Market Roundup
• Weak data, rate cut bets knock dollar to six-month low against yen
• Fed policymakers promise response if U.S. economy slows
• IMF warns U.S.-China tariffs to slash global growth in 2020
• US May ADP National Employment, 27k, 180k forecast, 275k previous
• US May ISM N-Mfg PMI, 56.9, 55.5 forecast, 55.5 previous
• US w/e MBA Mortgage Applications, 1.5%, -3.3% previous
• US w/e MBA 30-Yr Mortgage Rate, 4.23%, 4.33% previous
• CA Q1 Labor Productivity Rate, 0.3%, 0.3% forecast,-0.4% previous
• Fed says contacts worry about trade war; economy growing modestly
• Hope grows for deal to avoid U.S. tariffs on Mexican goods
• Oil slumps 4% on U.S. inventory build, equity rally caps losses
• Gold rises to 15-wk high as trade-conflicts, rate cut hopes fuel demand
Looking Ahead - Economic Data (GMT)
• 01:30 Australia Apr Trade Balance G&S (A$), 5,100 mln forecast, 4,949 mln previous
Looking Ahead - Events, Other Releases (GMT)
• 08:25 Bank of Japan Harunhiko Kuroda speaks in Tokyo
• 09:00 Bank of England Governor Mark Carney speaks in London
• 11:45 The ECB announces its policy decision, followed by President Draghi's news conference
• 12:40 Federal Reserve Bank of Dallas President Robert Kaplan speaks in Massachusetts
• 17:00 Federal Reserve Bank of New York President John Williams speaks in New York
Currency Summaries
EUR/USD: The euro strengthened against the U.S. dollar on Wednesday, as dollar struggled on rising expectations of a U.S. central bank interest rate cut in response to trade conflict-related risks. But Wednesday's small moves in the dollar index, which measures it against a basket of currencies, suggested markets had already priced in Fed rate cuts. The euro was up 0.3% at $1.1260, extending gains to a fourth session, and hitting a seven-week high. An index that tracks the dollar versus a basket of six major currencies was up 0.16 at 97.28. Immediate resistance can be seen at 1.1271 (100 DMA), an upside break can trigger rise towards 1.1307 (June 5th high).On the downside, immediate support is seen at 1.216 (5 DMA), a break below could take the pair towards 1.1188 (21 DMA).
GBP/USD: Sterling rose to a seven-day high on Wednesday, helped by a weaker dollar and a slightly better-than-expected reading of a closely watched survey on Britain's services sector.With uncertainty over who the next British prime minister will be and concerns that whoever triumphs could set Britain on a path towards a no-deal Brexit, the pound has remained under pressure.Its recovery from five-month lows hit on Friday has been more to do with a selloff in the dollar than improved sentiment towards sterling. The IHS Markit/CIPS services Purchasing Managers' Index (PMI) edged up to 51.0 in May from 50.4 in April, its strongest reading in three months and slightly above economists' average forecast in a poll.. Immediate resistance can be seen at 1.2741 (21 DMA), an upside break can trigger rise towards 1.2800 (Psychological level).On the downside, immediate support is seen at 1.2657 (9 DMA), a break below could take the pair towards 1.2562 (May 31st low).
USD/CAD: The Canadian dollar weakened against its U.S. counterpart on Wednesday, pulling back from an earlier two-week high as oil prices fell and the greenback halted this week's decline. The price of oil, one of Canada's major exports, fell to its lowest since January after U.S. crude inventories unexpectedly surged, adding to concerns about slowing global growth. U.S. crude oil futures settled 3.4% lower at $51.68 a barrel. Canadian labor productivity grew by 0.3% in the first quarter, reflecting a decline in hours worked for the first time in seven consecutive quarters, while business output remained virtually unchanged, Statistics Canada said.The Canadian dollar was last trading 0.2% lower at 1.3419 to the greenback, or 74.52 U.S. cents. The currency touched its strongest intraday level since May 22 at 1.3363.. Immediate resistance can be seen at 1.3452 (21 DMA), an upside break can trigger rise towards 1.3500 (Psychological level).On the downside, immediate support is seen at 1.3348 (100 DMA), a break below could take the pair towards 1.3200 (Psychological level).
USD/JPY: The dollar strengthened against the Japanese yen on Wednesday, ahead of a meeting of top officials from Mexico and the United States to discuss migration issues. Mexican officials will seek to persuade the White House in talks hosted by U.S. Vice President Mike Pence that their government has done enough to stem immigration and avoid looming tariffs. U.S President Donald Trump on Tuesday said he would push ahead with tariffs on Mexican imports despite resistance from his own party. He warned Republicans in Congress not to block his efforts. The tariffs are aimed at pressuring Mexico to take stronger action to stop the inflow of illegal migrants into the United States via the Mexican border.The dollar was 0.02 percent higher versus the Japanese yen at 108.44. Strong resistance can be seen at 108.44 (5 DMA), an upside break can trigger rise towards 108.92 (11 DMA).On the downside, immediate support is seen at 108.82 (Lower Bollinger Band), a break below could take the pair towards 108.00 (Psychological level).
Equities Recap
European stock markets crept higher on Wednesday as defensive shares gained ground, but rising tensions between Italy and the European Commission over the country's debt dampened sentiment.
UK's benchmark FTSE 100 closed down by 0.1 percent, the pan-European FTSEurofirst 300 ended the day up by 0.24 percent, Germany's Dax ended up by 0. 1 percent, France’s CAC finished the day up by 0.5 percent.
Wall Street's major indexes rose on Wednesday as investors bet on a Federal Reserve interest rate cut after weak private sector jobs data and hopes grew that the United States and Mexico would reach an agreement to avoid U.S. tariffs on Mexican goods.
Dow Jones closed up by 0.81 percent, S&P 500 ended up by 0.81 percent, Nasdaq finished the up by 0.64 percent.
Treasuries Recap
Short-dated U.S. Treasury yields fell on Wednesday, with two-year yields hitting their lowest since December 2017 in the wake of a report that showed private domestic jobs growth decelerated in May to its weakest in over nine years.
Ten-year Treasury yields were down 0.30 basis points at 2.118%, hovering near their lowest since September 2017.
The spread between two- and 10-year yields grew to near 31 basis points, the widest in seven months.
Commodities Recap
Gold prices pared earlier gains on Wednesday, having jumped to their highest in 15 weeks as nagging fears about global trade and expectations of a U.S. interest rate cut encouraged investors to flock toward bullion.
Spot gold was up 0.4% at $1,329.57 per ounce at 1:55 p.m. EDT (1755 GMT). The metal had earlier soared as much as 1.4% to $1,343.86, within striking distance of a 10-month peak at $1,346.73 scaled on Feb. 20. U.S. gold futures settled up 0.4% at $1,333.60 an ounce.
Oil prices fell on Wednesday, with West Texas Intermediate crude futures (WTI) dropping to its lowest since January after U.S. crude inventories unexpectedly surged, adding to concerns about slowing global growth.
Brent futures settled down $1.34, or 2.2%, at $60.63 a barrel. WTI ended $1.80, or 3.4%, lower at $51.68 a barrel. During the session, WTI touched a low of $50.60 a barrel, its lowest since Jan. 14.
