Market Roundup
• GBP, gilt yields skid after BoE disappoints rate hike bets.
• BoE sharply raises 2017 GDP forecast to +2.0%; Some MPC members "a little closer" to inflation overshoot limit.
• BOE’s Carney: Can see scenarios to move rates in either direction.
• BOE’s Carney: Risky to relocate London-based markets after Brexit.
• BOE’s Carney: Any inflation overshoot is temporary, monetary policy could be tightened faster if pay growth picks up.
• US jobless claims fall 14k to 246k from 260k ; 4-wk avg claims +2,250 to 248k.
• US Q4 productivity slows in Q4 to 1.3% from 3.5%, beats forecast 1%; labor costs 1.7% v 0.2% previous.
• White House: Treasury action on Russia routine, not easing sanctions.
• ECB’s Draghi: Benefits of leaving the euro are a mirage: govt’s have themselves to blame for their econ problems.
• ECB’s Coeure: Inappropriate to withdraw stimulus while inflation relies on stimulus (DJ).
• ECB’s Praet: don’t see impact of headline inflation in 2nd round effects; have to be careful when changing policy.
• ECB says will not focus on transient, oil-fuelled inflation bounce; repeats need for stimulus in bulletin.
• Latin American currencies up as Fed refrains from signaling March hike.
Looking Ahead - Economic Data (GMT)
• 22:30 Australia AIG Services Index Jan 57.70-previous
• 01:45 China Caixin Mfg PMI Final Jan forecast 51.8, 51.90-previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.0730 levels and currently trading at 1.0759 levels. The pair has made session high at 1.0823 and hit lows at 1.0757 levels. The euro declined against the dollar on Thursday on views that the greenback's longer-term upward trend remained intact. The euro was last slightly lower against the dollar at $1.0760, easing from an eight-week high of $1.0828 struck in the morning U.S. trading session. The dollar remained down 0.5 percent against the yen at 112.71 yen but off a session low of 112.06 yen. Aggressive language from Trump on Iran and a refugee deal with Australia also put the focus back on the geopolitical risks from his administration rather than the expectations of higher inflation that dominated markets' initial thinking last year. Data on Thursday was mixed. U.S. worker productivity slowed in the fourth quarter, while the number of Americans filing for unemployment benefits fell more than expected last week. The number of Americans filing for unemployment benefits fell more than expected last week, pointing to tightening labor market conditions that should support the economy this year. Other data on Thursday showed worker productivity slowing in the fourth quarter, which economists said suggested companies would need to keep hiring to increase output.
GBP/USD is supported in the range of 1.2482 levels and currently trading at 1.2519 levels. It reached session high at 1.2580 and dropped to session low at 1.2514 levels. Britain's pound fell against the dollar on Thursday after the Bank of England, while raising its forecast for British economic growth this year, kept monetary policy unchanged and said rates could go either way depending on the economic outlook. Bank of England appeared to be in no rush to tighten monetary policy in its latest inflation report, disappointing bets that interest rates could be hiked by the end of the year. Despite raising its growth forecasts a move that had been widely expected. The BoE sent broad signals that it was comfortable with its record low-interest rates, and it said it now expected inflation would be slightly lower in two years' time than it did in November. The bank stuck to its line from November that interest rates could still go in either direction, and its forecasts assumed a first rise in rates would not happen until the end of next year. Sterling fell to as low as $1.2533, down 0.9 percent on the day, as investors pushed back their expectations for when the BoE raises its interest rates from their record lows. It had earlier hit a seven-week high of $1.2706.
USD/CAD is supported at 1.2965 levels and is trading at 1.3025 levels. It has made session high at 1.3043 and lows at 1.2977 levels.The Canadian dollar strengthened against its U.S. counterpart on Thursday as oil rose and the greenback lost further ground since the Federal Reserve interest rate decision a day ago. The U.S. dollar fell to its lowest since mid-November after the Fed disappointed investors hoping for a clear sign of a March interest rate rise, while signs that the new U.S. administration favors a weaker greenback also weighed on the currency. U.S. crude prices were up 0.48 percent at $54.14 a barrel as evidence that OPEC and other big exporters were cutting production more than offset a sharp rise in U.S. crude and gasoline stockpiles. Gains for the loonie came after domestic data this week showed that the economy expanded faster than expected in November and that the manufacturing sector grew at its fastest pace in over two years in January. The Canadian dollar was last trading at C$1.3026 to the greenback, or 76.93 U.S. cents, stronger than Wednesday's close of C$1.3047, or 76.65 U.S. cents.
AUD/USD is supported around 0.7620 levels and currently trading at 0.7660 levels. It hit session high at 0.7694 and made session lows at 0.7655 levels. The Australian rose against US dollar on Thursday as the country boasted its biggest trade surplus on record in December, led by surging commodity prices. Official data on Thursday showed a trade surplus of A$3.51 billion ($2.67 billion) in December, handily outpacing forecasts of A$2.2 billion. The previous month was also revised up sharply to A$2.0 billion. The Australian dollar went as far as $0.7631, the highest since Nov.10. It also broke above key chart resistance of $0.7610/20, paving the way for $0.7720/40. U.S. non-farm payroll data for January will be closely watched on Friday. The report is seen as a key barometer of the health of the U.S. economy and will be examined for signs that growth is strong enough to support further interest rate hikes.
Equities Recap
European shares slipped on Thursday, weighed down by disappointing earning updates from Danish drugmaker Novo Nordisk and German lender Deutsche Bank, although Reckitt Benckiser was boosted by news of talks to buy U.S. rival Johnson Nutrition.
The UK's benchmark FTSE 100 closed up by 0.5 percent, FTSEurofirst 300 ended the day down by 0.25 percent, Germany's Dax ended up down 0.2 percent, and France’s CAC finished the day up by 0.1 percent.
U.S. stocks ended little changed on Thursday as the recent rally continued to stall following President Donald Trump's latest comments on trade and the policies he will pursue.
Dow Jones closed down by 0.03 percent, S&P 500 ended up 0.5 percent, Nasdaq finished the day down by 0.14 percent.
Treasuries Recap
U.S. Treasury prices gained on Thursday a day after the Federal Reserve gave a more dovish-than-expected statement, and as uncertainty over policies from President Donald Trump increased safety buying of U.S. debt.
Benchmark 10-year notes gained 7/32 in price to yield 2.45 percent, down from 2.47 percent late on Wednesday. The yields got as high as 2.52 percent before the Fed’s statement on Wednesday, as jobs and manufacturing data pointed to accelerating economic growth.
Commodities Recap
Oil prices edged lower on Thursday, giving back early gains as traders grew less concerned about tensions between the United States and Iran.
Brent futures fell 24 cents, or 0.4 percent, to settle at $56.56 a barrel, while U.S. West Texas Intermediate crude fell 34 cents, or 0.6 percent, to settle at $53.54.
Gold prices rose to an 11-week high on Thursday after the U.S. Federal Reserve gave no clear signal on the likelihood of a March interest rate increase in its latest statement, prompting another drop in the U.S. dollar.
Spot gold struck its highest level since Nov. 17 at $1,225.30 an ounce, and was up 0.6 percent at $1,216.10 by 2:22 p.m. EST (1922 GMT). U.S. gold futures for April delivery settled up 0.9 percent at $1,219.40.
