Market Roundup
• US Durable Goods Aug, 1.7%, 1.0% forecast, -6.8% previous.
• US Durables Ex-Transport Aug, 0.2%, 0.2% forecast, 0.6% previous.
• US Nondefe Cap Ex-Air Aug, 0.9%, 0.3% forecast, 1.0% previous.
• US Build Permits R Numb MM Aug, 1.272M, 1.300M previous.
• US Build Permits R Chg MM aug, 3.4%, 5.7% previous.
• US Pending Home Sales Chg Aug, -2.6%, -0.5% forecast, -0.8% previous.
• US Pending Homes Index Aug, 106.3, 109.1 previous.
• US MBA Mortgage Application w/e, -0.5%, -9.7% previous.
• US Mortgage Market Index w/e, 415.6, 417.5 previous.
• Dovish Bank of Canada signals rate pause after back-to-back hikes.
• Trump's plan calls for slashing taxes on businesses, the wealthy.
• Quebec, Britain threaten retaliation after Bombardier tariffs.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e, 381.8B previous
• 23:50 Japan Foreign Invest JP Stock w/e, -918.6B previous
Looking Ahead - Events, Other Releases (GMT)
• N/A BOE holds '20 Years On' conference. (to Sept 29)
• 06:35 BOJ’s Kuroda speaks at the annual meeting of Japanese securities firms
• 08:00 ECB’s Praet speaks in Berlin, Germany
• 10:00 RBA’s Guy Debelle will give speech at the BOE conference
• 11:00 ECB’s Lautenschlager speaks at conf. in Vienna, Austria
• 13:45 Fed’s Kansas City President Esther George speaks before conf. in Kansas
• 14:00 Fed’s Fischer speaks at ‘20 Years On’ Conf. in London
Currency Summaries
EUR/USD is likely to find support at 1.1700 levels and currently trading at 1.1747 levels. The pair has made session high at 1.1775 and hit lows at 1.1715 levels. The euro dipped against the U.S. dollar on Wednesday as the dollar rose on optimism about U.S. fiscal reforms boosted sentiment in favor of the greenback. The dollar index, which tracks the greenback against six major currencies, was up 0.54 percent at 93.469, after rising to 93.607, the highest since August 23.The greenback, which rose on Tuesday after Federal Reserve Chair Janet Yellen said the Fed needs to continue gradual rate hikes despite broad uncertainty about the path of inflation, added to gains on Wednesday after better-than-expected U.S. core capital goods data. New orders for U.S.-made capital goods increased more than expected in August and shipments maintained their upward trend, pointing to underlying strength in the economy despite an anticipated drag on growth from Hurricanes Harvey and Irma. The euro hit a more than one-month low as an ongoing dollar short squeeze and reaction to the German election encouraged investors to take profits on one of the best-performing currency trades this year. The dollar index rose 0.5 percent, while the euro was down 0.34 percent to $1.17451.
GBP/USD is supported in the range of 1.3356 levels and currently trading at 1.3396 levels. It reached session high at 1.3412 and dropped to session low at 1.2778 levels. Sterling declined against the dollar on Wednesday as a hawkish speech by the chief of the U.S. Federal Reserve boosted greenback against basket of major currencies. In an address on Tuesday, Yellen said it would be "imprudent" to keep rates on hold until inflation accelerates to the U.S. central bank's 2 percent target. Her remarks added fuel to growing bets on a December rate hike, apparently contradicting those who believed concerns over the slow pace of inflation would lead the Fed to wait longer to hike rates. The pound fell as much as 0.7 percent to $1.3364, its weakest since Aug. 14.Despite edging up after the UK data, sterling fell as much as half a percent to $1.3390 by 1930 GMT. The Confederation of British Industry (CBI) said its retail sales balance jumped to +42 in September from a reading of -10 in August, the highest since September 2015 and far above all forecasts in a poll of economists. Sterling had rallied almost 6 percent against the dollar earlier this month to a 15-month high above $1.3650, on rising expectations the Bank of England will raise interest rates in November. But it came under pressure this week as predictions of a U.S. hike prompted investors to cut short dollar bets.
