Market Roundup
- DXY pushes ahead now up 1.8% on week to 98.55.
- EUR/USD plays 1.0914 to 1.0832 and1.0878-1.0840 in Europe.
- Norges Bank leaves rates unchanged at 0.75%: 25-bp cut expected.
- Norges Bank rate path lowered, 100% chance of June cut.
- EUR/NOK peaks at 9.5980 before rate news then hits 9.4200 after.
- Taiwan sets benchmark rate at 1.625% vs 1.75% to boost growth.
- UK Nov Retail Sales 5.0% y/y vs 3.8% previous, 3.0% expected.
- UK Dec CBI Trends-Orders -7 vs -11 previous, -10 expected.
- EZ Q3 wages 1.4% vs 1.9% prev Q3 labour costs 1.1% vs 1.6% previous.
- Germany Dec IFO business Climate 108.7 vs 109.00 previous, 109.00 expected.
- Germany Dec IFO Current Conditions 112.8 vs 113.4 previous, 113.4 expected.
- Germany Dec IFO Expectations 104.7 vs 104.7 previous, 105.00 expected.
- Economists see next Fed rate hike in Q1 '16 - Reuters Survey.
- Japan PM Abe could delay tax rise, call snap poll - Again.
- China SAFE - China Nov commercial bank net FX sales $54.8b, Oct $20.1b.
- NZ FinMin English NZD/USD to fall gradually in response to Fed hike.
- GPIF sold Y618.2b JGBs, bought Y925.9b stks, Y954.1b for-bonds.
Economic Data Ahead
- (0830 ET/1330 GMT) New applications for U.S. jobless benefits likely dropped to 275,000 last week from 282,000, pointing to a steadily firming labor market. Continuing jobless claims for the week ending December 4th likely fell to 2.203 from 2.243M.
- (0830 ET/1330 GMT) The Commerce Department is set to release current account data for the third quarter. The current account deficit is expected to have expanded to $118.0 billion from $109.7 billion in the second quarter.
- (0930 ET/1430 GMT) Philadelphia Fed Manufacturing Survey for Dec likely edged up at 1.5 after rising to 1.9 in November.
- (1000 ET/1500 GMT) The Conference Board releases its leading indicator for November, which is expected to rise 0.1 after gaining 0.6 pct in October.
- (1030 ET/1530 GMT) EIA Natural Gas Storage Change (Dec 11), Consensus.
- (1400 ET/1900 GMT) Mexico's central bank is scheduled to announce its benchmark rates. Investors focus on how Banco de Mexico will move on key rates, which was at a record low of 3 percent, after the U.S. Fed's stance on rate hike.
- (1600 ET/2100 GMT) Chile's central bank meets to decide the benchmark rate. The market is split on whether the bank will raise rates by 25 basis points to contain inflation or leave easing in place to stimulate the still flagging economy.
Key Events Ahead
- (1430 ET/1930 GMT) Fed Trade Ops 30Yr F.Mae/Fr. Mac max $2.075bln.
- Brazil central bank president, Alexandre Tombini, and the other members of the board will meet for a year-end gathering. Tombini may use the meeting to send a message to markets at a time when most investors expect policymakers to end a short pause and raise rates again in January.
- The Bank of Japan is widely expected to keep monetary policy unchanged at the two-day rate review ending on Friday. Investors will be interested in how the Fed's rate decision could affect BOJ policy and its outlook on Japan's economy.
FX Beat
USD: The dollar touched a 2-week high against a basket of major currencies on Thursday after the U.S. Fed raised interest rates for the first time in almost a decade and signaled four more hikes are to come next year. The dollar index rose 0.9 percent to 98.794 and set for another test of stiff resistance around the 100.00 mark. The dollar advanced to 122.40 yen.
EUR/USD: The euro dropped to as low as $1.0832 from a high of 1.11011 in the wake of the Fed's statement, before recovering to $1.0878, still down half a percent on the day. Intraday trend is still weak as long resistance 1.0920 holds. Any break above 1.0920 will take the pair to 1.0960/1.1100 level. On the downside major support is around 1.0780 and break below targets 1.0720/1. minor support is around 1.0830/1.0790.
