Asia Roundup: Kiwi gains on better-than-expected current account figures, dollar eases ahead of FOMC meeting, crude oil volatile after surprise U.S. stock drawdown - Wednesday, March 15th, 2017

Market Roundup

• Workers at Japan’s top companies to get meager ’17 pay hikes - Reuters.
   
• Japan FY ’17 base wage hikes seen lower than in FY ’16 – MNI.
   
• China Prem Li – Doesn’t want trade war with US, 6.5% growth target not low but won’t be easy to meet, will cope, supports globalization-free trade, will continue to open up economy, ward off mass unemployment – Reuters.
   
• White House - Trump Paid $38 Million in Federal Taxes in 2005 – MSNBC.
   
• Australia March Westpac/MI consumer confidence index +0.1% to 99.7, sentiment steady, still below 100.
   
• Australia Feb new vehicle sales -2.7% m/m, ends two months of gains.
   
• New Zealand Q4 current account deficit NZ$2.335 billion, year to December NZ$7.112 billion, NZ$2.543 billion and NZ$7.25 billion forecast, Q4 deficit smallest in two years, deficit in year to December -2.7% of GDP.

Economic Data Ahead

• (0245 ET/0745 GMT) France Feb HICP – final, +0.1% m/m, +1.4% y/y forecast; flash -0.3%, +1.6%.
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• (0315 ET/0815 GMT) Switzerland Feb producer/import prices, +0.4% m/m forecast; last +0.4% m/m, +0.8% y/y.
   
• (0400 ET/0900 GMT) Italy Jan retail sales; last -0.5% m/m, -0.2% y/y.
   
• (0430 ET/0930 GMT) Great Britain Feb claimant count, -5k forecast; last -42.4k.
   
• (0430 ET/0930 GMT) Great Britain Jan ILO unemployment, 4.8% forecast; last 4.8%.
   
• (0430 ET/0930 GMT) Great Britain Jan average weekly earnings – 3-mo average, +2.4% y/y forecast; last +2.6%.
   
• (0430 ET/0930 GMT) Great Britain Jan – ex-bonus,  +2.5% y/y forecast; last +2.6%.
   
• (0500 ET/1000 GMT) Eurozone Q4  employment; last +0.2% q/q, +1.2% y/y.
   
• (0730 ET/1230 GMT) United States Feb CPI, unch m/m, +2.7% y/y forecast; last +0.6%, +2.5%.
   
• (0730 ET/1230 GMT) United States Feb – core, +0.2% m/m, +2.2% y/y forecast; last +0.3%, +2.3%.
   
• (0730 ET/1230 GMT) United States Feb real weekly earnings; last -0.4%.
   
• (0730 ET/1230 GMT) United States Feb retail sales, +0.1% m/m forecast; last +0.4%.
   
• (0730 ET/1230 GMT) United States Feb – ex-autos,   +0.2% m/m forecast; last +0.8%.
   
• (0730 ET/1230 GMT) United States Mar Empire State manufacturing index, 15.0 forecast; last 18.7.
   
• (0900 ET/1400 GMT) United States Jan business inventories, +0.3% m/m forecast; last +0.4%.
   
• (0900 ET/1400 GMT) United States Mar NAHB housing market index, 65.0 forecast; last 65.0.
   
• (1100 ET/1600 GMT) United States Feb Cleveland Fed CPI; last +0.3%.
   

Key Events Ahead
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• N/A   BoJ Policy Board begins two-day meeting.
• N/A   China National People’s Congress.
   
• N/A   Cape Town BAML Sun City conference (till March 16).
   
• N/A   Netherlands general election.
   
• (0300 ET/0800 GMT) Frankfurt Buba Banking Symposium/08:30 Riksbank Gov Ingves to speak.
   
• (0430 ET/0930 GMT) ECB ChiefEcon Praet in Frankfurt IIF G20 conference panel discussion.
   
• (0500 ET/1000 GMT) Greece E1 bln 13-week treasury bill auction.
   
• (0530 ET/1030 GMT) German FinMin Schaeuble press conference on ’18 budget.
   
• (0530 ET/1030 GMT) Germany E1 bln 2.5% 2046 Bund auction.
   
• (0530 ET/1030 GMT) Portugal E1.25-1.5 bln 6 and 12-month treasury bill auctions.
   
