Market Roundup
• U.S. short-term borrowing costs rise to highest since 2008.
• Lawyer charged with lying in U.S. probe of Russia election role.
• EU studying U.S. tax reform in depth before deciding on any action.
• UK regulator warns lawmakers over post-Brexit market rules.
• Merkel's future in Social Democratic hands as party vote starts.
• CA Dec Wholesale Trade MM, -0.5%, 0.4% previous, 0.7% previous, 0.3% revised.
Looking Ahead - Economic Data (GMT)
• 00:30 Japan Feb Nikkei Mfg PMI Flash, 54.8 previous
• 00:30 Australia Q4 Construction Work Done, -10.0% forecast, 15.7% previous
• 00:30 Australia Q4 Wage Price Index QQ, 0.5% forecast, 0.5% previous
• 00:30 Australia Q4 Wage Price Index YY, 2.0% forecast, 2.0% previous
Looking Ahead - Events, Other Releases (GMT)
• N/A ECB Governing Council meeting. No interest rate announcements scheduled - Frankfurt
• 10:30 Swedish central bank Deputy Governor Per Jansson talks about the economy and monetary policy – Stockholm
• 14:00 Fed's Patrick Harker speaks on the economic outlook before event, "Edward Jones Dean's Breakfast: The Economic Outlook," - Missouri
• 14:15 BOE's Mark Carney, Deputy Governor Ben Broadbent, Chief Economist Andy Haldane and Monetary Policy Committee external member Silvana Tenreyro answer questions about the central
bank's February Inflation Report from Parliament's Treasury Committee – London
• 19:00 FOMC will release the minutes from its January policy meeting - Washington
Currency Summaries
EUR/USD is likely to find support at 1.2231 levels and currently trading at 1.2339 levels. The pair has made session high at 1.2360 and hit lows at 1.2317 levels. The euro declined against US dollar on Tuesday as investors shrugged off worries about the U.S budget deficit and focused on large U.S. government debt auctions this week. The U.S. Treasury is preparing to sell more than $250 billion worth of new debt this week, which analysts said would be a key gauge of international investors' appetite for U.S. assets. The dollar has sold off in recent months on worries that the Trump administration's recently passed tax cuts and plans for large government spending would balloon the deficit. The dollar index, which measures the greenback against a basket of six major currencies, was up 0.69 percent at 89.713, on pace for its best one-day gain in nearly two weeks. The dollar has been in a steep decline since the start of 2017, with any positive impetus from rising U.S. interest rates offset by a barrage of bearish factors in recent months, including worries about the deficit, concerns the U.S. government is pursuing a weak dollar strategy, and moves by other central banks to tighten monetary policy. Some of the U.S. government's short-term borrowing costs rose to their highest level in more than nine years on Tuesday as Treasury raised $179 billion in the bond market to fund spending and make debt payments.Tuesday's Treasury auctions made up more than half of the $258 billion in supply scheduled for sale this week.The euro slipped 0.58 percent against the greenback and was last trading at 1.2335 in the late US session.
GBP/USD is supported in the range of 1.3900 levels and currently trading at 1.3985 levels. It reached session high at 1.4023 and dropped to session low at 1.3961 levels. Britain's pound recovered against the dollar on Tuesday after a media report said the European Parliament would call for giving Britain "privileged" single market access. Growing hopes that Britain and the European Union can agree a transition deal, and then terms for the UK that allow it to remain as close as possible to the trading bloc, have helped support sterling this year. According to Business Insider, the European Parliament is preparing to call for a more flexible approach in future relationship talks with Britain, a break from the position put forward by chief EU negotiator Michel Barnier. Speaking in Vienna on Tuesday, Britain's Brexit Minister, David Davis, said Britain and the European Union could reach a deal to access each others' markets. Britain, which is due to leave the EU next year, says it will agree a transition accord with the bloc by end-March. The EU summit in late March is expected to prove crucial for the progress of Brexit negotiations. The pound, which had been down 0.3 percent against the dollar at $1.3953 before the Business Insider story, jumped to the day's high of $1.4015, up 0.2 percent. It later traded slightly higher at $1.4005 at 1630 GMT even as the dollar extended its rally against other currencies.
