Market Roundup
• US ADP National Employment Sep, 135k, 125k forecast, 237k previous.
• US Markit Comp Final PMI Sep, 54.8, 54.6 previous.
• US Markit Svcs PMI Final Sep, 55.3, 55.1 previous.
• US ISM N-Mfg PMI Sep, 59.8, 55.5 forecast, 55.3 previous.
• US ISM N-Mfg Bus Act Sep, 61.3, 57.2 forecast, 57.5 previous.
• US MBA Mortgage Applications w/e, -0.4%, -0.5% previous.
• US MBA 30-Yr Mortgage Rate w/e, 4.12%, 4.11% previous.
• Trump tax plan expends recession-fighting US business tax break.
• The bankrupt utility behind Puerto Rico’s power crisis.
Looking Ahead - Economic Data (GMT)
• 00:30 Australia Retail Sales MM Aug, 0.3% forecast, 0.0% previous
• 00:30 Australia Trade Balance G&S Aug, 875M forecast, 460M previous
• 00:30 Australia Goods/Services Imports Aug, -1.0% previous
• 00:30 Australia Goods/Services Exports Aug, -2.0% previous
Looking Ahead - Events, Other Releases (GMT)
• 07:00 BoE’s Victoria Cleland speaks at The Future of Cash Conference, Vienna
• 08:15 ECB’s Praet gives welcome address at 7th ECB conf. in Frankfurt
• 12:30 Fed’s Jerome Powell, William Dudley and Treasury Market Practices Group members Tom Wipf and Sandie O'Connor speak at a conf. in New York
• 13:15 Fed’s San Francisco President John Williams speaks at Conf. in St. Louis, Missouri
• 13:30 Fed’s Philadelphia President Patrick Harker speaks at conf. in Austin, Texas
• 16:00 BoE’s Ian McCafferty speaks at The Founders’ Company Annual Lecture
• 20:30 Fed’s Kansas City President Esther George speaks at conf. in Austin, Texas
Currency Summaries
EUR/USD is likely to find support at 1.1715 levels and currently trading at 1.1762 levels. The pair has made session high at 1.1781 and hit lows at 1.1736 levels. The euro dipped against the U.S. dollar on Wednesday after data showed a service sector index increasing to its highest level in more than 12 years, boosting the likelihood that the Federal Reserve will raise rates at its December meeting. The pace of growth in the U.S. economy's service sector accelerated in September to fastest in 12 years, led by stronger new orders and employment, according to an industry report released on Wednesday. The Institute for Supply Management (ISM) said its index of non-manufacturing activity rose to 59.8, which was the highest since the August 2005 reading of 61.3. The latest reading also topped expectations of 55.5 from a poll of economists. Data earlier on Wednesday showed that U.S. private employers added 135,000 jobs in September, topping economists' expectations even as Hurricane Harvey and Irma "significantly impacted smaller retailers." Stronger U.S. data along with the prospect of U.S. tax cuts and the likelihood of an interest rate increase in December have boosted the U.S. currency in recent weeks. Traders have been cautious this week on the greenback, however, ahead of a busy calendar of economic data releases that will culminate in Friday’s employment report for September.
GBP/USD is supported in the range of 1.3200 levels and currently trading at 1.3246 levels. It reached session high at 1.3290 and dropped to session low at 1.3239 levels. Sterling initially edged up against the dollar on Wednesday, but gave up most of the ground as the dollar pulled back from earlier losses after upbeat U.S. ISM non-manufacturing index data. Sterling climbed initially after Britain's dominant services sector showed growth sped up unexpectedly last month, raising expectations the Bank of England will hike interest rates in November. The monthly purchasing managers' index (PMI) for the services sector picked up to 53.6 in September, slightly better than expectations in a poll of economists, and easily above the 50 level that separates growth from contraction. Some of the optimism surrounding sterling after the data was punctured by comments from ratings agency Standard & Poor's, which said it was "a bit sceptical" about the notion that Britain's economy needed an interest rate increase. Uncertainty about the outcome of the negotiations on Britain's divorce from the EU dragged sterling down to three-week lows in the previous session. It has fallen more than 10 percent against the dollar since Britain's June 2016 EU referendum in which a narrow majority voted to leave the bloc.
