Market Roundup
- USD/JPY +1.20%, EUR/USD -1.03%, GBP/USD -0.65%
- DXY +0.80%, DAX +0.65%, Brent +1.0%, Iron -1.14%, Gold -1.45%
- DXY highest since January ’03, USD/JPY highest since February
- SNB leaves policy unchanged: Says CHF strongly overvalued
- Norges Bank leaves policy unchanged at 0.5%, as expected
- Norway Finmin raises countercyclical buffers to 2.0% from 1.5%
- Germany Dec Flash Mfg PMI 55.5 vs 54.3 previous, 54.5 expected
- EZ Dec Flash Mfg PMI 54.9 vs 53.7 previous, 53.7 expected
- UK Nov Retail Sales +5.9% y/y vs revised +7.2% previous, 5.9% expected
- Germany Dec TR IPSOS PCSI 56.29 vs 53.40 previous
- UK Dec TR IPSOS PCSI 49.51 vs 48.9 previous
- UK Finmin Hammond-will address Japanese financial sector market access concerns
- Hammon-Committed to keep Britain competitive place for auto-industry
- The Fed's decision will stoke fresh financial turbulence - China's Xinhua
- Xinhua- global "disorder" in store as USD strengthens from accelerated pace of hikes
- AFR-Credit Suisse tips up to three RBA cuts to protect over geared households
- Moody’s – Fed rate hike reflects economic strength
- Fitch – Fed hike heralds step up in normalization
- Most US primary dealers still see only two Fed hikes in ’17 – Reuters poll
- BoJ mulls upgrading economic outlook – Nikkei.
- Japan Dec PMI manufacturing – flash 51.9, highest since January, Nov final 51.3
Economic Data Ahead
- (0830 ET/1330 GMT) The U.S. Commerce Department is likely to report that current account deficit narrowed to $110.5 billion in the third quarter from $119.9 billion in the previous quarter.
- (0830 ET/1330 GMT) The Federal Reserve Bank of New York is expected to report that manufacturing activity in New York State grew 4.5 in December after rising 1.5 in November.
- (0830 ET/1330 GMT) The number of Americans filing for unemployment benefits is likely to have decreased by 3,000 to a seasonally adjusted 255,000 for the week ended Dec. 9 while continuing claims for the week ended Nov. 25 stood at 2.005 m.
- (0830 ET/1330 GMT) The U.S. consumer price index likely increased 0.2 percent in November after rising 0.4 percent in October, while in the 12 months through November, the CPI is expected to have risen 1.7 percent. Excluding food and energy, the core CPI probably rose 0.2 percent after increasing 0.1 percent in October.
- (0830 ET/1330 GMT) Philadelphia Federal Reserve releases its manufacturing survey for the month of December. The indicator stood at 7.6 in November.
- (0830 ET/1330 GMT) Statistics Canada releases manufacturing shipments data for the month of October. Manufacturing sales are likely to have increased 0.4 percent after rising 0.3 percent in September.
- (0945 ET/1445 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of November. The index posted a final reading of 54.1 in the previous month.
- (1000 ET/1500 GMT) The National Association of Home Builders (NAHB) is expected to report that U.S. Housing Market Index edged up to 64 in December from 63 in November.
- (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending December 9.
- (1115 ET/1615 GMT) The Bank of Canada will release its financial system review.
- (1400 ET/1900 GMT) Mexico's central bank meets to decide its interest rate and is expected to raise interest rates by 25 basis points to 5.50 percent.
- (1645 ET/2145 GMT) The Statistics New Zealand releases current account data for the third quarter. The economy posted a deficit of $0.945 billion in the previous quarter.
Key Events Ahead
- (1100 ET/1600 GMT) The U.S. Federal Reserve Board holds an open meeting in Washington.
- (1115 ET/1615 GMT) Bank of Canada Governor Stephen S. Poloz's speech
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(1145 ET/1645 GMT) FedTrade Ops30-yar Ginnie Mae max $1.350 bln
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(1430 ET/1930 GMT) FedTrade Ops 30-yr Fannie Mae/Freddie Mac max $2.150 bln
FX Beat
DXY: The dollar hit 14-year peak against the euro and 10-month high versus the yen after the Federal Reserve raised the interest rate on Wednesday and projected more interest rate hikes for 2017. The greenback against a basket of currencies traded 0.4 percent higher at 102.60, having hit a fresh 14-year high of 102.66 earlier in the day. FxWirePro's Hourly Dollar Strength Index stood at 159.45 (Highly Bullish) by 1000 GMT.