USD/CAD is supported at 1.2312 levels and is trading at 1.2460 levels. It has made session high at 1.2462 and lows at 1.2369 levels. The Canadian dollar declined against its U.S. counterpart on Wednesday after Bank of Canada signalled rate pause after back-to-back hikes. Bank of Canada Governor Stephen Poloz said on Wednesday in a speech that suggested a third rate hike is not imminent, striking a cautious note and listing uncertainties facing Canada's economy, Poloz said the central bank will closely watch movements in longer-term interest rates and the exchange rate as it considers how to follow its two recent rate hikes. The dovish tone sent economists scrambling to revise expectations for the next rate hike, which some had predicted would come as early as October, and the Canadian dollar weakened to a near four-week low as investors bet on a slower pace of tightening. The Canadian dollar weakened to a near four-week low at C$1.2453 to the U.S. dollar, or 80.30 U.S. cents, after the speech and markets trimmed the odds of a hike next month to 36.4 percent. The likelihood of a December move was lowered to 80 percent after being nearly fully priced in before Poloz spoke. The currency's strongest level of the session was C$1.2331, while it touched Monday's near 4-week low at C$1.2482.
AUD/USD is supported around 0.7800 levels and currently trading at 0.7833 levels. It hit session high at 0.7882 and made session lows at 0.7838 levels. The Australian dollar slipped near six-week lows on Wednesday as the ever-mounting risk of a December rate rise from the Federal Reserve gave a lift to its U.S. counterpart. The Aussie dollar was last trading at $0.7855, having sunk 0.6 percent overnight from $0.7936. That left it uncomfortably close to chart support at the August low of $0.7808 and a break there would deal a major bearish blow. Bets on another interest rate hike before the year ends firmed following Tuesday comments from Federal Reserve Chair Janet Yellen, who said the U.S. central bank needs to continue gradual rate hikes despite broad uncertainty about the path of inflation. Data showed new orders for key U.S.-made capital goods increased more than expected in August, pointing to strength in the economy despite an anticipated drag to growth from massive hurricanes. Perceived chances of a hike at the Fed's December meeting hovered around 80 percent on Wednesday from 72 percent on Monday, according to the CME Group's FedWatch tool. In contrast, the Reserve Bank of Australia (RBA) has made it clear a rate rise is not in prospect for some time to come.
Equities Recap
Banks led European stocks to a 10-week high on Wednesday as a tax overhaul plan backed by President Donald Trump fuelled hope in a revival of the "Trumpflation" trade, a bet on rising rates, inflation and securities prices in the United States and beyond.
The UK's benchmark FTSE 100 closed up by 0.3 percent, FTSEurofirst 300 ended the day up by 0.42 percent, Germany's Dax ended up 0.5, and France’s CAC finished the day up by 0.3 percent.
U.S. stocks rose on Wednesday as gains in financial shares were powered by growing expectations for a December interest rate hike and on hopes President Donald Trump's administration may be making progress on a tax plan.
Dow Jones closed up by 0.26 percent, S&P 500 ended up 0.41 percent, Nasdaq finished the day up by 1.14 percent.
Treasuries Recap
U.S. Treasury yields rose to months- and years-long highs on Wednesday after a better-than-expected reading on U.S. durable goods orders that suggested inflation may be picking up and the Federal Reserve may be taking a stronger path of rate increases than currently priced into the market.
U.S. benchmark 10-year note yields rose to 2.316 percent, their highest since Aug. 1. Prices fell nearly two full points.
Yields on the 2-year note, the most sensitive to expectations of rate increases by the Fed, rose to 1.483 percent, the highest since November 2008.
Commodities Recap
Heightened expectations that the U.S. Federal Reserve will raise interest rates again this year drove gold to a one-month low on Wednesday, extending losses after the biggest one-day loss in almost two years during the previous session.
Spot gold was down 0.7 percent at $1,284.61 per ounce at 2:07 p.m. EDT (1807 GMT), earlier hitting its lowest since Aug. 25 at $1,282.23.
U.S. gold futures for December delivery settled down $13.90, or 1.07 percent, at $1,287.80 per ounce.
Brent prices fell on Wednesday while U.S. crude rallied, after oil stockpiles in the world's top consumer unexpectedly drew down with refiners coming back online following Hurricane Harvey last month.
Brent slipped from 26-month highs to settle down 54 cents, or nearly 1 percent, at $57.90 a barrel, while U.S. West Texas Intermediate crude (WTI) ended 26 cents, or 0.5 percent, higher at $52.14 but stayed below five-month highs.
