Market Roundup
- USD/JPY third day of losses: 112.23 Europe low vs 112.76 Asia high.
- CHF/JPY trading from 113.10 to 111.93 decent flows touted.
- EUR/USD holding to low side of 1.0961-1.1011 range.
- GBP/USD plays in between 1.4178 to 1.4241: EUR/GBP 0.7702-0.7746.
- DAX +0.5%, Brent +1.7%, DXY +0.08%.
- UK January Industrial Output 0.2% y/y vs -0.2% previous, +0.2% expected.
- UK January Manufacturing Output -0.1% y/y vs -1.7% previous, -0.7% expected.
- UK Buckingham Palace insists Queen is "politically neutral".
- Britain finance lobby TheCityUK says Brexit could crimp investment in UK.
- BoJ seen holding off cutting rates further for time being.
- Australia March Westpac/MI consumer confidence index -2.2% to 99.1.
- Asia corporate profits set for first drop since '08 - Nikkei.
Economic Data Ahead
- (0700 ET/1200 GMT) Brazil's inflation rate likely rose 10.47 percent in the 12 months through February, down from a 12-year high of 10.71 percent in January as a deep recession drags on, supporting expectations of a likely rate cut later this year. Prices probably inched higher 1.0 percent in February from January, slowing from an increase of 1.27 percent in the previous month.
- (0900 ET/1400 GMT) Mexico's annual inflation in the 12 months through February is likely to have increased to 2.94 percent, up from a 2.61 percent rate in January.
- (1000 ET/1500 GMT) The U.S. Commerce Department releases its data on January wholesale inventories that could offer more clues on how much of drag inventories will be on Q1 growth. Analysts expect wholesale inventories are expected to have fallen 0.2 percent in January after decreasing 0.1 percent in December.
- (1000 ET/1500 GMT) The Bank of Canada is expected to hold its interest rates at 0.50 percent, as it wants to see the impact of the government's expected spending measures. Analysts will be looking to see whether the BoC's comments on the Canadian dollar, which has rallied since the bank kept rates steady at its last meeting in January.
- (1000 ET/1500 GMT) The National Institute of Economic and Social Research releases its UK GDP estimates for the last three months ending in February.
- (1500 ET/2000 GMT) The Reserve Bank of New Zealand is set to announce its cash rate decision which is likely to be kept at 2.5 pct. The bank is expected to strengthen its easing bias as sustained weakness in inflation, low dairy prices, and the recent appreciation of the New Zealand dollar threaten the economic outlook.
Key Events Ahead
- (1500 ET/2000 GMT) RBNZ Press Conference
- (1810 ET/2310 GMT) RBNZ Governor Wheeler's Speech.
FX Recap
USD: The dollar was 0.2 percent lower against the yen at 112.44 yen, having slid 0.7 percent on Tuesday. Euro was 0.3 percent lower against the dollar at $1.0975.
EUR/USD: The euro was 0.3 percent lower against the dollar at $1.0975 and 0.5 percent lower at 123.55 yen. The low-yielding euro, which tends to do well during times of financial market uncertainty, however, underperformed and was weaker before a European Central Bank meeting on Thursday. The ECB is expected to take rates deeper into negative territory and announce more asset purchases in a bid to boost inflation. The pair is currently supported below $1.10 levels. It made intraday high at $1.1011 and low at $1.0954 levels. Short term bias remains bearish till the time pair holds key resistance level at $1.1050. On the down side, key support level is seen at $1.0825 marks. A daily close above key resistance will drag the parity towards $1.1160/$1.1376 marks thereafter.
USD/JPY: The yen has been a winner so far this week after China's exports tumbled by the most in more than six years last month. The pair breaks key support level at 112.57 and currently trading around 112.45 levels. Intraday bias remains bearish for the moment. A daily close below key support level at 110.98 will drag the parity towards 108.75/107.51 marks thereafter. On the top side, key resistance levels are seen at 114.87/115.96 levels.
USD/CHF: The short term bias remains neutral for the parity. Swiss franc erases previous gain against US dollar and remains well supported above 1.0000 levels. Pair is currently trading around 1.0030 levels. A daily close above 1.0073 is required to confirm the bullish bias. A current rebound from 0.9878 will take the parity towards key resistance area around 1.0073 and 1.0256 thereafter. Alternatively, a daily close below 1.0000 will turn the bias bearish and drag the parity towards major support at 0.9662 levels in near term. Pair paid intraday high at 1.0037 and low at 0.9944 levels.
