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Asia Roundup: Kiwi slumps on downbeat trade balance figures, dollar steadies amid rising U.S. Treasury yields, Asian shares advance - Friday, March 24th, 2017

Market Roundup

  • Trump issues ultimatum to House Republicans: Pass new health bill or he will leave Obamacare in place – New York Times.
     
  • CBO analysis of House Republican revised health-care bill shows just as many uninsured, less deficit reduction – Washington Post.
     
  • Dallas Fed Kaplan – Making reasonably good progress on inflation, labor market relatively tight, should move deliberately to remove accommodation, approaching time when we can allow balance sheet to gradually run off.
     
  • Foreign CB US debt holdings March 22 week +$14.029 bln to $3.211 trln, Treasuries +$18.039 bln to $2.887 trln, agencies -$2.554 bln to $262.755 bln.
     
  • NY Fed– Swaps with foreign CBs $1.019 bln Mar 22 wk, ECB$1.015 bln, BoJ rest.
     
  • Lipper – Investors add $8 bln to US taxable bond funds in week, pull back from “Trump trade”.
     
  • BoJ Gov Kuroda – Won’t signal policy shift via daily market ops, no change in striving for 2% inflation at earliest possible date, negative rate/yield curve control working, mindful of effect on banks, output-consumption pick- up but economic risks still tilted to downside, relationship between FX- monetary policy complicated – Reuters newsevent.
     
  • Japan FinMin Aso – G20 shared view free trade important, true some debate on wording (“free”, “fair”), US-Japan dialogue not on FX alone – Reuters.
     
  •  Japan March PMI mfg – flash 52.6, Feb final 53.3, output/new orders slow.
     
  • MoF flow data week-ended March 18 – Japanese sell net Y465.7 bln foreign stocks, buy Y149.4 bln bonds, Y29.1 bln bills; foreign investors sell net Y580.4 bln Japanese stocks, Y586.8 bln JGBs, buy Y2.9158 trln bills.
     
  • Japan March Reuters Tankan mfg index +25, non-mfg +26, Feb +20, +26, mfg index highest reading since April ’14, +23 and +24 forecast in June.
     
  • Japan seeks out more global infrastructure projects – Nikkei.
     
  • Japan SMFG seals strong result with A$1 bln global bond sale, first from Asia financial - IFR
     
  • China PBOC to strengthen management of Beijing mortgage loan risks – Reuters.
     
  • South Korea – Can’t rule out US branding it a currency manipulator – Reuters.
     
  • BoE MPC Vlieghe – Inflation does not mean rate hike, 3% at end ’17 before easing off, pass-through of weak GBP to inflation faster than thought -Times.
     
  • New Zealand Feb trade deficit NZ$18 mln, year to Feb NZ$3.79 bln, imports NZ$4.02 bln, exports NZ$4.01 bln.

Economic Data Ahead

  • (0400 ET/0800 GMT) France Mar PMI mfg       - flash, 52.4 forecast; last 52.2.
     
  • (0400 ET/0800 GMT) France Mar PMI services  – flash, 56.1 forecast; last 56.4.
     
  • (0400 ET/0800 GMT) France Mar PMI composite – flash, 55.6 forecast; last 55.9.
     
  • (0430 ET/0830 GMT) Germany Mar PMI mfg       - flash, 56.5 forecast; last 56.8.
     
  • (0430 ET/0830 GMT) Germany Mar PMI services  - flash, 54.6 forecast; last 54.4.
     
  • (0430 ET/0830 GMT) Germany Mar PMI composite – flash, 56.0 forecast; last 56.1.
     
  • (0500 ET/0900 GMT) Eurozone Mar PMI mfg       - flash, 55.3 forecast; last 55.4.
     
  • (0500 ET/0900 GMT) Eurozone Mar PMI services  - flash, 55.3 forecast; last 55.5.
     
  • (0500 ET/0900 GMT) Eurozone Mar PMI composite – flash, 55.8 forecast; last 56.0.
     
  • (0500 ET/0900 GMT) Italy Feb trade balance - non-EU; last E890 mln deficit.
     
  • (0530 ET/0930 GMT) Great Britain Feb BBA Mortgage Approvals    k    Feb             44.66           
     
  • (0830 ET/1230 GMT) United States Feb building permits – revised; prelim 1.21 mln AR, -6.2% m/m.
     
  • (0830 ET/1230 GMT) United States Feb durable goods orders, +1.2% m/m forecast; last +2.0%, ex-def +1.6%.
     
