Market Roundup
• Most Fed policymakers say rate hike likely needed 'soon', minutes show.
• Marginal if Fed hikes 3 or 4 times this year: Mester.
• Trump calls for new "structure" for U.S.-China trade deal.
• China signals to state giants: 'Buy American' oil and grains.
• Pompeo: U.S. will walk away from N.Korea summit rather than take bad deal.
• Trump teases 'big news' for U.S. auto workers, suggests NAFTA link.
• US Apr New Home Sales-Units, 0.662 mln, 0.679 mln forecast, 0.694 mln previous.
• US Apr New Home Sales Chg MM, -1.5%, -2.0% forecast, 4.0% previous.
• US Apr Build Permits R Numb, 1.364 mln, 1.377 mln.
• US Apr Build Permits R Chg MM, -0.9%, 4.1% previous.
• US May Markit Mfg PMI Flash, 56.6, 56.5 forecast, 56.5 previous.
• US May Markit Svcs PMI Flash, 55.7, 54.9 forecast, 54.6 previous.
• US May Markit Comp Flash PMI, 55.7, 54.9 previous.
• US w/e Mortgage Market Index, 366.7, 376.5 previous.
• US w/e MBA Mortgage Applications, -2.6%, -2.7% previous.
• US w/e MBA 30-Yr Mortgage Rate, 4.86%, 4.77% previous.
• Iran leader blasts U.S. for "theatrical" pullout from nuclear deal.
• Turkish central bank raises rates sharply to put floor under lira.
• ECB can still end bond buys this year: Coeure, Makuch.
• Italian president invites political novice to be prime minister.
Looking Ahead - Economic Data (GMT)
• 23 May 22:45 New Zealand Apr Trade - Imports, 4.94 bln previous
• 23 May 22:45 New Zealand Apr Trade - Exports, 4.85 bln previous
• 23 May 22:45 New Zealand Apr Trade Balance year ended total cumulative (NZD), -3.42 bln previous
• 23 May 23:00 Japan May Reuters Tankan DI, 21 previous
• 23 May 23:50 Japan w/e Foreign Invest JP Stock, 126.3 bln previous
• 23 May 23:50 Japan w/e Foreign Bond Investment, 827.0 bln previous
Looking Ahead - Events, Other Releases (GMT)
• N/A ECB’s Mario Draghi and Benoit Coeure participate in Eurogroup meeting in Brussels, Belgium
• 00:00 Richmond Fed’s Thomas Barkin gives introductory remarks before the Federal Reserve Banks of Dallas and Atlanta "Technology-Enabled Disruption: Implications for Business, Labor Markets and Monetary Policy" conference in Dallas
• 08:00 Bank of England Governor Mark Carney gives a Welcome Address & Introductory Remarks at the Bank of England Markets Forum 2018 in London
• 08:30 Speech by ECB's Peter Praet at 2018 IIF Spring Meeting organized by the Institute of International Finance in Brussels, Belgium
• 10:30 Lunchtime keynote speech by ECB’s Peter Praet at the European Business Summit in Brussels, Belgium
• 11:30 ECB publishes minutes of April policy meeting in Frankfurt, Germany
• 19:10 BoE’s Governor Mark Carney gives a speech at the annual dinner of London's Society of Professional Economists in London
Currency Summaries
EUR/USD is likely to find support at 1.1660 levels and currently trading at 1.1697 levels. The pair has made session high at 1.1719 and hit lows at 1.1673 levels. Euro declined to hit six-month low against the dollar on Wednesday as data indicating a slowdown in European business activity hurt the common currency. Euro zone economic growth slowed much more sharply than expected this month, a business survey showed, boosting concerns that there will be no return to the bloc's recent boom times. The European Central Bank will end its asset purchase programme this year and hike interest rates in 2019, a poll found last month, although policymakers may be concerned to see inflation easing along with growth. The euro was also hurt by worries that an incoming coalition Italian government comprised of the two anti-establishment parties - the League and 5-Star - looks likely to implement big-spending policies that could add to the country's large debt and lead to Rome clashing with the European Union. The dollar index , which measures the greenback against a basket of six other currencies, was up 0.4 percent at 93.982, after rising as high as 94.116, its strongest since December 12. The euro slipped 0.62 percent against the greenback to $1.1703, its weakest since mid-November.
GBP/USD is supported in the range of 1.3285 levels and currently trading at 1.3347 levels. It reached session high at 1.3364 and dropped to session low at 1.3305 levels. Britain's pound declined sharply against the dollar on Wednesday after weaker-than-expected UK inflation dented the prospect of the Bank of England (BoE) raising interest rates this year. The pound had been one of the best-performing currencies in 2018 but it has given up all its gains for the year following a broad rally in the dollar and signs Britain's economy is slowing. British inflation fell unexpectedly in April, according to figures that could add to doubts about when the Bank of England will raise interest rates again. Official data published on Wednesday showed annual consumer price inflation cooled to 2.4 percent, its weakest increase since March 2017, and down from 2.5 percent this March. The figure was below economists' average expectation in a poll for it to hold steady at 2.5 percent. High inflation, caused by the pound's drop after the 2016 Brexit vote, squeezed British consumers through last year, and although it has receded from its December peak of 3.1 percent. Consistently weak economic growth figures in early 2018, partly blamed on bad weather, have called into question whether the BoE will tighten monetary policy to curb inflation at all this year. At 1820 GMT the pound was down 0.7 percent to $1.3351 and headed for its biggest daily loss in three weeks.
