Market Roundup
• Fed hikes a quarter point as expected, sees faster pace of increases in 2017.
• Fed's median outlook is now for 3 hikes in 2017 vs 2 seen as in Sept.
• Then 3 Fed hikes in both 2018 and 2019
• Yellen: median forecast for 3 hikes in 2017 driven by changes in only some of participants.
• US November retail sales misses forecast, +0.1% vs consensus +0.3%.
• US retail sales control group also +0.1% vs forecast +0.3%.
• US producer prices post biggest gain in five months on services.
• US PPI +0.4% vs forecast +0.1%.
• U.S. industrial output falls as utilities, manufacturing weakens.
• US Nov industrial production -0.4% vs Reuters consensus -0.2%.
• U.S. business inventories post largest decline in 11 months.
• Brazil's Temer loses top aide due to graft allegations.
• Turkey's economic growth seen turning positive in Q4, minister says.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e -887.6b -previous
• 23:50 Japan Foreign Invest JP Stock w/e 400.1b -previous
• 0:30 Australia Employment Nov 20.0k forecast, 9.8k -previous
• 0:30 Australia Full Time Employment Nov 41.5k -previous
• 0:30 Australia Participation Rate Nov 64.50% forecast, 64.40% -previous
• 0:30 Australia Unemployment Rate Nov 5.60% forecast, 5.60% -previous
• 0:30 Japan Nikkei Mfg PMI Flash Dec 51.3 -previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.0500 levels and currently trading at 1.0532 levels. The pair has made session high at 1.0672 and hit lows at 1.0500 levels. Euro declined against the dollar on Wednesday as the dollar strengthened across the board after U.S. Federal Reserve raised interest rates by a quarter point and signaled a faster pace of increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation. The rate increase, regarded as a virtual certainty by financial markets in the wake of a string of generally strong economic reports, raised the target federal funds rate 25 basis points to between 0.50 percent and 0.75 percent. The euro fell about 0.9 percent against the dollar to a session low of $1.0534, easing from a six-day high of $1.0669 touched before the Fed decision. The dollar index, which measures the greenback against a basket of six major currencies, hit a nearly three-week high of 101.960 and was last up 0.8 percent at 101.86.
GBP/USD is supported in the range of 1.2500 levels and currently trading at 1.2549 levels. It reached session high at 1.2724 and dropped to session low at 1.2526 levels. Sterling declined to hit two weeks low against the U.S. dollar on Wednesday as U.S. dollar strengthened after U.S. Federal Reserve's raised interest. As expected, the Fed raised the target federal funds rate 25 basis points to between 0.50 percent and 0.75 percent. It was its first rate hike in a year and its second since the financial crisis. Central bank policymakers also shifted their outlook to one of slightly faster growth, with President-elect Donald Trump planning a simultaneous round of tax cuts and increased spending on infrastructure. The Fed now sees three rate hikes in 2017 instead of the two foreseen in September. The pound initially rose earlier in US session after weak retail sales and industrial output but reversed course after Federal Reserve raised interest rates. Sterling was down 0.5 percent against the greenback at $1.2553.
USD/CAD is supported at 1.3232 levels and is trading at 1.3273 levels. It has made session high at 1.3293 and lows at 1.3081 levels. The Canadian dollar declined against its U.S. counterpart on Wednesday as Canadian dollar was pressured by lower oil prices and broader gains for the greenback after the Federal Reserve raised U.S. interest rates for the first time in a year. The U.S. central bank raised rates by a quarter percentage point and signaled a faster pace of increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation. Prices of oil, one of Canada's major exports, fell as the U.S. dollar jumped after the Fed decision and after a jump in crude inventories at the biggest U.S. storage center renewed concerns about a glut. On the data front, Canadian home prices rose in November from a month earlier as prices continued to soar in Toronto, the biggest market, helping to drive household debt to another record, separate reports showed on Wednesday. The Canadian dollar was trading at C$1.3280 to the greenback, or 75.46 U.S. cents, much weaker than Tuesday's close of C$1.3133, or 76.14 U.S. cents.
USD/JPY is supported around 116.26 levels and currently trading at 117.05 levels. It peaked to hit session high at 117.36 and made session lows at 114.80 levels. The U.S. dollar rose sharply against the yen on Wednesday as demand for greenback increased after the Federal Reserve raised interest rates for the first time this year and signaled a faster pace of increases in 2017.The dollar rallied about 1.3 percent against the yen to 116.71 yen, its highest since Feb. 8, after the U.S. central bank raised the target federal funds rate by 25 basis points to between 0.50 percent and 0.75 percent. The Fed's median outlook for rates rose to three quarter-point increases in 2017 from two as of September. The Fed's last rate increase was a year ago, when it moved rates from the zero lower bound reached during the 2007-2009 financial crisis. Data prior to the Fed statement showed U.S. retail sales barely rose in November, while U.S. industrial production fell more than expected.
Equities Recap
European shares fell from an 11-month high on Wednesday, with Switzerland's Actelion slumping after U.S. healthcare company Johnson & Johnson JNJ.N ended discussions over a potential deal with Europe's largest biotech firm.
UK's benchmark FTSE 100 closed down by 0.1 percent, the pan-European FTSEurofirst 300 ended the day down by 0.35 percent, Germany's Dax ended down by 0.2 percent, France’s CAC finished the day down by 0.6 percent.
U.S. stocks fell the most in two months on Wednesday after the Federal Reserve raised interest rates by a quarter point and signaled hikes could come next year at a faster pace than some expected.
Dow Jones closed down by 0.60 percent, S&P 500 ended down by 0.81 percent, Nasdaq finished the day down by 0.49 percent.
Treasuries Recap
Shorter-dated U.S. Treasury yields rose to their highest point in more than five years after the release of the Federal Open Market Committee's rate decision and statement on Wednesday in which the Fed announced a 0.25 percentage point increase to U.S. overnight interest rates.
U.S. two-year Treasury notes were last down 4/32 in price to yield 1.238 percent, an increase of more than 8 basis points from its late Tuesday levels.
The three-year note dropped 7/32 in price to yield 1.527 percent, a gain of around 9 basis points.
The five-year note fell 13/32 in price for a 1.984-percent yield, 9 points higher.
Benchmark 10-year Treasury notes dropped 10/32 in price to yield 2.499 percent, a little more than 4 basis points above its late Tuesday mark and the highest since September 2014.
Commodities Recap
Gold turned lower and tapped the lowest in more than 10 months on Wednesday, after the Federal Reserve raised U.S. interest rates by a quarter point and signaled a faster pace of increases next year, causing the U.S. dollar to rally.
Spot gold was down 0.3 percent at $1,154.62 an ounce by 2:43 p.m. EST (1943 GMT), after falling to the lowest since Feb. 5 at $1,149.66, as yields on shorter-dated Treasuries hit their highest in more than five years.
U.S. gold futures settled up 0.4 percent at $1,163.70 prior to the Fed's statement.
Oil prices slid more than 3 percent on Wednesday as the dollar jumped after the U.S. Federal Reserve's decision to hike U.S. interest rates and after a jump in crude inventories at the biggest U.S. storage center renewed concerns about a glut.
Brent crude futures settled at $53.90 per barrel, down $1.82, or 3.27 percent after falling as low as $53.80. U.S. crude ended the session down $1.94, or 3.66 percent at $51.04 per barrel after hitting a low of $50.92
