Market Roundup
• US Existing Home Sales May 5.62m vs 5.55m forecast, 5.56m previous.
• US Existing Home Sales Chg May +1.1% vs -0.5% forecast, -2.5% previous.
• US Mortgage Market Index 445.2, 442.6 previous.
• US Mortgage Refinance Index 1526.8, 1494.8 previous.
• Fed's Harker: Could begin trimming balance sheet in September.
• US inflation expectations remain "well anchored" with a much lower chance of persistent disinflation-Goldman.
• Russia says actions by US sharply devalue assertions that Washington wants dialogue with Moscow.
• BoE's Haldane: Risks of raising rates too early have shrunk as growth, inflation have proved resilient.
• German finmin: The danger of deflation in euro zone has clearly been dispelled.
• Schaeuble hints at corporate tax cuts to fend off foreign competition.
• Iran says OPEC considering deeper output cuts, delegates skeptical.
• Brazil economic team eyes smaller cut in 2019 inflation goal
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e 526.6b previous
• 23:50 Japan Foreign Invest Stock w/e -143.1b previous
• 21:00 New Zealand RBNZ Interest Rate 1.75% forecast, 1.75% previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- Reserve Bank of New Zealand announces OCR (Official Cash Rate)
Currency Summaries
EUR/USD is likely to find support at 1.1100 levels and currently trading at 1.1164 levels. The pair has made session high at 1.1165 and hit lows at 1.1129 levels. Euro inched higher against dollar on Wednesday as the dollar eased after some traders to book profits on gains tied to expectations of possibly another U.S. interest rate increase later this year. Several Fed officials have said the bank should push ahead with rate rises, but the head of the Chicago Federal Reserve said on Tuesday he was increasingly concerned that soft inflation meant the bank would struggle to get price pressures back to its 2 percent objective. With no major economic data due this week, investors are focused on Fed speakers. Federal Reserve Board Governor Jerome Powell will speak on Thursday and Friday. St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester will speak on Friday. The euro stood at $1.1152 after hitting a three-week low, while the dollar index was down 0.2 percent at 97.541, below a one-month high of 97.871 reached on Tuesday.
GBP/USD is supported in the range of 1.2586 levels and currently trading at 1.2669 levels. It reached session high at 1.2703 and dropped to session low at 1.2637 levels. Sterling rose against the dollar on Wednesday as Sterling was boosted after Bank of England Chief Economist Andy Haldane signalled he would weigh in behind a rise in interest rates in the second half of this year. The pound had earlier sunk beneath $1.26 for the first time since mid-April as investors worried about Prime Minister Theresa May struggling to find the support she needs for her government, which lost its parliamentary majority in elections just under two weeks ago. But it reversed those falls as the chief economist's speech was published, trading up as much as 0.6 percent on the day to reach $1.2710, before easing back to $1.2666 by 1945 GMT. That still left it almost a cent higher than its earlier trough. Haldane's comments ran contrary to those of Governor Mark Carney, who had driven the pound lower on Tuesday by saying "now was not the time" to begin to raise rates.
USD/CAD is supported at 1.3246 levels and is trading at 1.3312 levels. It has made session high at 1.3347 and lows at 1.3273 levels. The Canadian dollar weakened against its U.S. counterpart on Wednesday as a drop in oil prices offset the Bank of Canada's recent shift to a more hawkish stance. The Bank of Canada's top two officials said last week that rate cuts put in place in 2015 had largely done their work, and the bank would assess whether rates need to be kept at near-record lows. If the Bank of Canada caught markets by surprise last week in laying the groundwork for interest rate hikes, it may have been because traders missed - or ignored - signals the central bank was already sending. Oil prices held near multi-month lows on Wednesday as investors discounted evidence of strong compliance by OPEC and non-OPEC oil producers with a deal to cut global output. The Canadian dollar, which fell about 0.4 percent on Tuesday, was last trading at C$1.3326 per dollar, down 0.3 percent on the day. It moved further away from a 3-1/2-month high of C$1.3165 reached a week ago after Bank of Canada's governor expressed support for an interest rate hike.
AUD/USD is supported around 0.7520 levels and currently trading at 0.7557 levels. It hit session high at 0.7562 and made session lows at 0.7541 levels. The Australian dollar declined against US dollar on Wednesday as Australian dollar was dragged lower by declining oil prices. The Australian dollar slipped 0.3 percent to $0.7558, a level not seen since June 14. It last traded at $0.7571. The Aussie has failed repeatedly to sustain a breach of chart resistance above $0.7630 after touching a 10-week high of $0.7636 last week. Oil prices fell about 3 percent to a 10-month low in heavy trading on Wednesday, as nagging fears about a global glut fed a sell-off that was interrupted briefly by news of a larger-than-expected drop in U.S. inventories. Technical analysts say the Aussie may slip to $0.7515/20 if it fails at current levels. It is up 5.2 percent so far this year, putting it among the best performing major currencies.
Equities Recap
Weakness among financial and energy stocks led European shares to fall again on Wednesday, as Provident Financial dropped following a profit warning, though Italian lenders bucked the downbeat trend.
UK's benchmark FTSE 100 closed down by 0.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.23 percent, Germany's Dax ended down by 0.3 percent, France’s CAC finished the day down by 0.4 percent.
The S&P 500 and Dow were weighed down by falling energy stocks as oil prices fell on Wednesday and added to investor concerns about low inflation while healthcare and technology stocks helped lift the Nasdaq Composite Index.
Dow Jones closed down by 0.24 percent, S&P 500 ended down 0.05 percent, Nasdaq finished the day up by 0.75 percent.
Treasuries Recap
The U.S. Treasury yield curve flattened to almost 10-year lows on Wednesday as investors evaluated the impact of hawkish Federal Reserve policy on the economy even as inflation measures are deteriorating.
Five-year note yields, which are highly sensitive to rate policy, rose to a four-week high of 1.80 percent on Tuesday. They last traded at 1.77 percent.
Meanwhile, Thirty-year bond yields, which are largely driven by future expectations of growth and inflation, dropped to 2.72 percent on Wednesday, the lowest since Nov. 9.
Commodities Recap
Gold rebounded on Wednesday from a five-week low as an oil price slump pushed down stock markets and a weaker U.S. dollar made bullion cheaper for holders of other currencies.
Spot gold was up 0.3 percent at $1,246.67 an ounce by 3:27 p.m. EDT (1927 GMT), while U.S. gold futures settled up 0.2 percent at $1,245.80.
Oil prices ended down more than 2 percent on Wednesday after hitting a 10-month low in volatile trade, as growing U.S. production and reduced Chinese refinery activity fed mounting concern over the stubborn global crude glut.
U.S. crude futures settled at $42.53, down 98 cents or 2.3 percent, after touching a low of $42.13, the lowest intraday level since August 2016. Brent crude futures settled down $1.20 or 2.61 percent at $44.82 a barrel.
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