USD/CAD is supported at 1.2800 levels and is trading at 1.2829 levels. It has made session high at 1.2915 and lows at 1.2825 levels. The Canadian dollar dipped against its U.S. counterpart on Wednesday as the greenback climbed, while concerns of a global trade war kept investors cautious. Losses for the loonie came as fresh uncertainty over U.S.-China trade talks weighed on global stocks. Canada's commodity-linked currency tends to track movement in equities due to the signal that stock markets send about prospects for growth. The price of oil, one of Canada's major exports, was pressured by a potential increase in OPEC crude output to cool the market's recent rally and cover any shortfalls in supply from Iran and Venezuela. Top U.S., Canadian and Mexican officials are in constant contact about slow-moving talks to revitalize the North American Free Trade Agreement (NAFTA) and are ready to meet at any time to push the process forwards, Canada's foreign minister, Chrystia Freeland, said on Tuesday. Canada sends 75 percent of its exports to the United States so its economy could be hurt if a NAFTA deal is not reached. The Canadian dollar was last trading 0.06 percent lower at C$1.2833 to the greenback. The currency touched its weakest level since May 15 at C$1.2916.
USD/JPY is supported around 109.30 levels and currently trading at 110.02 levels. It peaked to hit session high at 110.30 and made session lows at 109.53 levels. The Japanese yen strengthened against the dollar on Wednesday as investors viewed minutes from the U.S. Federal Reserve's latest policy meeting as slightly dovish. Most Federal Reserve policymakers thought it likely another interest rate increase would be warranted "soon" if the U.S. economic outlook remains intact, minutes of the central bank's last policy meeting showed. The readout of the meeting, released on Wednesday, also included a call by some policymakers to revise the Fed's monetary policy statement soon to reflect that rates would be close or above long-run estimates before too long. At the May 1-2 meeting Fed policymakers unanimously decided, as expected, to keep the benchmark overnight lending rate unchanged in a target range of between 1.50 percent and 1.75 percent. The Japanese yen gained 0.85 percent against the dollar, on pace for best day since late March. The safe-haven yen also gained against dollar, amid talk of Japanese retail investors selling the lira as stop-loss levels were hit. The yen tends to rise in times of market turbulence since Japan is the world's largest creditor nation and traders tend to assume Japanese investors would repatriate funds at times of crisis.
Equities Recap
European shares pulled back on Wednesday as U.S.-China trade talks stalled and a drop in crude prices slammed the brakes on a stellar run in energy stocks, while uncertainty in Italian politics continued to weigh on banks.
UK's benchmark FTSE 100 closed down by 0.4 percent, the pan-European FTSEurofirst 300 ended the day down by 1.17 percent, Germany's Dax ended down by 1.5 percent, France’s CAC finished the day down by 1.3 percent.
U.S. stocks ended with small gains on Wednesday after minutes from the Federal Reserve's latest meeting suggested higher inflation may not result in faster interest rate hikes.
Dow Jones closed up by 0.20 percent, S&P 500 ended up by 0.32 percent, Nasdaq finished the day up by 0.64 percent.
Treasuries Recap
U.S. Treasury yields held at lower levels on Wednesday after minutes of the Federal Reserve's May meeting showed that most Fed policymakers thought it likely another interest rate increase would be warranted "soon" if the U.S. economic outlook remains intact.
Benchmark 10-year note yields held around the 3.02 percent level where they had traded before the minutes, down from 3.054 percent on Tuesday and from an almost seven-year high of 3.128 percent on Friday.
Commodities Recap
Gold prices rose on Wednesday as the U.S. dollar backed off its highs against a basket of currencies while investors interpreted minutes from the U.S. Federal Reserve's latest policy meeting as dovish.
Spot gold gained 0.3 percent at $1,294.19 per ounce by 2:35 p.m. EDT (1835 GMT), after touching its highest since May 15 at $1,297.84. U.S. gold futures for June delivery settled down $2.40, or 0.2 percent, at $1,289.60 per ounce.
Oil benchmarks fell on Wednesday after an unexpected build in U.S. crude and gasoline inventories despite strong demand, and as traders weighed a possible increase in OPEC crude output to cover any shortfalls in supply from Iran and Venezuela.
Brent crude futures slipped 23 cents to settle at $79.80 a barrel, while U.S. crude lost 36 cents to $71.84 a barrel.