  • (0830 ET/1230 GMT) United States Feb - ex-transport,       +0.5% m/m forecast; last  unch.
     
  • (0830 ET/1230 GMT) United States Feb – non-def cap ex-air, +0.6% m/m forecast; last -0.1%.
     
  • (1045 ET/1445 GMT) United States Mar Markit PMI mfg       - flash, 54.8 forecast; last 54.2.

Key Events Ahead

  • N/A   EC VP Dombrovskis, Italy FinMin Padoan meeting in Rome.

  • (0500 ET/0900 GMT) Riksbank General Council meeting.
     
  • (0615 ET/1015 GMT) ECB/BoI Angeloni speaks in Milan.
     
  • (0700 ET/1100 GMT) UK DMO GBP0.5/0.5/1.0 bln 1/3/6-month treasury bill auctions.
     
  • N/A   SF Fed Williams speaks at Brookings Institution in Washington, DC.
     
  • (0845 ET/1245 GMT) Chicago Fed Evans speaks at Fed Washington, DC conference.
     
  • (0905 ET/1305 GMT) St Louis Fed Bullard presentation on economy in Memphis, Tennessee.
     
  • (1000 ET/1400 GMT) NY Fed Dudley in fireside chat with York College (NY) students.
     
  • (1130 ET/1530 GMT) Canada FinMin Morneau speaks in Toronto.
     

FX Beat

DXY: The dollar steadied versus its major peers ahead of a final vote on the U.S. health care bill by Friday afternoon. The greenback against a basket of currencies traded 0.2 percent up at 99.96, having hit a low of 99.55 on Wednesday, its lowest since Feb. 2. FxWirePro's Hourly Dollar Strength Index stood at 72.69 (Bullish) by 0500 GMT.

EUR/USD: The euro declined, extending losses for the third straight day, as the greenback strengthened after House Republican speaker Ryan and leader McCarthy noted that there will be a procedural vote Friday morning and a final vote by Friday afternoon on the health care bill. The European currency traded 0.1 percent lower at 1.0767, having touched a high of 1.0824 on Wednesday, its highest since Feb. 2. FxWirePro's Hourly Euro Strength Index stood at -13.85 (Neutral) by 0400 GMT. Investors now await Eurozone's preliminary manufacturing and services PMI reports, ahead of the U.S. durable goods orders and flash manufacturing PMI data. Immediate resistance is located at 1.0800, a break above targets 1.0828 (Feb 2 High). On the downside, support is seen at 1.07746 (23.6% retrace of 1.0525 and 1.0824, a break below could drag it near 1.0718 (Mar. 21).

USD/JPY: The dollar advanced, halting its 8-day losing streak as the U.S. Treasury yields and the greenback strengthened after voting on the Healthcare Bill was postponed. On Thursday, the major slumped to a 4-month low as growing concerns over Trump's economic agenda triggered broad risk aversion. The pair traded 0.4 percent up at 111.32, having hit a low of 110.62 in the previous session, its lowest since Nov. 22. FxWirePro's Hourly Yen Strength Index stood at 102.76 (Highly Bullish) by 0400 GMT. Investors’ will continue to track price action in the U.S. Treasury yields, ahead of U.S. durable goods data, Preliminary manufacturing PMI figures and Fedspeaks line up. Immediate resistance is located at 111.66 (78.6% retracement of 115.50 and 110.62), a break above targets 112.00. On the downside, support is seen at 110.50, a break below could take it near 110.26 (Nov. 22 Low).

GBP/USD: Sterling fell below the 1.2500 handle, drifting away from a 1-month high hit in the previous session as the greenback strengthened across the board. The major trades 0.35 lower at 1.2477, having hit a high of 1.2531 the day before, its highest since Feb. 24. FxWirePro's Hourly Sterling Strength Index stood at 37.22 (Neutral) by 0400 GMT. Investors’ focus will remain on developments surrounding Brexit process, ahead of the UK mortgage approval report and the U.S. economic data. Immediate resistance is located at 1.2548 (Feb. 14 High), a break above could take it near 1.2605 (Jan. 27 High). On the downside, support is seen at 1.2446 (5-DMA), a break below targets 1.2400. Against the euro, the pound traded 0.1 percent up at 86.26 pence, having hit a high of 86.04 the day before, its highest since Mar 3.