• (0700 ET/1200 GMT) UK PM May House of Commons testimony, Q&A.
   
• (1300 ET/1800 GMT) FOMC policy announcement, 25 bp hike in FF rate target to 0.75-1.0% forecast.
   
• (1330 ET/1830 GMT) FOMC Chair Yellen press conference.
   
• (1500 ET/2000 GMT) US Treasury Jan int’l capital flows data (TIC), Dec $42.8 bln outflow.
   

FX Beat

DXY: The dollar eased versus its major peers as investors took profits before the U.S. central bank policy meeting decision. The greenback against a basket of currencies traded 0.1 percent down at 101.64, having hit a low of 101.01 on Monday, its lowest since Feb. 28. FxWirePro's Hourly Dollar Strength Index stood at -46.96 (Neutral) by 0500 GMT.

EUR/USD: The euro edged up as the greenback eased ahead of the Federal Reserve monetary policy decision. However, the upside remains capped as concerns about a Dutch vote and the French presidential elections offset market speculation that the European Central Bank could be poised to wind down its stimulus programme. The European currency traded 0.1 percent higher at 1.0616, having hit a high of 1.0714 on Monday, its highest since Feb. 7. FxWirePro's Hourly Euro Strength Index stood at -68.76 (Bearish) by 0400 GMT. Investors now await Eurozone employment change figures, ahead of the U.S. economic fundamentals. Immediate resistance is located at 1.0626 (23.6 retrace of 1.0714 and 1.0599, a break above targets 1.0657 (50.0% retrace). On the downside, support is seen at 1.0599 (61.8% retrace of 1.0714 and 1.0525), a break below could drag it near 1.0565 (78.6% retrace).

USD/JPY: The dollar consolidated between a narrow range as investors awaited anxiously for U.S. central bank policy meeting outcome, with an immediate rate increase fully priced and for further clues on its monetary policy outlook. However, the Dutch elections and developments on the Brexit process triggered a risk-off wave that supported the Japanese yen's safe-haven appeal. The major traded 0.05 percent up at 114.80, having hit a high of 115.50 on Friday, its highest since Jan. 19. FxWirePro's Hourly Yen Strength Index stood at 13.52 (Neutral) by 0400 GMT. Investors’ will continue to track price action in the U.S. Treasury yields, ahead of the U.S. retail sales, consumer price index and FOMC policy decision. Immediate resistance is located at 115.10, a break above targets 115.50/115.75. On the downside, support is seen at 114.36 (10-DMA), a break below could take it near 114.03 (23.6% retrace of 113.58 and 115.50).

GBP/USD: Sterling steadied after tumbling to an 8-week low on concerns over a second Scottish independence referendum and renewed Brexit-process related news. However, the recovery appears fragile as the dollar stands strong ahead of the FOMC interest rates decision. Sterling trades 0.1 percent up at 1.2164, having hit a low of 1.2109 in the previous session, its weakest since Jan. 17. FxWirePro's Hourly Sterling Strength Index stood at -80.03 (Slightly Bearish) by 0400 GMT. Investors’ focus will remain on developments surrounding the Brexit process and the UK employment report, ahead of the U.S. economic data and FOMC policy outcome. Immediate resistance is located at 1.2217 (23.6 % retracement of 1.2569 and 1.2109), a break above could take it near 1.2300. On the downside, support is seen at 1.2132 (Mar 9 Low), a break below targets 1.2100. Against the euro, the pound trades flat at 87.25 pence, having hit a fresh 8-week low of 87.87 on Monday.

AUD/USD: The Australian dollar gained as the oil prices strengthened after an industry report showed a surprise drawdown of 531,000 barrels in U.S. crude stockpiles last week. However, expectations of a 25 bps rate hike at the FOMC meeting and upward revisions to the U.S. economic forecasts capped the upside in the major. The Aussie trades 0.2 percent up at 0.7573, hovering towards a high of 0.7592 touched on Monday, it’s highest since Mar. 8. FxWirePro's Hourly Aussie Strength Index stood at 114.86 (Highly Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of series of U.S. economic data and FOMC policy decision. Immediate support is seen at 0.7538 (5-DMA), a break below targets 0.7500. On the upside, resistance is located at 0.7601 (78.6 % retracement of 0.7632 and 0.7491), a break above could take it till 0.7628 (21-DMA).

