Market Roundup
• US Jan New Home Sales Chg MM, -7.8%, 3.8% forecast, -9.3% previous, -7.6 revised.
• US Feb Dallas Fed Mfg Bus Index, 37.20, 33.40 previous.
• Negotiators seek progress on NAFTA despite fresh Trump tension.
• U.S., North Korea should lower threshold for talks, says South.
• U.S. Supreme Court rejects Trump over 'Dreamers' immigrants.
• 'Don't worry about the NRA,' Trump tells U.S. governors.
• Canada budget to stay the course with risk of choppy waters ahead.
• Germany's Merkel wins party nod to renew coalition with Social Democrats.
• Putting pressure on Britain's May, Labour backs new customs union with EU.
• Eurozone economic slack may be bigger than thought: Draghi.
• ECB's next VP echoes bank's policy line in Parliamentary hearing.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand Jan Trade - Imports, 4.91B previous
• 21:45 New Zealand Jan Trade Balance, 640.0M
• 21:45 New Zealand Jan Trade Balance YY, -2.84B previous
• 21:45 New Zealand Jan Trade - Exports, 5.55B
Looking Ahead - Events, Other Releases (GMT)
• 08:40 ECB Board member Yves Mersch gives keynote address at 2nd Annual Conference on “FinTech and
Digital Innovation: Regulation at the European level and beyond” organised by Afore Consulting - Brussels
• 09:00 Swedish First Deputy Governor Kerstin af Jochnick will give a speech titled "Sveriges Riksbank 350 years old – from banknote ban to negative interest rates" - Tumba, Sweden
• 15:00 Fed's Chairman Jerome Powell delivers semi-annual monetary policy testimony before the House Financial Services Committee – Washington
• 17:00 Riksbank's Deputy Governor Henry Ohlsson will discuss the tasks and present his view on Swedish and international economic developments when he visits Ovanåker Municipality - Edsbyn, Sweden
Currency Summaries
EUR/USD is likely to find support at 1.2203 levels and currently trading at 1.2312 levels. The pair has made session high at 1.2356 and hit lows at 1.2275 levels. Euro declined against the dollar on Monday as the dollar gained ahead of a slew of U.S. economic data and events this week, including Federal Reserve Chairman Jerome Powell's testimony, which could determine whether the greenback's recovery from a three-year low can be sustained. The prospect of further interest rate increases by the Federal Reserve, more than what the market has initially priced in, has bolstered the dollar in the last few weeks. Concerns about rising inflation after a prolonged period of stagnant price gains have raised the possibility that the Fed could tighten more than expected this year and the next, an expectation that has boosted Treasury yields and lifted the dollar. Since the dollar index hit a three-year trough more than a week ago, the U.S. currency has risen 1.4 percent and is tracking nearly 1.0 percent in gains for the month of February, after losses of more than 3 percent in January. The focus this week is Powell's first congressional testimony. Powell will testify on the central bank's semiannual report on monetary policy and the economy on Tuesday before the U.S. House of Representatives’ Financial Services Committee. Investors will be scanning Powell's comments for any signs that the central bank wants to raise rates faster to address inflationary pressures.
GBP/USD is supported in the range of 1.3853 levels and currently trading at 1.3967 levels. It reached session high at 1.4046 and dropped to session low at 1.3927 levels. The British pound declined against the greenback on Monday as greenback rebounded following hawkish comments from a central bank official boosted bets that interest rates may rise as early as May. The dollar rebounded from the day's lows against a basket of currencies and was trading near the day's highs at 89.21 with its gains more pronounced against the euro and the yen. Despite sterling's retreat, sentiment remained optimistic after Dave Ramsden, a deputy governor at the Bank of England and one of the two policymakers who opposed the BoE's decision to raise interest rates in November, said the central bank may need to raise British interest rates somewhat sooner he expected. His comments in a newspaper interview added to the general chorus of optimism emanating from central bank officials in recent days, increasing the odds of a rate hike in May to 70 percent, according to money markets. Sterling was flat on the day after having rallied as much as 0.7 percent earlier to the day's highs at $1.4070. The British pound peaked at $1.4346 in late-January, a 7.5 percent jump from early December levels. It is now more than 2.5 percent below that high.
