Market Roundup
• Fed's Powell nods to "gradual" rate increases, close eye on inflation.
• Traders boost bets on Fed rate hikes after Powell comments.
• U.S. Jan Durable Goods, -3.7%, -2.0% forecast, +2.8% previous, +2.6% revised.
• U.S. Jan Durables ex-Transport, -0.3%, +0.4% forecast, +0.7% previous.
• U.S. Jan non def Cap ex-Air, -0.2%, +0.5% forecast, -0.6% previous.
• U.S. Feb Consumer Confidence, 130.8, 126.6 forecast, 125.4 previous, 124.3 revised.
• U.S. Redbook MM, -0.6%, -0.7% previous.
• U.S. Redbook YY, +3.3%, +3.7% previous.
• U.S. Dec Monthly Home Price MM, +0.3%, +0.4% forecast, +0.5% revised
• U.S. Dec Monthly Home Price YY, +6.5%, +6.5% forecast, +6.7% revised.
• U.S. Dec CaseShiller 20 MM SA, +0.6%, +0.6% forecast, +0.7% previous.
• U.S. Dec CaseShiller 20 YY, +6.3%, +6.3% forecast, +6.4% previous.
• U.S. trade officials meet auto executives amid latest NAFTA push.
• Weak German inflation shows ECB still facing uphill battle.
• ECB could end bond buys this year: Weidmann.
• Eurozone sentiment slips in Feb as only services mood improves.
Looking Ahead - Economic Data (GMT)
• 27 Feb 21:45 New Zealand Jan Ext Migration & Visitors, 3.90% previous
• 27 Feb 21:45 New Zealand Jan Perm/Long-Term Migration, 5,700 previous
• 27 Feb 23:50 Japan Jan Industrial output prelim mm, -4.2% forecast, 2.9% previous
• 27 Feb 23:50 Japan Feb IP Forecast 1 Mth Ahead, -4.3% previous
• 27 Feb 23:50 Japan Mar IP Forecast 2 Mth Ahead, 5.7% previous
• 27 Feb 23:50 Japan Jan Retail Sales YY, 2.1% Rtrs forecast, 3.6% previous
• 28 Feb 00:00 New Zealand Feb NBNZ Business Outlook, -37.8% previous
• 28 Feb 00:00 New Zealand Feb NBNZ Own Activity, 15.6% previous
• 28 Feb 00:30 Australia Jan Private Sector Credit, 0.3% previous
• 28 Feb 00:30 Australia Jan Housing Credit, 0.4% previous
• 28 Feb 01:00 China Feb NBS Non-Mfg PMI Index, 55.30 previous
• 28 Feb 01:00 China Feb NBS Manufacturing PMI, 51.2 forecast, 51.3 previous
• 28 Feb 05:00 Japan Jan Construction Orders YY, -8.1% previous
• 28 Feb 05:00 Japan Jan Housing Starts YY, -5.0% previous, -2.1% previous
Looking Ahead - Events, Other Releases (GMT)
• 10:00 Norges Bank Governor Oystein Olsen speaks at the University of Oslo - Oslo
• 14:00 Canada Finance Minister Bill Morneau speaks the day after the federal government's budget is released - Ottawa
• 16:00 Swedish Governor Stefan Ingves speaks on the Riksbank's history and the development of money - Lulea, Sweden
Currency Summaries
EUR/USD is likely to find support at 1.2200 levels and currently trading at 1.2246 levels. The pair has made session high at 1.2346 and hit lows at 1.2220 levels. Euro declined sharply against the dollar on Tuesday after Federal Reserve Chairman Jerome Powell told U.S. lawmakers the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending. Powell pledged to "strike a balance" between the risk of an overheating economy and the need to keep growth on track. His congressional testimony was his first public appearance since being sworn in as chairman earlier this month. The Fed is expected to approve its first rate increase of 2018 at its next policy meeting in March, when it will also provide fresh economic projections and Powell will hold his first news conference. The Fed is widely expected to raise rates next month and in December signaled a total of three rate hikes this year. Fed officials will release new forecasts, including their views on the appropriate future path of rate hikes, when they meet next month. The dollar index, which measures the greenback against a basket of six other major currencies, has climbed 2.5 percent since hitting a three-year low more than a week ago. It was last up 0.6 percent at 90.356, after earlier reaching a three-week peak of 90.498. The euro was down 0.26 percent against the dollar at 1.2233.