NZD/USD: The New Zealand dollar advanced after data showed the economy posted its smallest current account deficit in more than two years. The quarterly deficit was NZ$2.335 billion in the three months to December, from a deficit of NZ$5.029 billion in the previous quarter, as surging tourism and reinsurance claims boosted the cash inflow in the economy. The Kiwi trades 0.2 percent higher at 0.6935, after falling as low as 0.6890 last week, it’s lowest since Jan. 4. FxWirePro's Hourly Kiwi Strength Index was at 136.92 (Highly Bullish) by 0500 GMT. Investors’ will continue to track board based market sentiment, ahead of the U.S. macroeconomic drivers for further momentum. Immediate resistance is located at 0.6950 (Mar 13 High), a break above could take it near 0.6973 (23.6% retrace of 0.7244 and 0.6890)/ 0.7000. On the downside, support is seen at 0.6890 (Mar 10 Low), a break below could drag it near 0.6850.

Equities Recap

Asian shares tumbled as investors expect more headwinds for emerging markets due to an increasingly hawkish Federal Reserve.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent.

Tokyo's Nikkei fell 0.23 percent to 19,565.19 points, Australia's S&P/ASX 200 index rose 0.22 percent to 5,771.60 points and South Korea's KOSPI was trading 0.19 percent down at 2,129.75 points.

Shanghai composite index edged down 0.07 percent to 3,237.16 points, while CSI300 index was trading 0.01 percent down at 3,456.90 points.

Hong Kong’s Hang Seng was trading 0.04 percent lower at 23,817.54 points. Taiwan shares shed 0.04 percent at 9,740.31 points.

Commodities Recap

Crude oil prices declined after retreating from a three-month low in the previous session following on the back of an unexpected drawdown in U.S. crude stockpiles. International benchmark Brent crude was trading 0.3 percent down at $51.67 per barrel by 0413 GMT, having hit a low of $50.23 the prior day, its lowest since Nov. 30. U.S. West Texas Intermediate crude rose 0.1 percent to $48.54 a barrel, after falling to a trough of $47.07 on Tuesday, its weakest since Nov end.

Gold prices edged up, reversing some of its previous session losses on increasing concerns over the outcome of the Dutch elections, while investors awaited clues on the pace of U.S. interest rate hikes this year. Spot gold edged up 0.25 percent to $1,201.46 per ounce by 0425 GMT, having tumbled to its weakest since Jan. 31 at $1,194.86 on Friday. U.S. gold futures were down 0.1 percent at $1,201 per ounce.

Treasuries Recap

The 10-year U.S treasury yield stood at 2.5985 percent higher by 0.003 bps, while 5-year yield was 0.004 bps up at 2.1303 percent.

The Japanese government bonds remained flat as investors await to watch the Bank of Japan’s (BoJ) 2-day monetary policy meeting, scheduled to be held on March 15-16, announcing its decision on Thursday. The benchmark 10-year bond yield hovered around 0.09 percent, the long-term 30-year bond yields also traded flat at 0.87 percent and the yield on the short-term 2-year note remained rose by 1/2 basis points to -0.25 percent.

The Australian bonds traded modestly higher as investors poured into safe-haven assets ahead of the February employment report, scheduled to be released on March 16. The yield on the benchmark 10-year Treasury note fell 1/2 basis point to 2.93 percent, the yield on 15-year note dived nearly 1 basis point to 3.32 percent and the yield on short-term 2-year also traded 1 basis point lower at 1.89 percent.

The New Zealand government bonds traded mixed Wednesday as investors wait to watch the country’s fourth-quarter gross domestic product (GDP), scheduled to be released on March 16. The yield on the benchmark 10-year bond rose 1 basis point to 3.38 percent, while the yield on 7-year note dipped nearly 1 basis point to 2.93 percent while the yield on short-term 2-year note also traded 1 basis point lower at 2.18 percent.

The Canadian government bond prices were slightly higher across a flatter yield curve, with the 2-year up 4 Canadian cents to yield 0.854 percent and the 10-year rising 34 Canadian cents to yield 1.835 percent. The 2-year yield fell 2.9 basis points further below its U.S. Treasury equivalent to a spread of -52.6 basis points. Earlier in March, it had touched its widest gap since January 2016 at -55.2 basis points.