Market Roundup
• Fed sees rate hikes on track; continued U.S. growth.
• U.S. imposes more North Korea sanctions; targets ships, firms.
• Former Trump campaign aide set to plead guilty in Russia probe.
• US w/e ECRI Weekly Index, 149.0, 149.8 previous.
• US w/e ECRI Weekly Annualized, 7.5%, 8.5% previous.
• CA Jan CPI Inflation MM, 0.7%, 0.4% forecast, -0.4% previous.
• CA Jan CPI Inflation YY, 1.7%, 1.4% forecast, 1.9% previous.
• CA Jan CPI BoC Core YY, 1.2%, 1.2% previous.
• CA Jan CPI BoC Core MM, 0.5%, -0.5% previous.
• CA Jan CPI MM SA, 0.5%, 0.2% previous, 0.1% revised.
• CA Jan Core CPI MM SA, 0.2%, 0.1% previous, 0.2% revised.
• ECB has enough bonds to safely retreat from new buys – Coeure.
• UK's PM May to set out Brexit wish-list as opponents plot ambush.
Looking Ahead - Economic Data (GMT)
• 24 Feb 01:30 CN Jan China House Prices YY, 5.3% previous.
Looking Ahead - Events, Other Releases (GMT)
• 10:00 ECB's Benoit Coeure delivers a welcome address at the first meeting of the Working Group on Euro Risk-Free Rates, organized by the ECB – Frankfurt
• 13:00 Fed's James Bullard gives presentation on the U.S. economy and monetary policy before the National Association for Business Economics conference, "Promoting Sustained Growth: Policy Tensions and Risks" - Washington
• 14:00 ECB's Mario Draghi speaks to the European Parliament's ECON committee - Brussels
• 18:00 BOE's Deputy Governor Jon Cunliffe to speak at Warwick University - London
• 20:00 Fed's Randal Quarles speaks on "A View From the Federal Reserve Board" before the National Association for Business Economics conference, "Promoting Sustained Growth: Policy Tensions and
Risks" - Washington
Currency Summaries
EUR/USD is likely to find support at 1.2230 levels and currently trading at 1.2282 levels. The pair has made session high at 1.2318 and hit lows at 1.2281 levels. Euro slipped against the greenback on Friday and is set to post its second-biggest weekly loss in nearly four months as investors focused on adding hedges to their portfolios before a big week for foreign exchange markets from a European politics perspective. The outcome of the Italian general election is due on March 4 and the German Social Democrats poll of its members on joining another coalition government with Chancellor Merkel’s conservatives is also due that day, two big political risk events for markets which may trigger fresh market volatility. Hedging-related strategies were popular as investors rushed to the currency derivative markets in short tenors to buy option contracts to cover the period over those two events. In a market where long euro bets are at their largest on record, according to CFTC positioning data, any less than optimal results from either of these two major political events may prompt some hedge funds to sell the single currency. Implied volatility on the euro for two-week maturities, a gauge of expected currency swings, was at its highest levels since the outcome of the French elections last April, indicating that some investors were taking no chances.
GBP/USD is supported in the range of 1.3852 levels and currently trading at 1.3996 levels. It reached session high at 1.4003 and dropped to session low at 1.3904 levels. Sterling edged up against the dollar on Friday but finished the week in much the same place as it had started, with weaker-than-expected economic data being offset by hawkish comments from Bank of England policymakers. The BoE's chief economist Andy Haldane told parliament on Wednesday the central bank could end up needing to raise interest rates faster than investors currently expect, sending the pound higher. Though Haldane's colleagues at the Bank struck a slightly less hawkish tone, they were still upbeat. Governor Mark Carney said there was no need to give a direct commitment on rates as markets - which have largely priced in a May rate hike had broadly understood the BoE’s message. Thus an unexpected downward revision to Britain's fourth-quarter GDP on Thursday only resulted in a temporary bout of sterling weakness. At one point, the pound suddenly lurched downwards, to as low as $1.3904, but it quickly recovered was trading up 0.1 percent on the day at $1.3971.
