Market Roundup
• U.S. private sector adds 179k jobs in July, Jun revised to 176k from 172k (ADP).
• US Markit svcs PMI final 51.4 v 50.9, comp PMI final 51.8 vs 51.5 previous.
• US ISM N-Mfg PMI 55.5 vs forecast 56, 56.5 previous; employment index 51.4 vs 52.7 previous, new order 60.3 vs 59.9.
• USD rallies after losses, Japan MOF Asakawa warns against speculative moves in FX market.
• Fed’s Evans: one US rate increase this year could be appropriate.
• Fed’s Evans: Worries inflation still too low; sees inflation reaching 2% by end ’18.
• Italy signs off measures for state guarantee on bad loan sales will move EUR 200bn off banks books.
• Economy Minister Padoan: Italy's banks are not in crisis; pose no threat to other banking systems.
• US crude inventories surprise rise, market shifts focus to gas draw (-3.3mn barrels v forecast 200k drop)
Looking Ahead - Economic Data (GMT)
• 23:50 Japan- Foreign Bond Investment w/e 679.3b-previous
• 23:50 Japan- Foreign Investments in Japanese Stocks w/e -271.5b- previous
• 01:30 Australia-Retail Sales MM Jun forecast 0.4%, 0.20%- previous
• 01:30 Australia-Retail Trade Q2 forecast 0.5%, 0.50%- previous
Looking Ahead - Events, Other Releases (GMT)
• 10:15 China FRB- Dallas Pres Kaplan speaks on "Economic Conditions and Implications for Monetary Policy" before the Official Monetary and Financial Institutions Forum City Lecture event
Currency Summaries
EUR/USD is likely to find support at 1.1100 levels and currently trading at 1.1147 levels. The pair has made session high at 1.1185 and hit lows at 1.1140 levels. The euro declined against US dollar on Wednesday as the dollar recovered from six-week lows hit the previous session, as investors squared positions ahead of Friday's U.S. non-farm payrolls report, data that should help determine the timing of the next interest rate hike. The greenback had been on its best run of weekly gains in 1-1/2 years until last week, when expectations the Federal Reserve would clearly signal a near-term rate hike were disappointed and U.S. growth data came in much weaker than expected. In mid-morning trading, the dollar index rose 0.4 percent to 95.474. On Tuesday, the index hit a six-week low and was still down a slight 0.2 percent so far this week. The euro, meanwhile, fell 0.5 percent against the dollar to $1.1170 , hurt by the dollar's broad recovery.
GBP/USD is supported in the range of 1.3268 currently trading at 1.3313 levels. It reached session high at 1.3340 and hit low at 1.3276 levels. Sterling declined slightly against the dollar on Wednesday after upbeat U.S. economic data renewed hope that the Federal Reserve could raise interest rates again this year. Data on Wednesday showing the U.S. private sector added 179,000 jobs in July, more than economists had expected, gave the dollar a minor boost. The report, released by payrolls processor ADP, suggested that the labor market continues to improve, suggesting Fed might raise interest rates in the near future. Growing bets the U.S. Federal Reserve could refrain from increasing interest rates this year have supported high-yielding assets for weeks, but traders say a strong reading for Fridays non-farm payrolls jobs report could threaten those views. Sterling was down 0.3 percent against the dollar, at $1.3311 Since the historic Brexit vote, the pound has lost more than 10 percent of its value against the greenback.
USD/CAD is supported at 1.3000 levels and is trading at 1.3070 levels. It has made session high at 1.3122 and lows at 1.3060 levels. The Canadian dollar strengthened against US dollar on Wednesday as crude oil prices rallied with U.S. crude futures returning to above $40 a barrel, after a larger-than-expected gasoline draw offset a surprise build in crude stockpiles. Oil rose higher after hitting its lowest since April the previous day, supported by an industry report showing a fall in U.S. inventories. U.S. crude inventories rose for a second week in a row, gaining 1.4 million barrels last week, compared with analysts' expectations for a decrease of 1.4 million barrels, Energy Information Administration (EIA) data showed. Gasoline stocks slumped by 3.3 million barrels, versus forecasts for a 200,000-barrel drop. The large draw assuaged some market participants' worry of a gasoline glut amid the peak U.S. summer driving season. On the data front, Canada's international trade data for June and employment report for July are awaited on Friday.
AUD/USD is supported around 0.7567 levels and currently trading at 0.7584 levels. It hit session high at 0.7595 and made session lows at 0.7567 levels. The Australian dollar held its ground against the dollar on Wednesday as yield-hungry investors continued to pour money into the currency despite a central bank easing the day before. The Australian dollar stood at A$0.7586, having climbed nearly 1 percent on Tuesday even as the Reserve Bank of Australia (RBA) cut rates to record lows. The Aussie's resilience has, in turn, led the market to price in a 50-50 chance of yet another cut by November. The currency is up more than 4 percent so far this year, when the RBA has repeatedly warned that such strength was unwarranted. Meanwhile, investors continued to shy away from the U.S. dollar after last week's disappointing GDP data and indications from the Federal Reserve that interest rates won't go up in a hurry
Equities Recap
European shares ended little changed on Wednesday as a rebound by the region's struggling banks and a rally in carmaker Fiat-Chrysler helped offset losses among companies that reported poor earnings updates.
UK's benchmark FTSE 100 closed down by 0.13 percent, the pan-European FTSEurofirst 300 ended the day up by 0.09 percent, Germany's Dax ended up by 0.02 percent, France’s CAC finished the day down by 0.28 percent.
Wall Street advanced modestly on Wednesday after a sharp rise in oil prices boosted energy shares, while better-than-anticipated data on the labor market helped financial stocks.
Dow Jones closed up by 0.21 percent, S&P 500 ended up by 0.30 percent, Nasdaq finished the day up by 0.42 percent.
Treasuries Recap
U.S. Treasury yields held steady on Wednesday, a day after jumping in response to Japan's new fiscal stimulus, as investors awaited a key U.S. jobs report on Friday.
U.S. 30-year Treasuries prices were last down 2/32 in price to yield 2.289 percent, compared with 2.286 percent late Tuesday. Long-dated yields hit a session low in early U.S. trading of 2.274 percent.
Benchmark 10-year Treasuries prices were last down slightly to yield 1.539 percent, from a yield of 1.537 percent late Tuesday.
Benchmark yields earlier hit a session high of 1.571 percent and, in morning trading, a session low of 1.530 percent.
Commodities Recap
The price of gold dropped on Wednesday, retreating from a three-week high set in the previous session, after a rise in the dollar on the back of strong economic data.
Spot gold 0.4 percent to $1,357.96 an ounce by 3:10 p.m. EDT (1910 GMT). It had touched $1,367.33 per ounce, its highest since July 11, on Tuesday.
The most-active U.S. gold futures for December delivery settled down 0.6 percent at $1,364.70 an ounce.
Oil prices jumped more than 3 percent on Wednesday, with U.S. crude futures returning to above $40 a barrel, after a larger-than-expected gasoline draw offset a surprise build in crude stockpiles in the No. 1 oil consumer.
U.S. West Texas Intermediate (WTI) crude settled up $1.32, or 3.3 percent, at $40.83 a barrel. On Tuesday, it settled below $40 a barrel for the first time since April.
Brent crude rose $1.30, or 3.1 percent, to settle at $43.10. It hit a more than three-month low of $41.51 the previous day.