GBP/USD: Sterling rose half a percent against a weakened euro on Wednesday, showing resilience in spite of British industrial output growing by less than expected in January. The pound, which has been broadly steady since a Brexit-driven sell off at the end of last month, traded at 77.07 pence per euro, within sight of one-month highs against the single currency it hit last week and also inched up to $1.4228. UK production rose 0.3% over the month in January after it had plunged a more-than-expected 1.1% in the previous month. Manufacturing output grew 0.7% after falling a revised 0.3% in the previous month, according to the survey. The pair fails to break key resistance at $1.4268 and remains well supported below $1.43 levels. Short term bias remains bearish till the time pair holds key resistance at $1.4268 level. On the down side key support falls at $1.3835 level. Alternatively, a daily close above $1.4270 will take the parity towards key resistance at $1.4357.
AUD/USD: Aussie eased to $0.7494 against US dollar, from $0.7450 early and an eight-month high of $0.7486 touched on Monday. In addition, Aussie lost ground against a broadly stronger yen to 83.54 yen, having touched a one-month high of 85.00 on Monday. In A current rebound from $0.6826 is a corrective move. A sustained close above $0.7486 took the parity towards key resistance at $0.7507and $0.7642 thereafter. On the downside, a break below $0.7108 support levels will turn bias back to the downside for retesting 0.6826 low.
NZD/USD: The New Zealand dollar fell to $0.6736 against US dollar. In addition, kiwi fell to 75.84 against yen, down by 2 percent so far this week. Investors are counting down to the Reserve Bank of New Zealand's decision on Thursday. RBNZ likely to strengthen its easing bias as sustained weakness in inflation, low dairy prices, and the recent appreciation of the New Zealand dollar threaten the economic outlook. The pair fails to break below $0.67 marks and currently trading around $0.6780 levels. Still overall trend remains bullish till the time pair holds key support at $0.6713 marks.
Equities Recap
The global stock markets dropped on Wednesday as Chinese shares closed down more than 1 percent due to sharp sell-off on worries about the economic outlook.
The European shares opened higher but held below recent one-month highs, the FTSEurofirst 300, UK's FTSE, France's CAC all rose 0.1 pct in early deals, while Germany's DAX opened flat.
Tokyo's Nikkei closed down 0.84 pct at 16,642.20, MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.3 percent, down 1.4 percent from a two-month high hit on Monday.
China's CSI300 Index closed down 1.2 pct at 3,071.91 points, Shanghai Composite Index ended down 1.3 pct at 2,862.56 points. HK's Hang Seng Index lost 0.1 pct at 19,996.26 points.
Commodities Recap
Oil prices climbed above $40 a barrel, driven by bets that the world's largest exporters could agree this month to freeze production. Brent crude futures rose 62 cents to $40.27 a barrel by 0930 GMT, having touched 3-month highs on Tuesday above $41, while U.S. crude futures were up 49 cents at $36.99.
Gold slipped 0.4 percent at $1,258 an ounce by 1038 GMT. It hit $1,279.60 last week, its strongest since Feb. 3, 2015. U.S. gold for April delivery eased 0.5 percent to $1,256.70 an ounce.
Treasuries Recap
The 10-year U.S. Treasury yield stood at 1.847 percent vs U.S. close of 1.834 percent on Tuesday.
Japanese government bonds dropped on Wednesday as investors locked in gains, particularly in the super long zone, after the previous session's rally. The 30-year yield was the biggest mover, adding 20 bps to 0.715 pct after plunging 21 bps in the previous session. The 20-year yield added 16.5 bps, while the 40-year yield rose 18 bps to 0.740 pct. The benchmark 10-year yield rose 7.5 bps to minus 0.025 percent, moving away from a record low of minus 0.100 percent set on Tuesday. March 10-year JGB futures slipped 0.77 point to end at 151.61.
UK Gilts opened 66 ticks lower than the settlement of 121.49 as core markets embraced a sell off noted from Asian fixed income markets. Yesterday's high on 10-year cash was an early victim at 1.435 pct but sellers have so far, respected Monday's low at 1.45 pct.
German bund futures opened 42 ticks lower at 162.75, while Portugal's 10-year bonds rose 2 bps to 3.03 pct, on track for their first week of rises in four, but still some way off 2-year highs of 4.38 percent hit in February.
Australian government bond futures were off multi-week lows, with the 3-year bond contract down half a tick at 98.045. The 10-year contract rose 0.75 ticks to 97.4475, while the 20-year contract was up 5.25 ticks to 96.9525. New Zealand government bonds gained, sending yields around 3 basis points lower along the curve.
