.1%.
   
• (0300 ET/0800 GMT) Spain Q4  GDP, +0.7% q/q, +3.0% y/y forecast; last +0.7%, +3.0%.
   
• (0315 ET/0815 GMT) Switzerland Jan retail sales; last -3.5% y/y.
   
• (0400 ET/0900 GMT) Italy Jan unemployment, 12.0% forecast; last 12.0%.
   
• (0430 ET/0930 GMT) Great Britain Feb construction PMI, 52.2 forecast; last 52.2.
   
• (0500 ET/1000 GMT) Eurozone Jan unemployment, 9.6% forecast; last 9.6%.
   
• (0500 ET/1000 GMT) Eurozone Feb inflation – flash, +2.0% y/y forecast; last +1.8%.
   
• (0500 ET/1000 GMT) Eurozone Feb – ex-food/energy,  +0.9% y/y forecast; last +0.9%.
   
• (0500 ET/1000 GMT) Eurozone Jan producer prices, +0.6% m/m, +3.2% y/y forecast; last +0.7%, +1.6%.
   
• (0830 ET/1330 GMT) Canada Q4  GDP, +2.0% AR forecast; last +0.9% q/q, +3.5% AR.
   
• (0830 ET/1330 GMT) United States w/e initial jobless claims, 243k forecast; last 244k.
   
• (0945 ET/1445 GMT) United States Feb ISM-New York index; last 731.3.
  ​

Key Events Ahead

• N/A   Norges Bank Gov Olsen lecture at Bergen NHH School of Economics.
   
• (0330 ET/0730 GMT) ECB Lautenschlaeger speaks at LSE German Symposium.
   
• (0400 ET/0900 GMT) Austria EconMin Mitterlehner speaks in Vienna on reforms.
   
• (0430 ET/0930 GMT) Spain E3-4 bln 0.4/1.5% 2022/27 Bono, E0.5-1 bln 0.3% 2021 linker sales.
   
• (0450 ET/0950 GMT) France E6-7 bln 0.25/1.25/1.75% 2026/36/66 OAT auctions.
   
• (0530 ET/1030 GMT) GBP2.5 bln 0.5% 2022 Gilt auction.
   
• (1300 ET/1800 GMT) BoC DepGov Lane speaks in Montreal.
   
• (1800 ET/2300 GMT) Cleveland Fed Mester speaks at NY Barnard College Power Talk event.
   

FX Beat

DXY: The dollar rallied versus its major competitors as hawkish comments from Federal Reserve Governor Lael Brainard boosted the prospects of U.S. interest rate hike this month. The greenback against a basket of currencies traded 0.1 percent up at 101.89, having hit a high of 101.97 the prior day, it’s strongest since Jan. 11. FxWirePro's Hourly Dollar Strength Index stood at 101.72 (Highly Bullish) by 0500 GMT.

EUR/USD: The euro declined, extending losses for the third consecutive session, as the greenback steadied near a seven-week high on growing signs the Federal Reserve is considering hiking interest rates this month. Moreover, heightened odds of Le Pen victory in French elections continued to weigh on the major. The European currency traded 0.1 percent down at 1.0531, having hit a low of 1.0514 the prior day, it’s lowest since Feb. 22. FxWirePro's Hourly Euro Strength Index stood at 8.27 (Neutral) by 0400 GMT. Investors’ attention will remain on Eurozone's unemployment rate and consumer price index figures, ahead of U.S. jobless claims benefit data. Immediate resistance is located at 1.0570 (5-DMA), a break above targets 1.0621 (38.2 % retracement of 1.0828 and 1.0493). On the downside, support is seen at 1.0514 (Previous Session Low), a break below could drag it lower 1.0500.

USD/JPY: The dollar rallied for the fourth straight day, as hawkish comments from Federal Reserve Governor Lael Brainard on the U.S economy, boosted Fed interest rate hike expectations. However, slightly subdued performance seen behind the treasury yields capped the upside in the major.  The major trades 0.2 percent higher at 113.97, having hit high of 114.15 earlier in the session, its highest since Feb. 16. FxWirePro's Hourly Yen Strength Index stood at -8.11 (Neutral) by 0400 GMT. Investors’ will continue to track price action in the U.S. Treasury yields, ahead of the U.S. unemployment benefits figures. Immediate resistance is located at 114.30, a break above targets 114.50. On the downside, support is seen at 113.42 (Feb. 13 Low), a break below could take it near 113.00 (10-DMA).

GBP/USD: Sterling tumbled to a 6-week low below the 1.2300 handle as disappointing manufacturing data and fresh buying interest around the greenback weakened the bid tone around the British currency. The major trades 0.1 percent lower at 1.2282, having hit a low of 1.2260 earlier in the session, its weakest since Jan. 20. FxWirePro's Hourly Sterling Strength Index stood at -62.36 (Bearish) by 0400 GMT. Investors’ attention will remain on the UK Markit Construction PMI, ahead of U.S. economic data. Immediate resistance is located at 1.2300 (Session High), a break above could take it near 1.2365 (23.6 % retracement of 1.2706 and 1.2260). On the downside, support is seen at 1.2250 (Feb 19 Low), a break below targets 1.2200. Against the euro, the pound trades flat at 85.75 pence, having hit a near 2-week low of 85.90 the day before.