USD/JPY: The yen hit a 1-week trough of 122.645 yen per dollar overnight as Japan's Nikkei surged, before bouncing back to 122.33 yen, down just 0.1 percent on the day. It has broken major resistance around 122.25 and jumped till 122.65 level. On the higher side any break above 122.70 targets 123/123.65. Minor support is at 121.90 and break below targets 121.50/121.
GBP/USD: Sterling was flat on the day against the greenback after recovering from early losses and a third of a percent higher against the euro on Thursday after a better than expected retail sales data for November. It touched highs for the day above $1.50 after dropping along with other major currencies against the greenback following the U.S. Fed's decision. By 0935 GMT, the pound stood flat on the day at $1.4970. On the lower side major support is around 1.4900 and break below targets 1.4850/1.4800 level. It is facing minor resistance around 1.5030 and break above will take the pair to next level around 1.5060/1.5100. Further bullishness is only above 1.5250. It was up 0.3 percent at 72.57 pence per euro, having hit a high of 72.55 pence immediately after the data.
USD/CHF: The pair has recovered after making a low of 0.9820 and is currently trading around 0.9976. It has also broken major resistance 0.9950 and a short term trend reversal till 1.0030 is possible. On the lower side support is at 0.9925 (200 day MA) and break below will drag the pair down till 0.9900/0.9870/0.9850 is possible. Overall bullish invalidation is only below 0.9800.
AUD/USD: The Australian dollar fell on Thursday, as U.S. dollar bulls welcomed the U.S. Fed's decision to raise interest rates for the first time in nearly a decade. It dropped 0.7 percent on the day to $0.7177, pulling closer to a recent trough of $0.7160 touched twice last week. Aussie is consolidating in narrow range between 0.7150-0.7335 level for past three trading sessions. Major intraday resistance is around 0.7240 and break above targets 0.7280/0.7335. On the lower side major support is around 0.7150 and any break below will target 0.7100/0.7050.
NZD/USD: The New Zealand dollar slid nearly 1 percent on the day to $0.6734, after rising to a 7-week high of $0.6835 the day before.
Equities Recap
Stock markets rallied as investors welcomed the Fed rate hike as a sign of confidence in the US economy.
European stocks followed with Britain's FTSE 100 rising 1.7 pct higher, Germany DAX climbed 1.8 pct, France CAC 40 inched 2 pct higher in early deals.
Tokyo's Nikkei average ended up 1.59 pct at 19,353.56, China's CSI300 Index closed up 1.9 pct at 3,755.89 points, HK'S Hang Seng Index finished up 0.8 pct at 21,872.06 points and Shanghai Composite Index ended up 1.8 pct at 3,580.00 points.
Commodities Recap
Oil prices dropped to 11-year low, weighed on further by supply glut and inventories build up and as USD strengthened post Fed's rate hike decision. Brent crude for February Delivery slipped 20 cents to $37.19 per barrel. Global benchmark shed 3.3 pct in last session, WTI for January delivery fell 33 cents at $35.19, while US crude dipped 5% on Wednesday.
Gold fell to lose some of its previous gains, with the choppy trading as USD rose after Fed's hike. Spot gold dropped 0.6 pct to $1066.20 per troy ounce. U.S. gold dropped 1 pct to a session low of $1,064.20. Copper slipped 0.3 percent and is down 27 percent for the year so far.
Treasuries Recap
U.S Treasury yields hit their highest since April 2010, they were only up 4 bps in all at 1.009 percent and widened the premium over German yields to 134 basis points, close to the biggest since late 2006 and a positive draw for the dollar.
German 10-year bond yields fell below 0.60 percent, down 8 basis points on day after Fed hike.
JGB prices closed the day unchanged to slightly higher, pushing yields down by 0.5bp to 1bp from yesterday's afternoon close.
UK Gilts started 26 touches higher than the close, as predicted, as core markets sent higher after US Fed indicated that the tightening cycle would be gradual. March Gilts were around 4 ticks lower on the November retail sales data at 117.28.
New Zealand government bonds shed, pushing yields 1.5 bps higher. Australian government bond futures dropped, with the 3-year bond contract losing 2 ticks at 97.820. The 10-year contract dipped 2.5 ticks to 97.0400, while the 20-year contract fell 3 ticks to 96.5400.