EUR/USD: The euro tumbled, having hit a fresh 14-year low earlier in the session, as the greenback continued to rise across the board on the back of hawkish Federal Reserve stance. The pair failed to make a recovery, despite better-than-expected German and Eurozone's preliminary manufacturing PMI reports. Moreover, divergent monetary policy outlook between the continents continued to weigh on the major. The European currency trades 0.9 percent lower at 1.0440, having touched a low of 1.0430, its lowest since Dec. 2002. FxWirePro's Hourly Euro Strength Index stood at 27.09 (Neutral) by 0900 GMT. On the lower side, major support stands at 1.0460 (2015 yearly lows) and any violation below targets 1.0400/1.02835 (161.8% retracement of 1.05047 and 1.08700). The minor resistance stands at 1.05250 (support turned into resistance) and any break above will take the pair to immediate resistance at 1.0580 (3- day EMA)/1.0630 (7- day MA).
USD/JPY: The dollar rallied to hit fresh 10-month high above the 118.00 handle, as a fresh bout of buying interest seen in the U.S treasury yields boosted the dollar bulls’ sentiment. On Wednesday, the Federal Reserve announced its first interest-rate hike in 2016 and hinted towards a faster pace of rate increases in 2017. The major trades 0.8 percent higher at 117.97, having touched a high of 118.04, its strongest since early Feb. FxWirePro's Hourly Yen Strength Index stood at -141.47 (Highly Bearish) by 0900 GMT. The major resistance is around 119 and break above targets 120. On the lower side, minor support is around 116.50 (hourly Kijun-Sen) and any break below targets 114.75 (200- HMA).
GBP/USD: Sterling fell towards the 1.2500 handle, as the greenback continued to rise after the Federal Reserve raised the interest rate and signaled a faster pace of interest rate hikes next year. The selling pressure intensified after data released earlier showed retail sales volumes just rose by 0.2 percent in November compared with 1.8 percent growth in October. Investors now await Bank of England’s monetary policy decision, where it is unlikely to alter the benchmark interest rates or its quantitative easing program. Sterling trades 0.2 percent down at 1.2533, after declining to a 2-week low of 1.2509 earlier in the day. FxWirePro's Hourly Sterling Strength Index stood at 8.49 (Neutral) by 1000 GMT. The cable broke major support at 1.25300 (55- day EMA) and this confirms minor weakness, a decline till 1.2450/1.23800 is possible. On the higher side, 1.2600 will be acting as minor resistance and any break above will take the pair to next level till 1.2680/1.27200. Against the euro, the pound trades 0.4 percent higher at 83.47 pence, having hit an early 10-day high of 83.41 pence.
USD/CHF: The Swiss franc declined to a 12-month low against the dollar after the Swiss National Bank kept interest rates at record low levels in order to keep a cap on the highly overvalued Swiss currency. The dollar trades 0.5 percent higher at 1.0250, having hit a high of 1.0256, its highest Dec 2015. FxWirePro's Hourly Swiss Franc Strength Index stood at 21.68 (Neutral) by 1000 GMT. Any break above temporary top confirms bullishness, a jump till 1.30280 is possible. On the lower side support, minor support stands at 1.0150 (5- day MA) and below that level targets 1.00780/1.0020.
AUD/USD: The Australian dollar slumped to a 2-week low, as divergent monetary policy outlooks between the Fed and RBA benefited the U.S. dollar. However, the downside was capped as better-than-expected Australian November jobs report provided some relief to the Aussie bulls. The major trades 0.2 percent lower at 0.7420, having hit an early low of 0.7383, it’s lowest since Nov. 16. FxWirePro's Hourly Aussie Strength Index stood at -75.68 (Slightly Bearish) by 1000 GMT. On the higher side, minor resistance is around 0.7430 and any break above will take the pair till 0.7480/0.7530. The major support is around 0.7380 and break below will drag it till 0.73500/0.7300.
NZD/USD: The New Zealand dollar declined below the 0.7100 handle to hit a fresh 2-week low, as the greenback strength across the board, following the widely expected Fed’s decision to hike rates by a quarter point. Moreover, the major will continue to track U.S. dollar price action, ahead of the U.S. inflation data and New Zealand's current account report for further momentum on the pair. The Kiwi trades 0.6 percent lower at 0.7070, after falling as low as 0.7067, it’s lowest since Dec. 1. FxWirePro's Hourly Kiwi Strength Index was at -83.16 (Slightly Bearish) by 1000 GMT. Immediate resistance is located at 0.7160, a break above could take it near 0.7200. On the downside, support is seen at 0.7066 (Nov 29 Low), a break below could drag it lower 0.7050.
Equities Recap
European shares advanced, hovering near 11-month high, as gains in global banks following the Federal Reserve's interest rate decision boosted market sentiments.
The pan-European STOXX 600 index increased 0.1 percent at 356.07 points, while the FTSEurofirst 300 index shed 0.14 percent at 1,408.70 points.
