Market Roundup
• US Dec Industrial Production MM, 0.9%, 0.4% forecast, 0.2% previous, -0.1% revised.
• US Dec Capacity Utilization MM, 77.9%, 77.3% forecast, 77.1% previous, 77.2% revised.
• US Dec Manuf Output MM, 0.1%, 0.3% forecast, 0.2% previous, 0.3% revised.
• US Jan NAHB Housing Market Index, 72, 72 forecast, 74 previous.
• US w/e MBA Mortgage Application, 4.1%, 8.3% previous.
• US w/e Mortgage Market Index, 406.3, 390.2 previous.
• US w/e Mortgage Refinance Index, 1314.0, 1259.2 previous.
• US w/e MBA 30-Yr Mortgage Rate, 4.33%, 4.23% previous.
• US w/e MBA Purchase index, 249.2, 242.7 previous.
• US w/e Redbook MM, -0.3%, 0.1% previous.
• US w/e Redbook YY, 2.6%, 3.4% previous.
• U.S. economy, inflation growing at modest-to-moderate pace -Fed.
• Republicans eye another short-term bill to fund U.S. government.
• Trump says Russia helping N.Korea skirt sanctions; Pyongyang getting close on missile.
• Trump's ex-aide Bannon strikes deal to avoid grand jury testimony -CNN.
• Bank of Canada hikes rates, takes dovish tone amid NAFTA clouds.
• Mixed New Year messages from Bank of England on next rates move.
• British lawmakers back the Brexit legislation, stiffer tests yet to come.
• Farage backs off second Brexit referendum talk as EU says UK still welcome.
• Bitcoin slumps below $10,000, half its peak, as regulatory fears intensify
Looking Ahead - Economic Data (GMT)
• 17 Jan 23:50 Japan w/e Foreign Bond Investment, 173.0B previous
• 17 Jan 23:50 Japan w/e Foreign Invest JP Stock, 597.9B previous
• 18 Jan 00:30 Australia Dec Employment, 9.0k forecast, 61.6k previous
• 18 Jan 00:30 Australia Dec Full Time Employment, 41.9k previous
• 18 Jan 00:30 Australia Dec Participation Rate, 65.4% forecast, 65.4% previous
• 18 Jan 00:30 Australia Dec Unemployment rate, 5.4% forecast, 5.4% previous
• 18 Jan 01:30 China Dec China House Prices YY, 5.1% previous
• 18 Jan 04:30 Japan Nov Industrial Output Rev, 0.6% previous
Looking Ahead - Events, Other Releases (GMT)
• Jan 17 21:30 Fed's Loretta Mester gives a lecture on monetary policy communications - New Jersey
• Jan 18 14:30 ECB's Benoit Cœure is a panel participant at a joint conference by the IMF and Bundesbank on "Germany – Current Economic Policy Debates" – Frankfurt
• Jan 18 17:30 Bank of France Governor Francois Villeroy de Galhau gives annual start-of-year address to the financial sector - Paris
Currency Summaries
EUR/USD is likely to find support at 1.2186 levels and currently trading at 1.2265 levels. The pair has made session high at 1.2323 and hit lows at 1.2192 levels. Euro dipped against the dollar on Wednesday as euro attracted short selling as some European Central Bank officials voiced worries about the currency's strength. In an interview with Italian newspaper la Repubblica Vitor Constancio, the ECB vice president, said he did not rule out that monetary policy would still continue to be "very accommodating for a long time. Meanwhile, ECB policymaker Ewald Nowotny told reporters on Wednesday the euro's recent strength against the dollar is "not helpful," which encouraged profit-taking before a policy meeting next week. The euro's decline helped stabilize the greenback, which had dipped after Federal Reserve released periodic Beige Book report on the economy. The outlook for the dollar, however, remains dour on the view that other central banks besides the Federal Reserve are moving away from the ultra-low-rate stance and unconventional tools they adopted after the 2008 global credit crisis. The index that tracks the dollar against a basket of currencies was up 0.26 percent at 90.629. It hit a three-year low of 90.113 earlier. The euro was down 0.30 percent at $1.2206 after hitting a three-year peak versus the greenback at $1.2322.
