Market Roundup
• Fed holds rates steady, sees portfolio cuts "relatively soon".
• Fed expects inflation to remain somewhat below 2% in near term but stabilize in medium term.
• Fed leaves target interest rate unchanged at 1.00-1.25%.
• US New Home Sales-Units June, 0.610m, 0.615m forecast, 0.605m previous.
• US New Home Sales Change MM June, 0.8%, 1.4% forecast, 4.9% previous.
• US MBA Mortgage Application w/e, 0.4%, 6.3% previous.
• US Mortgage Market Index w/e, 418.5, 416.7 previous.
• US MBA Purchase Index w/e, 240.1, 245.5 previous, 2-months low.
• US Mortgage Refinance Index w/e, 1414.3, 1367.8 previous.
• US MBA 30-Yr Mortgage Rate w/e, 4.17%, 4.22 previous.
• US Treasury's Mnuchin urges Congress to lift debt limit before recess.
• Obamacare repeal battle back on the Senate floor.
• ECB's Nowotny: ECB could reduce but not stop asset buys from Jan.
• Sluggish UK economy inches forward, Bank of England unlikely to act.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e, 947.8b
• 23:50 Japan Foreign Invest JP Stock w/e, 341b forecast
• 01:30 Australia Export Prices QQ Q2, -6.3% forecast, 9.4 previous
• 01:30 Australia Import Prices QQ Q2, 0.7% forecast, 1.2% previous
Looking Ahead - Events, Other Releases (GMT)
• 08:00 The European Central Bank releases monthly data on lending and money supply - Frankfurt
Currency Summaries
EUR/USD is likely to find support at 1.1620 levels and currently trading at 1.1726 levels. The pair has made session high at 1.1734 and hit lows at 1.1620 levels. The euro rose sharply against the greenback in the late US session on Wednesday as the dollar turned negative after the release of the Federal Reserve's policy statement following its July meeting. The Federal Open Market Committee announced no changes to monetary policy, as expected. Policymakers said, however, that the U.S. central bank would begin implementing balance sheet normalization "relatively soon." That marked a change from the committee's previous statement that it would begin to reduce its $4.5 trillion bond holdings this year. While the statement did seemingly set the Fed up to begin paring its balance sheet as soon as its next meeting in September, the lack of surprise allowed the market to revert to the trend of dollar weakness seen before the statement's release. The dollar index, which measures the greenback against six world currencies, fell to 93.396, its lowest since June 23, 2016. The euro, which had been bumping up against a 23-month high for most of the week, pushed through that mark to touch $1.1739, its highest since Jan. 15, 2015.
GBP/USD is supported in the range of 1.3021 levels and currently trading at 1.3107 levels. It reached session high at 1.3120 and dropped to session low at 1.3031 levels. Sterling rose against the dollar on Wednesday after dollar turned lower after the Federal Reserve signaled it could begin to cut its massive bond portfolio relatively soon. The U.S. central bank, which also kept its benchmark lending rate in a target range of 1.00 to 1.25 percent, said it was continuing the slow path of monetary tightening that has lifted benchmark U.S. interest rates by a percentage point since 2015. It said it expected to start winding down its holdings of bonds "relatively soon" in a sign of confidence in the U.S. economy. Driven by a late surge the British pound was last trading at $1.3099, 0.66 percent higher on the day by 19:45 GMT. On the data front, Britain’s economy failed to build much momentum over the past three months after almost stalling at the start of the year, reducing an already slim chance that the Bank of England will soon reverse last year's emergency interest rate cut. Economic output grew by 0.3 percent on the quarter, edging up from a sluggish rate of 0.2 percent in the first quarter, as a booming film industry and bright spots elsewhere in the services sector were largely offset by contractions in manufacturing and construction.
USD/CAD is supported at 1.2414 levels and is trading at 1.2443 levels. It has made session high at 1.3540 and lows at 1.2415 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday as higher oil prices, as a weaker dollar across the board boosted Canadian dollar. The Canadian dollar has rallied some 10 percent since early May, mostly on the back of a weaker U.S. dollar and robust economic data that spurred the Bank of Canada to raise interest rates earlier this month. Higher oil prices also have helped. Oil prices rose to near eight-week highs, with Brent futures trading over $50 a barrel after data showed a fall in U.S. inventories. U.S. crude stocks fell last week as refineries hiked output and imports dropped, while gasoline stocks decreased and distillate inventories fell, the Energy Information Administration said on Wednesday. The Canadian dollar pushed through an April 2016 support level and touched C$1.2415 to the greenback, or 80.55 U.S. cents, its strongest level since July 2015. The Canadian dollar was last trading at C$1.2446 to the greenback, up 0.51 percent. The currency traded between C$1.2415 and C$1.2545.
AUD/USD is supported around 0.7874 levels and currently trading at 0.7994 levels. It hit session high at 0.7813 and made session lows at 0.7903 levels. The Australian dollar strengthened against US dollar on Wednesday as investors sold greenback after the Federal Reserve kept interest rates unchanged and said it expected to start winding down its massive holdings of bonds soon. As broadly expected by investors, the Fed maintained its benchmark lending rate and said it was continuing the slow path of monetary tightening. The Australian dollar was last trading at $0.7801, after earlier falling to $0.7904.On the data front, Australian consumer prices were surprisingly soft last quarter and core inflation rate stayed below target for a sixth straight quarter, a reminder of just why interest rates in the country are at record lows and set to remain there for months to come. Underlying inflation rose 0.5 percent in the second quarter, from the first, which matched market forecasts. The annual rate of 1.8 percent was again short of the Reserve Bank of Australia's long-term target band of 2 percent to 3 percent, where it has been since the start of 2016.
Equities Recap
Supportive crude prices and strong results from energy firms and auto companies helped European shares rise on Wednesday.
UK's benchmark FTSE 100 closed up by 0.2 percent, the pan-European FTSEurofirst 300 ended the day up by 0.45 percent, Germany's Dax ended up by 0.31 percent, France’s CAC finished the day up by 0.49 percent.
The Dow industrials, S&P 500 and the Nasdaq Composite notched record closing highs on Wednesday after the Federal Reserve kept interest rates unchanged and on strong earnings reports from Boeing and AT&T.
Dow Jones closed up by 0.45 percent, S&P 500 ended up 0.03 percent, Nasdaq finished the day up by 0.17 percent.
Treasuries Recap
U.S. Treasury prices gained on Wednesday after the Federal Reserve indicated that it is likely to begin paring its balance sheet in the coming months and struck a slightly dovish tone on inflation.
Benchmark 10-year notes gained 11/32 in price to yield 2.29 percent, down from 2.33 percent on Tuesday.
Commodities Recap
Gold jumped 1 percent to a six-week high on Wednesday, after the U.S. Federal Reserve said it would start to wind down its massive holdings of bonds "relatively soon," pushing the dollar lower.
Spot gold rallied 1.1 percent to $1,262.11 an ounce by 3:11 p.m. EDT (1911 GMT). Its session high of $1,263.42 was the highest since June 15.Before the Fed statement, U.S. gold futures for August delivery settled down 0.2 percent at $1,249.40.
Oil prices rose to near eight-week highs on Wednesday, with Brent crude futures above $50 a barrel, as a much steeper than expected decline in U.S. inventories encouraged hopes the global crude glut would recede.
Brent crude futures settled up 77 cents or 1.5 percent to $50.97 a barrel. U.S. West Texas Intermediate futures rose 86 cents or 1.8 percent to $48.75 a barrel.
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