AUD/USD: The Australian dollar declined after data showed the economy's trade surplus for the month of January came in at 1.3 billion AUD, which was lower than the expected print of 3.8 billion AUD. However, better-than-expected building permits figures, which rose 1.8 percent in January, limited the downside in the major. The Aussie trades 0.2 percent down at 0.7655, having touched a low of 0.7636 in the previous session, it’s lowest since Feb. 15. FxWirePro's Hourly Aussie Strength Index stood at 71.88 (Bullish) by 0500 GMT. Markets will continue to digest downbeat economic data, ahead of series of U.S. dataflow. Immediate support is seen at 0.7636 (Previous Session Low), a break below could drag it near 0.7600. On the upside, resistance is located at 0.7700, a break above targets 0.7778 (Nov. 8 High).

NZD/USD: The New Zealand dollar fell towards a 6-week low hit in the previous session as the greenback rose on speculation the U.S. Federal Reserve would hike rates as early as this month. However, the major trimmed some loss as RBNZ Governor Wheeler’s overnight comments provided some support to the NZD bulls. The Kiwi trades 0.1 percent lower at 0.7137, having hit a low of 0.7099 on Wednesday, it’s lowest since Jan. 17. FxWirePro's Hourly Kiwi Strength Index was at -18.61 (Neutral) by 0500 GMT. Investors’ will continue to track overall market sentiment, ahead of the U.S. macroeconomic fundamental drivers for further momentum on the major. Immediate resistance is located at 0.7164 (23.6 % retracement of 0.7375 and 0.7099), a break above could take it near 0.7200. On the downside, support is seen at 0.7100, a break below could drag it till 0.7070 (Jan 13 Low).

Equities Recap

Asian shares rallied following overnight gains on the Wall Street, as investors cheered President Donald Trump's less combative tone in his first speech to Congress, while the dollar strengthened on growing expectations of a U.S. rate hike this month.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 percent.

Tokyo's Nikkei gained 0.9 percent to 19,569.50 points, Australia's S&P/ASX 200 index rose 1.19 percent to 5,772.50 points and South Korea's KOSPI was trading 0.61 percent up at 2,104.71 points.

Shanghai composite index fell 0.17 percent to 3,241.57 points, while CSI300 index was trading 0.34 percent up at 3,446.33 points.

Hong Kong’s Hang Seng was trading 0.4 percent higher at 23,882.12 points. Taiwan shares added 0.2 percent at 9,691.80 points.

Commodities Recap

Crude oil prices edged up, after declining from a 1-week high hit in the previous session as a record build-up in U.S. stockpiles weighed on the market sentiment. International benchmark Brent crude was trading 0.05 percent up at $56.28 per barrel by 0359 GMT, having hit a high of $57.01 the prior day, its highest since Feb. 23. U.S. West Texas Intermediate crude gained 0.1 percent at $53.68 a barrel, after tumbling to a trough of $54.20 on Tuesday, its weakest since Feb. 17.

Gold prices declined as the dollar strengthened on hawkish comments from U.S. Federal Reserve officials that boosted expectations of a U.S. interest rate hike in March. Spot gold dropped 0.2 percent to $1,246.62 per ounce by 0406 GMT, having hit its lowest since Feb. 23 at $1,236.84 in the previous session. U.S. gold futures fell 0.2 percent to $1,247.60.

Treasuries Recap

The 10-year U.S treasury yield stood at 2.4599 percent lower by 0.002 bps, while 5-year yield was down by 0.002 bps at 1.9890 percent.

The Australian bonds rose modestly following weaker-than-expected trade balance during the month of January. The yield on the benchmark 10-year Treasury note fell 1/2 basis point to 2.81 percent, the yield on 15-year note also slipped 1/2 basis point to 3.24 percent while the yield on short-term 2-year slumped nearly 2 basis points to 1.84 percent.

The New Zealand government bonds ended the session tad higher after the Reserve Bank of New Zealand Governor Graeme Wheeler maintained 'neutral' economic and policy outlook, besides, adding that risks remain tilted to the downside. The yield on the benchmark 10-year bond fell 1 basis point to 3.34 percent at the time of closing, the yield on 7-year note also slid nearly 1 basis point to 2.89 percent and the yield on short-term 2-year note traded 1 basis point lower at 2.20 percent.

The Canadian government bond prices were lower across the yield curve, with the two-year price down half a Canadian cent to yield 0.761 percent and the benchmark 10-year falling 49 Canadian cents to yield 1.69 percent.