Market Roundup
• US PPI +0.6% v forecast 0.3%, 0.2% previous, boosted by higher energy prices; Y/Y PPI +1.6%.
• US PPI ex-food, energy, trade services up 0.2 % v 0.1% previous.
• Fed’s Yellen: A rate increase will likely be appropriate for upcoming meetings, can’t say whether the increase will come in March or June, monetary policy not on pre-set course, unwise to wait too long to hike rates.
• Fed’s Yellen: Fed in coming months will be discussing investment strategy on its balance sheet, eventually will stop reinvestments in balance sheet.
• Fed’s Yellen: pace of job growth is strong & likely exceeds what is sustainable in long run.
• Fed’s Kaplan (voter): Prudent to raise rates sooner rather than later, US econ will grow a little more than 2% this year, asked about global threats to growth says china bears watching.
• Fed’s Lockhart (non-voter): Sees no urgency for Fed to move next month.
• Fed’s Lacker (non-voter): US rates need to rise quicker than markets expect, may need more than 3 hikes in ’17.
• Weak data undercuts optimism on EZ econ strength; Eurozone flash Q4 GDP y/y 1.7% v 1.8% forecast 1.8% previous.
• Moody’s: evidence suggests anti-euro sentiment increasing in Italy, as elsewhere in Euro area; dissatisfaction with established political parties may translate into gains for euro-skeptic parties in next election.
Looking Ahead - Economic Data (GMT)
• 00:00 Australia Consumer Sentiment Feb 0.1%-previous
• 00:30 Australia New Motor Vehicle Sales m/m Jan 0.3%- previous
Looking Ahead - Events, Other Releases (GMT)
• 20:50 Australia RBA Head of Economic Analysis Dept Heath is scheduled to speak at the ABE Forecasting Conference
Currency Summaries
EUR/USD is likely to find support at 1.0543 levels and currently trading at 1.0576 levels. The pair has made session high at 1.0638 and hit lows at 1.0558 levels. Euro declined against the dollar on Tuesday as investors raised their outlook on a faster pace of U.S. interest rate increases following comments from Federal Reserve Chair Janet Yellen. Yellen's remarks reinforced recent comments from other Fed policymakers who would like to see a faster pace of rate increases that is appropriate at this point of the economic expansion. Flynn's resignation raised worries about the Trump administration's ability to implement its economic policies, including planned tax cuts, which have been seen as bullish for the dollar and stocks. On the data front, U.S. producer prices recorded their largest gain in more than four years in January amid increases in the cost of energy products, but a strong dollar continued to keep underlying inflation at the factory gate tame. The U.S. Labor Department said on Tuesday its producer price index for final demand jumped 0.6 percent last month, which was the biggest rise since September 2012 and followed a 0.2 percent gain in December. Higher prices for some services also contributed to the increase in January. The dollar index reached a three-week high at 101.38, reversing an earlier drop to 100.90. It was last up 0.25 percent at 101.21. The euro fell 0.2 percent against the greenback at $1.0572.
GBP/USD is supported in the range of 1.2432 levels and currently trading at 1.2469 levels. It reached session high at 1.2486 and dropped to session low at 1.2443 levels. Sterling inched lower against the U.S. dollar on Tuesday after U.S. Federal Reserve Chair Janet Yellen struck a hawkish tone on the timing of an interest rate hike. The Fed signaled in December that it expected to raise rates three times in 2017.The dollar reversed course after Yellen's comments and was last up 0.3 percent after touching a three-week high of 101.38 against a basket of major currencies.British consumer prices rose last month at the fastest pace since June 2014, caused by higher global oil prices and the Brexit vote-fuelled fall in the value of sterling, official data showed on Tuesday. Consumer prices rose 1.8 percent compared with a year earlier, the Office for National Statistics said, slightly below expectations for a 1.9 percent annual rise. Sterling fell as much 0.7 percent to 85.18 pence per euro before clawing its way back to 84.82 pence as signals that U.S. interest rates should rise drove the euro backwards across FX markets. The pound had already fallen 0.5 percent against the dollar at $1.2458 and it stayed there as the greenback rallied. The political uncertainty from Britain's looming divorce from the European Union also continued weigh on sterling.