USD/CAD is supported at 1.2600 levels and is trading at 1.2478 levels. It has made session high at 1.2676 and lows at 1.2609 levels. The Canadian dollar dipped against its U.S. counterpart on Monday as greenback rose and investors weighed talks to revamp the NAFTA trade pact. Mexico and Canada aim to finish reworking less contentious chapters of the North American Free Trade Agreement with the United States in new talks that began on Sunday, hoping to clear the path for a breakthrough on the toughest issues before upcoming elections. The dollar rose in choppy trade as the prospect the Fed will raise rates more than the three times it has signaled for 2018 has bolstered the U.S. currency the past few weeks. Oil hit three-week highs, supported by strong U.S. demand and comments from Saudi Arabia that it would continue to curb production in line with efforts by the Organization of the Petroleum Exporting Countries to cut global supplies. The Canadian dollar was trading 0.2 percent lower at C$1.2676 to the greenback, or 78.87 U.S. cents. The currency traded in a range of C$1.2615 to C$1.2682. On Thursday, it touched its weakest in two months at C$1.2760.
AUD/USD is supported around 0.7787 levels and currently trading at 0.7851 levels. It hit session high at 0.7853 and made session lows at 0.7823 levels. The Australian dollar declined against US dollar on Monday as Australian dollar was dragged lower by stronger greenback as investors bet that Federal Reserve Chairman Jerome Powell will stick to a gradual rate-hike approach despite indications that inflation is perking up. The Australian dollar was last trading at $0.7867, down 0.1 percent but, well above a recent 1-1/2-month trough of $0.7756 where crucial chart support lies. The antipodean currency has experienced wild gyrations this month as a bond rout cascaded through financial markets and hit risk appetite. The Aussie is already down 2.6 percent so far this month, its worst performance since November 2016.Last week was particularly trying for Aussie bulls when minutes from the Fed's January policy meeting offered a relatively upbeat tone on the economy in a boost to the U.S. dollar. The focus still remains on the Fed, with Chairman Jerome Powell's congressional testimony on monetary policy and the economy on Tuesday. The market is pricing in three rate hikes by the Fed this year while some participants even expect four. On the other hand, the Reserve Bank of Australia (RBA) has reiterated that interest rates in the country were set to remain at record lows for a long time.
Equities Recap
European shares rose on Monday, with gains across bourses and industry sectors, as the focus gradually shifts from the earnings season to monetary policy and politics with Italy's election on Sunday.
UK's benchmark FTSE 100 closed up by 0.8 percent, the pan-European FTSEurofirst 300 ended the day up by 0.58 percent,Germany's Dax ended up by 0.5 percent, France’s CAC finished the day up by 0.7 percent.
U.S. stocks rose sharply on Monday as a decline in Treasury yields assuaged investors' concerns about rising interest rates.
Dow Jones closed up by 1.57 percent, S&P 500 ended up 1.18 percent, Nasdaq finished the day up by 1.14 percent.
Treasuries Recap
U.S. Treasury yields fell on Monday as traders reduced their bearish bond positions in advance of new Federal Reserve Chairman Jerome Powell's semi-annual monetary policy testimony before Congress this week.
The yield on 10-year Treasury notes was 2.859 percent, down 1 basis point from Friday. Last Wednesday, it reached 2.957 percent, which was the highest since January 2014.
Commodities Recap
Gold prices rose on Monday as a softer U.S. dollar helped the metal rebound from its biggest weekly loss this year, but moves were muted before the debut congressional testimony by U.S. Federal Reserve Chair Jerome Powell later this week.
Spot gold gained 0.2 percent at $1,331.01 by 1:33 p.m. EST (1833 GMT), while U.S. gold futures for April delivery settled up $2.50, or 0.2 percent, at $1,332.80 per ounce.
Oil rose on Monday, hitting three-week highs, supported by strong U.S. demand and comments from Saudi Arabia that it would continue to curb production in line with OPEC-led efforts.
U.S. crude rose 36 cents to settle at $63.91 per barrel and Brent gained 19 cents to settle at $67.50 per barrel.
