Market Roundup
• Canada says NAFTA agreement possible by Friday, but hard work ahead.
• Trump says NAFTA talks with Canada likely to meet Friday deadline.
• Mexico-U.S. accords include Mexican auto export cap -sources .
• US Q2 GDP 2nd Estimate, 4.2%, 4.1% previous, 4.0% forecast.
• US Q2 GDP Deflator Prelim, 3.2%, 3.2% previous, forecast 3.0%.
• US Q2 Core PCE Price Prelim, 2.0%, 2.0% previous, 2.0% forecast.
• US July Pending Sales Change m/m, -0.7%, 0.95 previous, 0.3% forecast, 1.0% revised.
• US 24 Aug w/e Mortgage market Index, 344.0, 349.9 previous.
• US 24 Aug w/e MBA 30-yr Mortgage Rate, 4.78%, 4.81% previous.
• CA Q2 Current Account C$, -15.88B, -19.50B previous, -15.20B forecast, -17.48B previous.
• Argentina burns reserves, asks for early IMF help as peso crashes.
• EU's Barnier offers Britain close ties but "no single market a la carte".
• In latest White House exit, Trump to lose counsel McGahn.
• Democratic left, Trump loyalists, women win U.S. nominating contests.
Looking Ahead - Economic Data (GMT)
• 29 Aug 22:45 NewZealand Jul Building consents, -7.6% previous.
• 29 Aug 23:50 Japan 25 Aug w/e Foreign Bond Investment, -1,929.4B previous
• 29 Aug 23:50 Japan Jul Retail Sales y/y, 1.8% previous, 1.2% forecast, 1.7% revised
• 29 Aug 23:50 Japan 25 Aug w/e Foreign Invest JP stock, -510.6B previous
• 30 Aug 01:00 New Zealand Aug NBNZ Business Outlook, -44.9% previous
• 30 Aug 01:00 New Zealand Aug NBNZ Own Activity, 3.8% previous
• 30 Aug 01:30 Australia Jul Building Approvals, 6.4% previous, -2.5% forecast
• 30 Aug 01:30 Australia Jul Private House Approvals, 5.0% previous
• 30 Aug 01:30 Australia Q2 Capital Expenditure, 0.4% previous, 0.6% forecast
• 30 Aug 01:30 Australia Q2 Building Capex, -1.3% previous, 0.5% forecast
• 30 Aug 01:30 Australia Q2 Plant/Machinery Capex, 2.5% previous, 1.0% forecast
Looking Ahead - Events, Other Releases (GMT)
• N/A German Finance Minister Olaf Scholz, UBS' Axel Weber, BaFin's Felix Hufeld, Deutsche Beorse's CEO, and Goldman Sachs' Germany chief participate in a banking conference in Frankfurt.
• 07:45 Vice-President of the Deutsche Bundesbank, Professor Claudia M Buch, speaks in Basel, Switzerland.
• 17:30 Bundesbank chief Jens Weidmann speaks in Athens.
Currency Summaries
EUR/USD is likely to find support at 1.1600 levels and currently trading at 1.1706 levels. The pair has made session high at 1.1706 and hit lows at 1.1649 levels. The euro was little changed against dollar on Wednesday as lingering Sino-U.S. trade tensions continued to weigh on the market. The dollar was stuck in a tight range on Wednesday after touching a four-week low overnight as optimism over the U.S.-Mexico trade deal gave way to caution ahead of an upcoming deadline in the Sino-U.S. trade dispute. The deadline for public comment on U.S. President Donald Trump's tariffs on another $200 billion of Chinese goods is on Sept. 5, with the new measures possibly taking effect next month. On the data front, U.S. economic growth was a bit stronger than initially thought in the second quarter, notching its best performance in nearly four years. Gross domestic product grew at a 4.2 percent annualized rate, the Commerce Department data showed in its second estimate of GDP growth for the second quarter. That was slightly up from the 4.1 percent pace of expansion reported in July. The data cemented expectations for a U.S. rate hike next month. The dollar index declined 0.1 percent at 94.56. It traded as low as 94.434 during the previous session, its lowest since July 31. The euro was flat at $1.1706.
GBP/USD is supported in the range of 1.2843 levels and currently trading at 1.3030 levels. It reached session high at 1.3030 and dropped to session low at 1.2862 levels. Sterling rose sharply against the dollar on Wednesday after Michel Barnier said the bloc was prepared to offer Britain an unprecedentedly close relationship after it quits the EU, but it would not permit anything that weakened the body's single market. His comments offered some relief to battered sterling bulls who have started pricing in the prospect of a no-deal Brexit in recent days, especially via the currency derivatives markets. Michel Barnier said the bloc was prepared to offer Britain an unprecedentedly close relationship after it quits the EU, but it would not permit anything that weakened the body's single market. His comments offered some relief to battered sterling bulls who have started pricing in the prospect of a no-deal Brexit in recent days, especially via the currency derivatives markets. Britain could choose to withhold some payments to the European Union if a deal to ease its exit from the bloc is not reached before it leaves in March, Brexit minister Dominic Raab told legislators on Wednesday. With both senior European and British government officials refusing to budge from their respective negotiating positions in recent days, the prospect of a no-deal Brexit has piled pressure on the British currency in recent days.