USD/CAD is supported at 1.3000 levels and is trading at 1.3071 levels. It has made session high at 1.3106 and lows at 1.3033 levels. The Canadian dollar weakened against the greenback on Tuesday as testimony by Federal Reserve Chair Janet Yellen boosted the greenback. Yellen told the U.S. Senate Banking Committee the central bank will likely need to raise interest rates at an upcoming meeting, although she expressed caution about the considerable economic policy uncertainty under the Trump administration. On the data front, home prices rose 0.5 percent in January and 13.0 percent from a year earlier as values in the hot Toronto market climbed even further and those in Vancouver picked up after three months of declines, the Teranet-National Bank Composite House Price Index showed. U.S. crude prices settled 27 cents higher at $53.20 a barrel, but some gains were pared amid concerns about rising supply from U.S. shale output. The dollar index reached a three-week high at 101.38, reversing an earlier drop to 100.90. It was last up 0.25 percent at 101.21. The Canadian dollar was trading at C$1.3042 to the greenback, or 76.68 U.S. cents, stronger than Monday's close of C$1.3075, or 76.48 U.S. cents. U.S. crude prices settled 27 cents higher at $53.20 a barrel, but some gains were pared amid concerns about rising supply from U.S. shale output.
AUD/USD is supported around 0.7610 levels and currently trading at 0.7655 levels. It hit session high at 0.7685 and made session lows at 0.7617 levels. The Australian dollar declined against US dollar on Tuesday as US dollar got a lift after Federal Reserve Chair Janet Yellen reiterated her positive view of the U.S. economy while signalling more rate hikes at congressional testimony on Tuesday. The greenback was initially under pressure following the resignation of President Donald Trump's national security adviser, Michael Flynn, who quit over revelations he had discussed U.S. sanctions against Moscow with the Russian ambassador to the United States before Trump took office.The Australian dollar was last trading at $0.7660, coming off a three-month high of $0.7696 hit in early February. The Aussie has traded in a sideways direction since the beginning of the month, failing persistently at $0.7700, despite a recent surge in the price of iron ore Australia’s top export earner. The near-term prospect for the Aussie will also be determined by the greenback, which has been on an uptrend this month.
Equities Recap
European shares steadied on Tuesday, as gains in the auto sector on news that PSA Group is in talks to buy General Motors' European auto operations and stronger banking stocks offset weaker consumer and pharma stocks.
UK's benchmark FTSE 100 closed down by 0.1 percent, FTSEurofirst 300 ended the day down by 0.01 percent, Germany's Dax ended flat, and France’s CAC finished the day up by 0.2 percent.
Major U.S. stock indexes established record highs on Tuesday, led by bank stocks after Federal Reserve Chair Janet Yellen said it would be unwise to wait too long to raise interest rates.
Dow Jones closed up by 0.43 percent, S&P 500 ended up 0.39 percent, Nasdaq finished the day up by 0.31 percent.
Treasuries Recap
U.S. Treasury yields jumped on Tuesday after Federal Reserve Chair Janet Yellen said it would be unwise to wait too long to raise interest rates, striking a more hawkish tone than investors expected.
Benchmark 10-year notes were last down 10/32 in price to yield 2.47 percent, after rising as high as 2.50 percent, the highest since Feb. 3, where the notes have technical support.
The yield curve between five-year notes and 30-year bonds flattened to 109 basis points, the lowest since Feb. 1.
Commodities Recap
Gold came off its highs on Tuesday, as the dollar advanced after U.S. Federal Reserve Chair Janet Yellen said the central bank will likely need to raise interest rates at an upcoming meeting with the economy expanding further.
Spot gold traded 0.4 percent higher at $1,229.49 an ounce by 2:36 p.m. EST (1936 GMT), while U.S. gold futures settled down 0.03 percent at $1,225.40.
Oil prices pared gains after the settlement Tuesday, as evidence of surging U.S. crude oil stockpiles underscored concerns that shale production might limit the effectiveness of an OPEC-led effort to cut global output.
Brent crude traded at $55.73 a barrel at 4:39 p.m. Eastern, off the settlement of $55.97 a barrel, which was up 38 cents but well off the session high of $56.46 a barrel.
U.S. light crude traded at $52.94 a barrel following the inventory report by a trade group, after settling up 27 cents at $53.20.