USD/CAD is supported at 1.2552 levels and is trading at 1.2637 levels. It has made session high at 1.2642 and lows at 1.2605 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as the greenback broadly rose and following domestic data that showed an unexpected drop in December wholesale trade. The value of Canadian wholesale trade dipped 0.5 percent in December, pulled down in part by weaker demand for home entertainment equipment and household appliances, Statistics Canada said on Tuesday. Analysts had forecast an increase of 0.4 percent. Statscan revised November's month-on-month gain down to 0.3 percent from an initial 0.7 percent to incorporate corrected data from some respondents. The U.S. dollar climbed on Tuesday against a basket of major currencies, continuing a rebound from a sharp decline in recent weeks that took it to three-year lows. U.S. crude rose on Tuesday on signs of inventory declines at a key storage hub, while Brent eased under pressure from a stronger dollar. The Canadian dollar was trading 0.6 percent lower at C$1.2642 to the greenback.
The currency's strongest level of the session was C$1.2558, while it touched its weakest since Feb. 14 at C$1.2645.
USD/JPY is supported around 106.48 levels and currently trading at 107.24 levels. It peaked to hit session high at 107.34 and made session lows at 107.02 levels. The U.S. dollar strengthened against the yen on Tuesday as the dollar recovered ground after hitting a three-year low last week, but gains were limited as investors were cautious on political worries and uncertainty about this week's huge U.S. bond auctions. The dollar continued its rebound from three-year lows as investors shrugged off worries about the U.S. budget deficit and focused on large U.S. government debt auctions this week. The U.S. Treasury Department Tuesday sold record amounts of three-month and six-month bills at the highest interest rates for these maturities at auctions in more than nine years, Treasury data showed. The U.S. Treasury will sell more than $250 billion worth of new debt this week, which analysts said would be a key gauge of international investors' appetite for U.S. assets. The dollar has sold off in recent months on worries that the Trump administration's recently passed tax cuts and plans for large government spending would widen the deficit. Investors are also anticipating the release on Wednesday of the U.S. Federal Reserve's January policy meeting minutes and the Thursday release of the European Central Bank's latest policy meeting minutes. The dollar index, which measures the greenback against a basket of six major currencies, was up 0.61 percent at 89.646.The dollar was up 0.52 percent against the Japanese yen.
Equities Recap
European shares rose on Tuesday thanks to a slew of well-received results, though banks were a weak spot after reported weaker than expected earnings and said it needed as much as $7 billion of fresh capital.
The UK's benchmark FTSE 100 closed flat, FTSEurofirst 300 ended the day up by 0.53 percent, Germany's Dax ended up by 0.9 percent, and France’s CAC finished the up by 0.7 percent.
A sharp drop in Walmart shares weighed heavily on the Dow and the S&P 500 on Tuesday to put a six-session winning streak in jeopardy, but gains in Amazon and technology stocks helped lift the Nasdaq.
Dow Jones closed down by 1.03 percent, S&P 500 ended down 0.59 percent, Nasdaq finished the day down by 0.08 percent.
Treasuries Recap
U.S. Treasury yields rose on Tuesday with the benchmark 10-year yield hovering near a four-year peak as investors made room for this week's deluge of $258 billion of government debt supply.
The 10-year Treasury yield was 2.893 percent, up 1.6 basis points from late on Friday. It reached 2.944 percent last week, a four-year peak.
The two-year yield was 2.227 percent, 3.8 basis points higher than late Friday, while the five-year yield was up 2 basis points at 2.650 percent after touching 2.689 percent, the highest since April 2010.
Commodities Recap
Gold prices were pressured by a stronger U.S. dollar and rising interest rates on Tuesday, dropping for a third session, but were underpinned by political worries and uncertainty about this week's huge U.S. bond auctions.
Spot gold shed 1.3 percent at $1,328.71 an ounce by 1:35 p.m. EST (1835 GMT), dropping to $1,328.26, its lowest since Feb. 14.
U.S. gold futures for April delivery settled down $25, or 1.8 percent, at $1,331.20 per ounce.
U.S. crude hit a near two-week high in a choppy session on Tuesday amid inventory declines at a key storage hub and on expectations that top producers could extend cooperation beyond 2018, while Brent fell under pressure from a stronger dollar.
Brent crude futures ended the session 42 cents, or 0.6 percent, lower at $65.25 a barrel after trading between $65.81 and $64.78 a barrel.
U.S. West Texas Intermediate (WTI) crude futures settled up 22 cents, or 0.4 percent, at $61.90 a barrel, as the March contract expired. Prices rallied to a high of $62.74 a barrel early in the session, the highest since Feb. 7.
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