GBP/USD is supported in the range of 1.3743 levels and currently trading at 1.3846 levels. It reached session high at 1.3941 and dropped to session low at 1.3750 levels. Britain's pound rose to hit its highest levels against the dollar since Britain's vote to leave the European Union in 2016 on Wednesday, as traders awaited the latest developments in Brexit negotiations. The pound reached as high as $1.3944 in US trading, its highest levels since June 24 2016, with the better-than-expected economic performance of the British economy and hopes that Britain will soon agree a transition deal with Brussels supporting sterling. British unemployment is likely to fall further than the Bank of England and most other economists expect this year, pushing pay growth to near its fastest rate since the financial crisis, BoE policymaker Michael Saunders said on Wednesday. The BoE's Saunders stuck close to existing BoE language that interest rates are likely to need to rise further over time in his speech, and that any increases would be "limited and gradual". Sterling was trading around the $1.3850 up 0.44 percent on the day.
USD/CAD is supported at 1.2353 levels and is trading at 1.2428 levels. It has made session high at 1.2537 and lows at 1.2358 levels. The Canadian dollar strengthened against the greenback on Wednesday after Bank of Canada hiked interest rates and painted positive picture on the domestic economy, even though it sounded a cautious tone on the future of NAFTA. The central bank raised its benchmark interest rate by 25 basis points to 1.25 percent, as expected, after recent data showed strong job growth and firmer inflation. The loonie initially fell as the bank's worries about prospects for the North American Free Trade Agreement dented expectations for additional rate increases. The central bank raised its forecast for 2018 growth to 2.2 percent from 2.1 percent, while it also bumped up its forecast for 2019, after an estimated 3.0 percent expansion in 2017. The price of oil, one of Canada's major exports, rose ahead of the release of U.S. petroleum data that was expected to show a ninth straight weekly drawdown in crude inventories. The Canadian dollar was trading 0.4 percent higher at C$1.2428 to the greenback. The currency's weakest level of the session was C$1.2540, while it touched its strongest since Jan. 5 at C$1.2362.
USD/JPY is supported around 110.00 levels and currently trading at 111.19 levels. It peaked to hit session high at 111.11 and made session lows at 110.57 levels. The U.S. dollar strengthened against the yen on Wednesday as dollar recouped some of its earlier losses as traders expected Federal Reserve will continue to tighten monetary policy this year. The U.S. economy and inflation expanded at a modest-to-moderate pace from late November through the end of 2017, while wages continued to push higher, the Federal Reserve said on Wednesday. Several regional Fed districts noted increases in manufacturing, construction, and transportation input costs, according to the report. Some reported expectations of further wage increases in the coming months, though prices pressures were still mixed, the Fed said. Despite still weak inflation overall, Fed policymakers currently expect to raise interest rates three times this year. The central bank raised rates three times in 2017 against a backdrop of steady growth and low unemployment. The majority of Fed policymakers appear to be putting more emphasis on the need to raise rates given the economy is at or near full employment rather than waiting until inflation appreciably rises.
Equities Recap
Weak trading updates in Britain and dealmaking activity drove some big share price moves in Europe on Wednesday as the broader market weakened after a strong start to the year.
UK's benchmark FTSE 100 closed down by 0.5 percent, the pan-European FTSEurofirst 300 ended the day down by 0.16 percent, Germany's Dax ended down by 0.6 percent, France’s CAC finished the day down by 0.4 percent.
U.S. stocks jumped on Wednesday and the Dow closed above 26,000 for the first time as investors' expectations for higher earnings lifted stocks across sectors.
Dow Jones closed up by 1. 25 percent, S&P 500 ended up 0.95 percent, Nasdaq finished the day up by 1.03 percent.
Treasuries Recap
The U.S. yield curve flattened to a decade-low spread between 5-year and 30-year yields and two-year Treasury yields hit a nine-year high on Wednesday on expectations the Federal Reserve will continue to tighten monetary policy this year.
The 10-year Treasury yields were 2.561 percent, above Tuesday's close at 2.544 percent. Two-year yields were 2.039 percent, after hitting 2.047 percent earlier in the day, its highest since September 2008.
Commodities Recap
Gold prices reversed early gains to trade slightly lower on Wednesday as the U.S. dollar recovered from a three-year low against a basket of currencies.
Spot gold was flat, last up 0.1 percent at $1,339.44 an ounce by 1:58 p.m. EST (1858 GMT). It remained close to Monday's peak of $1,344.44, its highest since Sept. 8.
U.S. gold futures for February delivery settled up $2.10, or 0.2 percent, at $1,339.20 per ounce.
Oil prices ended higher on Wednesday ahead of the release of U.S. petroleum data that was expected to show a ninth straight weekly drawdown in crude inventories.
Brent futures settled 23 cents higher at $69.38 a barrel while U.S. West Texas Intermediate (WTI) crude gained 24 cents to $63.97 per barrel.