Britain's FTSE 100 trades 0.15 percent down at 6,939.11 points, while mid-cap FTSE 250 tumbled 0.18 percent at 17,650.52 points.
Germany's DAX rallied 0.51 percent at 11,301.41 points; France's CAC 40 trades 0.7 percent higher at 4,801.56 points.
Tokyo's Nikkei gained 0.10 percent to 19,273.79 points, Australia's S&P/ASX 200 index fell 0.78 percent to 5,540.90 points and South Korea's KOSPI shed 0.01 percent at 2,036.65 points.
Shanghai composite index declined 0.7 percent at 3,117.68 points, while CSI300 index slumped 1.1 percent at 3,340.43 points. Hong Kong’s Hang Seng lost 1.8 percent at 22,059.40 points.
Commodities Recap
Crude oil prices rose after declining sharply in the previous session, as investors expect a tighter market in 2017 due to planned output cuts by OPEC and other producers. International benchmark Brent crude was 1.08 percent higher at $54.27 per barrel by 0921 GMT, having touched a 6-day low of $53.55 on Wednesday. U.S. West Texas Intermediate crude rose 0.85 percent at $51.17 a barrel, after falling to a low of $50.65 in the previous session, its lowest since Dec 8.
Gold prices slumped to their lowest in over 10 months as the greenback surged to a 14 years after the U.S. Federal Reserve raised interest rates for the first time in a year and projected more rate hikes in 2017. Spot gold was trading 0.5 percent lower at $1,137.24 an ounce by 0924 GMT after falling to its weakest level since Feb. 3 at 1,134.72 earlier in the day. U.S. gold futures declined 1.7 percent to $1,143.70 per ounce, having hit their lowest since Feb. 1 at $1,136.40 earlier.
Treasuries Recap
The benchmark United States 10-year bonds witnessed a heavy sell-off in the wake of the December FOMC hawkish statement, pushing yields by 8-1/2 basis points to 2.60 percent (highest since September 2014).
The Eurozone periphery bonds weakened following the Federal Reserve interest rate hike and Chair Janet Yellen’s hawkish commentary. The French 10-year bond yields rose 6 basis points to 0.79 percent, Irish 10-year bonds yield climbed 1-1/2 basis points to 0.92 percent, Italian equivalent bounced 3-1/2 basis points to 1.83 percent, Netherlands 10-year bonds yield ticked 5 basis points higher to 0.50 percent, Portuguese equivalents up 4 basis points to 3.79 percent and the Spanish 10-year bonds yield inched 4-1/2 basis points to 1.44 percent.
The UK gilts witnessed a heavy selling pressure as the U.S. Federal Reserve presented a hawkish outlook in its last monetary policy meeting for 2016 late Wednesday. Markets now await the Bank of England’s (BoE) monetary policy decision later in the day. The yield on the benchmark 10-year gilts rose 10-1/2 basis points to 1.49 percent, the super-long 40-year bond yield bounced 8 basis points to 1.93 percent and the yield on short-term 2-year climbed 4-1/2 basis points to 0.15 percent.
The German bunds slumped after the Federal Reserve in its last monetary policy meeting for 2016 raised interest rates for the first time this year and signaled at a faster hike in borrowing costs next year. The yield on the benchmark 10-year bond rose 6 basis points to 0.36 percent, the long-term 30-year bond yield climbed 7 basis points to 1.14 percent and the yield on short-term 3-year bond bounced 1-1/2 basis points to -0.70 percent.
The Japanese government bonds slumped after the Federal Reserve increased interest rates for the first time in 2016 and hinted at a faster hike in borrowing costs in 2017, majorly driven by increased inflation expectations and labor market tightening. The benchmark 10-year bond yield rose 2 basis points to 0.08 percent (highest since mid-February), the long-term 30-year bond yield bounced more than 1 basis points to 0.75 percent and the yield on short-term 2-year note climbed 1/2 basis point to -0.19 percent.
The New Zealand government bonds plunged as the U.S. Federal Reserve presented a hawkish outlook in its last monetary policy meeting for 2016 late Wednesday. The yield on the benchmark 10-year bond rose more than 10 basis points lower at 3.42 percent (highest level in 2016), the yield on 7-year note jumped 13 basis points to 2.98 percent and the yield on short-term 2-year note bounced 9 basis points at 2.27 percent.
The Australian government bonds witnessed a heavy sell-off as investors moved away from safe-haven buying after the Federal Reserve in its last monetary policy statement of 2016 raised short-term interest rate by 25 basis points and signaled a faster pace of interest rate hike next year. The yield on the benchmark 10-year Treasury note rose more than 8 basis points to 2.89 percent, the yield on 15-year note jumped 11 basis points to 3.36 percent and the yield on short-term 2-year bounced 6 basis points to 1.91 percent.