USD/CAD is supported at 1.2855 levels and is trading at 1.2905 levels. It has made session high at 1.2966 and lows at 1.2903 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday, with the loonie recovering from earlier lows as investors remained optimistic that Canada would secure a deal on a revamped NAFTA trade pact. Canada said a deal to salvage the trilateral North American Free Trade Agreement (NAFTA) is possible by a Friday deadline, but it will be hard work to resolve specific issues as talks with the United States entered a second day. Canada sends about 75 percent of its exports to the United States, so its economy could benefit if a trilateral trade deal with the U.S. and Mexico is reached. The modest gain for the loonie came ahead of Canadian gross domestic product data on Thursday that could help guide expectations for another interest rate hike from the Bank of Canada as soon as next week. The central bank has hiked four times since July 2017 to leave its policy rate at 1.50 percent. The price of oil, one of Canada's major exports, was supported by a drawdown in U.S. crude and gasoline stockpiles and on news of falling Iranian crude shipments as U.S. sanctions deter buyers. The Canadian dollar was trading 0.1 percent higher at C$1.2907 to the greenback. The currency, which notched a nearly three-month high on Tuesday at C$1.2887, traded in a range of C$1.2905 to C$1.2966.
AUD/USD is supported around 0.7236 levels and currently trading at 0.7306 levels. It hit session high at 0.7308 and made session lows at 0.7274 levels. The Australian dollar dipped against the US dollar on Wednesday after the country's No.2 lender raised mortgage rates, spurring speculation the central bank will be forced to keep policy accommodative to offset such rate increases. The Australian dollar slipped to a day's low of $0.7299 soon after Westpac Banking Corp said it would raise variable home loan rates by 14 basis points. The currency was last down 0.4 percent at $0.7306.Some analysts predicted other banks would follow Westpac's move. That sparked speculation the Reserve Bank of Australia (RBA) will have to keep policy stimulatory for a long time to come to offset such increases. The RBA last cut rates to a record low 1.50 percent in August 2016 and has repeatedly said there was no case for a hike in the near-term. Interest rate futures also pushed back the prospects of a hike with only a 40 percent chance of a 25 basis point increase seen in early 2020. The currency had a wild ride late last week amid a major political upheaval that saw the shock exit of Malcolm Turnbull as the country's prime minister. The Aussie has since stabilised after Scott Morrison, a Turnbull ally, won the top position, although traders were still jittery about the fate of the ruling Liberal-National coalition in upcoming state and federal elections.
Equities Recap
European shares rose on Wednesday as optimism over talks between the United States and Canada reinvigorated risk appetite, though the FTSE came under pressure from a rise in sterling.
The UK's benchmark FTSE 100 closed down by 0.7 percent, FTSEurofirst 300 ended the day down by 0.30 percent, Germany's Dax ended up by 0.3 percent, and France’s CAC finished the up by 0.3 percent.
Wall Street extended its rally on Wednesday, with the S&P 500 and the Nasdaq hitting record highs for the fourth straight session as technology companies pushed indexes higher and promising trade negotiations stoked investor sentiment.
Dow Jones closed up by 0.24percent, S&P 500 ended up 0.58 percent, Nasdaq finished the day up by 1.00 percent.
Treasuries Recap
U.S. Treasury yields were little changed on Wednesday afternoon as an overnight drop in longer-dated yields and a flattening of the yield curve were mostly reversed by an upward revision of U.S. second-quarter gross domestic product.
The yield on the U.S. benchmark 10-year Treasury note was down half a basis point from Tuesday's close, last at 2.879. The 30-year bond yield was down 1.5 basis points, last at 3.018 percent.
The two-year note yield was up 0.8 basis points, last at 2.673 percent. The spread between two- and 10-year yields was down less than a basis point at 20.6 basis points.
Commodities Recap
Spot gold climbed on Wednesday as the U.S. dollar turned negative, but expectations for higher U.S. interest rates limited gains and kept the December gold contract pressured.
Spot gold gained 0.4 percent at $1,205.20 per ounce by 2:09 p.m. EDT (1809 GMT).
Prices hit their highest level since Aug. 10 at $1,214.28 on Tuesday, but closed 0.8 percent lower, as U.S. Treasury yields rose after the United States and Mexico struck a trade deal.
However, U.S. gold futures for December delivery settled down $2.90, or 0.2 percent, at $1,211.50 per ounce.
Oil prices rose more than 1 percent on Wednesday, with Brent at its highest in seven weeks and U.S. crude touching a three-week peak, supported by a drawdown in U.S. crude and gasoline stocks and reduced Iranian crude shipments as U.S. sanctions deter buyers.
Brent crude jumped $1.19, or 1.6 percent, to settle at $77.14, after touching $77.41, its highest since July 11.
U.S. oil settled 98 cents, or 1.4 percent higher at $69.51 a barrel, after touching $69.75, its highest since Aug. 7.