USD/CAD is supported at 1.2554 levels and is trading at 1.2660 levels. It has made session high at 1.2718 and lows at 1.2607 levels. The Canadian dollar edged higher against its broadly firmer U.S. counterpart on Friday after data showed Canada's inflation cooled less than economists had expected. The annual inflation rate pulled back to 1.7 percent in January, above economists' forecasts for 1.4 percent, as consumers paid less for gasoline and vehicles, data from Statistics Canada showed. Underlying inflation firmed. The data may not have much impact on the Bank of Canada's interest rate outlook after inflation was boosted by a minimum wage hike in Ontario, Canada's most populous province. Chances of another rate hike in March stayed at less than 10 percent, data from the overnight index swaps market showed. The central bank lifted rates in January for the third time since July. Its benchmark rate sits at 1.25 percent. The price of oil, one of Canada's major exports, rose as attempts by major producers to erode stockpiles offset rising U.S. oil output and exports. The Canadian dollar was last trading 0.2 percent higher at C$1.2649 to the greenback, or 78.77 U.S. cents. The currency traded in a range of C$1.2614 to C$1.2726.
AUD/USD is supported around 0.7789 levels and currently trading at 0.7831 levels. It hit session high at 0.7835 and made session lows at 0.7787 levels. The Australian dollar eased against the dollar on Friday and was on track for weekly losses as investors bet interest rates in Australia will remain at record lows while the United States continues to tighten policy. The Australian dollar slipped 0.2 percent to $0.7827, not far from a 1-1/2 month trough of $0.7756 set in early February. For the week, it is down 1 percent. The antipodean currency has had a golden run since late 2017, largely on the back of solid investor appetite for risky assets and as the greenback stumbled to multi-year lows.But the prospect of at least three U.S. rate rises in 2018 has helped reverse the dollar's slide. Federal Reserve Chair Jerome Powell's first semi-annual testimony to Congress on Tuesday will be watched for any update on the central bank's economic forecasts. On the other hand, the Reserve Bank of Australia (RBA) has hammered home the point that interest rates in the country were set to remain at record lows for a long time. The dollar index, which measures the greenback against a basket of six other major currencies, was up 0.19 percent at 89.904. The index hit a three-year low of 88.253 on Feb 16.
Equities Recap
European shares ended the day in positive territory after a choppy session, posting a slim weekly gain as investors digested a flurry of company results that included disappointing updates from Royal Bank of Scotland and Valeo.
UK's benchmark FTSE 100 closed down 0.13, the pan-European FTSEurofirst 300 ended the day up by 0.22 percent, Germany's Dax ended up by 0.2 percent, France’s CAC finished the day up by 0.1 percent.
U.S. stocks rallied on Friday, lifted by gains in technology stocks and a retreat in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year.
Dow Jones closed up by 1.40 percent, S&P 500 ended up by 1.60 percent, Nasdaq finished the day down by 1.77 percent.
Treasuries Recap
U.S. Treasury prices gained on Friday as uncertainty about recent stock market volatility helped boost demand for the bonds and as investors rebalanced portfolios ahead of month-end.
Benchmark 10-year notes gained 14/32 in price to yield 2.868 percent. The yields have fallen from a four-year high of 2.957 percent on Wednesday.
Commodities Recap
Gold eased on Friday, heading towards its biggest weekly decline in 2-1/2 months, as the U.S. dollar climbed from last week's three-year low on the back of higher U.S. Treasury yields.
Spot gold was down 0.2 percent at $1,328.74 by 1:37 p.m. EST (1837 GMT), its fifth losing session in six. U.S. April gold futures settled down $2.40, or 0.2 percent, at $1,330.30 per ounce.
Oil prices rose on Friday to their highest in more than two weeks, supported by the shutdown of the El Feel oilfield in Libya and upbeat comments from Saudi Arabia that an OPEC-led effort to cut stockpiles is working.
Brent crude futures rose 92 cents to settle at $67.31 a barrel, a 1.4 percent gain. The global benchmark's session high of $67.37 was its highest since Feb. 7.
West Texas Intermediate (WTI) crude futures rose 78 cents to settle at $63.55 a barrel, trading between $62.33 and $63.73.