GBP/USD is supported in the range of 1.3794 levels and currently trading at 1.3925 levels. It reached session high at 1.3992 and dropped to session low at 1.3856 levels. The British pound eased against the greenback on Tuesday after Federal Reserve chief Jerome Powell's comments that the central bank would stick to gradual rate rises boosted the dollar. With expectations of a May rate hike by the Bank of England mostly priced into financial markets, the dollar's fortunes have been the dominant driver in recent sterling price action, with investors also wary of Brexit-related headlines. Powell's Congressional testimony, which began at 1500 GMT and followed a statement of his comments on the U.S. economy, is his first public appearance since being sworn in as Fed chair earlier this month. Traders will watch closely to see whether the new chief will continue on the gradual monetary rate path pursued by his predecessor Janet Yellen, or whether he will take a more hawkish approach. Sterling fell 0.6 percent to as low as $1.3891, its lowest since Feb. 22, having traded higher against the dollar before Powell's comments to U.S. lawmakers were published.
USD/CAD is supported at 1.2661 levels and is trading at 1.2736 levels. It has made session high at 1.2762 and lows at 1.2683 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as the greenback rose on the release of testimony that showed new U.S. Federal Reserve chief Jay Powell will continue on the gradual monetary rate path pursued by his predecessor, and ahead of Ottawa unveiling its federal budget. Fed policymakers anticipate three rate increases this year, and Powell, who replaced Janet Yellen, gave no indication in prepared remarks to the House Financial Services Committee that the pace needs to quicken even as the "tailwinds" of government stimulus and a stronger world economy propel the U.S. recovery. The price of oil, one of Canada's major exports, edged lower ahead of weekly data that is forecast to show a rise in U.S. crude inventories, although investor faith in OPEC's ability to curtail production helped stem a larger price slide. The loonie has weakened against the dollar in seven of the last eight sessions as the dollar has retraced some of its losses since it hit a three-year low on Feb. 16.
USD/JPY is supported around 106.75 levels and currently trading at 107.33 levels. It peaked to hit session high at 107.63 and made session lows at 106.71 levels. The U.S. dollar strengthened against the yen on Tuesday as traders perceived a greater tightening of U.S. monetary policy than forecast after remarks by the new Federal Reserve chief in testimony before the U.S. Congress. Fed Chairman Jerome Powell pledged to balance the risk of an overheating economy and the need to keep growth on track in his prepared testimony, but Powell's remark that inflation has strengthened since December sent yields higher and stocks lower. Powell's first semi-annual economic testimony as Fed chief before the U.S. Congress comes at a sensitive time for the market, which has swayed wildly in recent weeks on inflation worries. His outlook spooked traders who now fear the U.S. central bank might raise key short-term borrowing costs four times in 2018, one more rate increase than they had previously thought. The dollar index rose 0.60 percent, while the Japanese yen weakened 0.49 percent versus the greenback to 107.33 per dollar.
Equities Recap
European stocks dipped on Tuesday as traders perceived a greater tightening of U.S. monetary policy than forecast after remarks by the new Federal Reserve chief in testimony before the U.S. Congress.
UK's benchmark FTSE 100 closed down 0.01 percent, FTSEurofirst 300 ended the day down by 0.0 8percent, Germany's Dax ended down by 0.4 percent and France’s CAC finished the day down by 0.01 percent.
U.S. stocks suffered their biggest daily drops since the sell-off almost three weeks ago after comments from Federal Reserve Chairman Jerome Powell on Tuesday sparked concerns about more interest-rate increases than expected this year.
Dow Jones closed down by 1.16 percent, S&P 500 ended down 1.26 percent, Nasdaq finished the day down by 1.22 percent.
Treasuries Recap
The margin between U.S. shorter- and longer-dated yields narrowed on Tuesday after Federal Reserve Chairman Jerome Powell said that since December data pointed to a strengthening economy and his confidence had increased that inflation will rise.
The benchmark 10-year Treasury yield was 2.901 percent, up 4 basis points from late on Monday, while the two-year yield was 2.266 percent, over 3 basis points on the day.
The spread between five-year and 30-year Treasury yields contracted by 3 basis points to 51 basis points. It remained above the decade low of 40 basis points reached on Feb. 1.
Commodities Recap
Spot gold was down 1.1 percent at $1,318.22 an ounce by 1:34 p.m. EST (1834 GMT). Its session low of $1,313.26 was a two-week low. April U.S. gold futures settled down $14.20, or 1.1 percent, at $1,318.60 per ounce.
Oil fell on Tuesday, its first decline in five days, pressured by a firmer U.S. dollar and expectations that upcoming weekly data will show an increase in U.S. crude inventories.
Brent crude settled at $66.63 a barrel, an 87 cent drop from Monday. U.S. West Texas Intermediate crude fell 90 cents to $63.01.