AUD/USD: The Australian dollar slumped to a 9-day low after two of Australia's largest banks hiked up mortgage rates for speculative buyers as part of a campaign by regulators to tighten an already heated housing market. However, the downside was limited as a rise in commodity prices and higher Asian equities boosted market sentiment. The Aussie trades 0.1 percent down at 0.7618, having hit a low of 0.7610 earlier in the session, it’s lowest since Mar. 15. FxWirePro's Hourly Aussie Strength Index stood at -65.38 (Bearish) by 0500 GMT. Investors will continue to track broad based market sentiment, ahead of the U.S. economic data for further momentum. Immediate support is seen at 0.7600, a break below targets 0.7577 (Feb 2 Low). On the upside, resistance is located at 0.7647 (10-DMA), a break above could take it over 0.7681/ 0.7720.

NZD/USD: The New Zealand dollar declined, extending losses for the second straight day following worse-than-expected New Zealand's trade balance figures. The economy recorded a trade deficit of $-18 million in February, against expectations of $160 million surplus, with exports and imports at $4.01 billion and $4.02 billion, respectively. The Kiwi trades 0.35 percent down at 0.7003, retreating from a peak of 0.7089 touched earlier in the week, it’s strongest since Mar. 2. FxWirePro's Hourly Kiwi Strength Index was at -130.95 (Highly Bearish) by 0500 GMT. Investors’ will continue to digest downbeat domestic trade data, ahead of U.S. macro fundamental drivers and House vote on the Healthcare bill. Immediate resistance is located at 0.7050, a break above could take it near 0.7090. On the downside, support is seen at 0.6989 (50.0% retrace of 0.6890 and 0.7089), a break below could drag it lower 0.6966 (61.8% retrace).

Equities Recap

Asian shares advanced following a fresh bout of risk-on market sentiment, while the dollar steadied after U.S. lawmakers noted that there will be a final vote on the health care bill by Friday afternoon.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.2 percent.

Tokyo's Nikkei gained 0.91 percent to 19,259.73 points, Australia's S&P/ASX 200 index rose 0.81 percent to 5,754.40 points and South Korea's KOSPI was trading 0.21 percent down at 2,168.57 points.

Shanghai composite index edged up 0.16 percent to 3,253.14 points, while CSI300 index was trading 0.31 percent higher at 3,473.33 points.

Hong Kong’s Hang Seng was trading 0.16 percent lower at 24,288.04 points. Taiwan shares shed 0.3 percent at 9,902.98 points.

Commodities Recap

Crude oil prices edged up, halting its four-day losing streak as a fall in Saudi exports to the United States supported prices. International benchmark Brent crude was trading 0.3 percent up at $50.61 per barrel by 0402 GMT, having hit a low of $49.75 on Wednesday, its lowest since Nov. 30. U.S. West Texas Intermediate crude rose 0.34 percent to $47.81 a barrel, after falling as low as $47.08 earlier in the week, its weakest since Nov. 30.

Gold prices edged down, retreating from a 3-week high touched in the previous session, as the dollar regained some ground after U.S. lawmakers delayed a vote on a healthcare bill. Spot gold eased 0.1 percent at $1,243.71 per ounce by 0411 GMT, having hit a high of $1,253.06 on Thursday, its strongest since Feb. 28. U.S. gold futures were down 0.3 percent at $1,243.80.

Treasuries Recap

The 10-year U.S treasury yield stood at 2.434 percent higher by 0.016 bps, while 5-year yield was 0.026 bps up at 1.968 percent.

The Australian bonds snapped rally on the last trading day of the week, tracking weakness in the U.S. counterpart and as investors poured into riskier assets, including equities and crude oil. The yield on the benchmark 10-year Treasury note rose 1 basis point to 2.77 percent, the yield on 15-year note also climbed 1 basis point to 3.17 percent and the yield on short-term 2-year traded 1/2 basis point higher at 1.78 percent.

The New Zealand bonds closed flat as investors largely shrugged-off the worse-than-expected trade deficit for the month of February. The yield on the benchmark 10-year bond fell 1 basis point to 3.23 percent, the yield on 7-year note hovered around 2.83 percent while the yield on short-term 2-year note closed flat at 2.15 percent.

The Canadian government bond prices were mixed across the yield curve, with the 2-year flat to yield 0.775 percent and the 10-year falling 5 Canadian cents to yield 1.688 percent. On Wednesday, the 10-year yield touched a three-week intraday low at 1.651 percent.

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