USD/CAD is supported at 1.2415 levels and is trading at 1.2470 levels. It has made session high at 1.2493 and lows at 1.2445 levels. The Canadian dollar edged higher against its U.S. counterpart on Wednesday ahead of top-tier domestic data this week and the greenback slipped back against a basket of major currencies. Speculation that U.S. President Donald Trump's choice for the next head of the Federal Reserve could be a less hawkish candidate than had previously been expected weighed on the U.S. dollar. Canada's trade data for August is due on Thursday and the September employment report is scheduled for release on Friday, which could help guide market expectations on prospects of another interest rate hike by the Bank of Canada this month. The central bank has raised rates twice since July. But the chances of another hike as soon as this month have dwindled to less than 20 percent from nearly 40 percent before Governor Stephen Poloz signalled last week that a third hike was not imminent, the overnight index swaps market indicated. The Canadian dollar was last trading at C$1.2472 to the greenback, or 80.14 U.S. cents, up 0.1 percent. The currency traded in a range of C$1.2449 to C$1.2495. On Tuesday, it touched a one-month low at C$1.2539.
AUD/USD is supported around 0.7824 levels and currently trading at 0.7860 levels. It hit session high at 0.7861 and made session lows at 0.7839 levels. The Australian dollar strengthened against US dollar on Wednesday as dollar gave back some of its recent gains amid speculation about who might be the next chair of the Federal Reserve. The Aussie popped up 0.4 percent to $0.7864, having touched a three-month trough at $0.7785 overnight. The pullback was linked to reports that U.S. Treasury Secretary Steven Mnuchin favoured Fed Governor Jerome Powell to replace Janet Yellen as Fed chair. The report fueled expectations that U.S. interest rates will rise slowly in coming months as inflation remains stubbornly below the U.S. central bank's 2 percent target. But that perception lost some steam, however, following stronger-than-expected service-sector figures, which boosted the likelihood that the Fed will hike rates in December. Oil prices slipped on caution that rising U.S. crude output could scupper a crude rally that lasted for most of the third quarter.
Equities Recap
European shares fell on Wednesday with Spain's IBEX marking its biggest loss since last year's Brexit vote shook equity markets.
UK's benchmark FTSE 100 closed flat, the pan-European FTSEurofirst 300 ended the day down by 0.14 percent, Germany's Dax ended up by 0.5 percent, France’s CAC finished the day down by 0.1 percent.
U.S. stocks ended up slightly to extend a run of record closing highs on Wednesday as data on the services sector added to signs of strength in the economy and lifted optimism about earnings.
Dow Jones closed up by 0.07 percent, S&P 500 ended up 0.11 percent, Nasdaq finished the day up by 0.04 percent.
Treasuries Recap
U.S. Treasury debt yields drifted higher on Wednesday after a measure of U.S. services sector activity hit a 12-year high, offsetting some concerns about an upcoming payrolls report.
In late trading, the benchmark 10-year U.S. Treasury note yield was at 2.333 percent, up from 2.332 percent late on Tuesday, while the 30-year yield was at 2.877 percent, compared with Tuesday's 2.872 percent. U.S. two-year note yields were up slightly at 1.479 percent.
Commodities Recap
Gold pared gains on Wednesday as the U.S. dollar came off its lows on strong data from the U.S. service sector index.
U.S. gold futures for December delivery settled up $2.20, or 0.2 percent, at $1,276.80 per ounce.
Oil prices fell on Wednesday after a surprising jump in U.S. crude exports to a record 2 million barrels per day fanned worries about global oversupply.
WTI settled down 44 cents to $49.98 a barrel while Brent fell 20 cents to $55.80 a barrel.
