Market Roundup
- EUR/USD snaps impressive two-day rally: backs away from 1.1342 Thurs high
- USD/JPY off its 110.67 Thurs low and hinting at higher levels next week
- GBP/USD marginally lower high at 1.4496 and 1.4412 low early Europe
- DAX +0.2%, Brent +0.35%, Iron ore +5.5%
- Germany Feb Producer Prices -3.0% y/y vs -2.4% previous, -2.6% expectations
- EZ Q4 Wages 1.5% vs +1.4% in Q3
- EZ Q4 Labour costs +1.3% y/y vs +1.1% Q3
- ECB’s Praet-May cut deposit rate further if needed-Repubblica
- Japan FinMin Aso – Closely watching FX market moves
- BoJ Jan policy minutes three options proffered – more QQE, NIRP or combo
- PM Abe considering delaying planned sales tax hike – Yomiuri
- ChiefCabSec Suga– Not true government considering sales tax hike delay
- China Feb new home prices +3.6% y/y, Jan +2.5%
- New Zealand Fonterra update – ‘15/16 collection forecast -4%, NZ -1%, Australia -3%
Economic Data Preview
- (0830 ET/1230 GMT) The Statistics Canada will release its retail sales for the month of January. Sales are likely to have risen 0.6 percent, offsetting some of the slump in December.
- (0830 ET/1230 GMT) The Statistics Canada is likely to report that the annual inflation rate have declined to 1.5 percent in February, pulling away from the Bank of Canada's 2 percent target and providing room for the central bank to remain accommodative.
- (0830 ET/1230 GMT) Chile releases data on its gross domestic product (GDP) growth in the fourth quarter, which is expected to have grown 0.34 percent in the fourth quarter, slower than the 0.4 percent rise seen in the third quarter.
- (1000 ET/1400 GMT) The University of Michigan will release its consumer sentiment index for the month of March. The index is expected to show a preliminary reading of 92.2 after posting a final reading of 91.7 for February.
- (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count
- (1500 ET/1900 GMT) Mexico's central bank meets to decide its March interest rate and is likely to hold its key lending rate steady. Analysts expect the benchmark interest rate to remain at 3.75 percent in March.
Key Events Ahead
- (0900 ET/1300 GMT) The Federal Reserve Bank of New York President William Dudley Speech
- (1100 ET/1500 GMT) Federal Reserve Bank of Boston President Eric Rosengren will speak at "Supervising Large, Complex Financial Institutions: Defining Objectives and Measuring Effectiveness" conference hosted by the Federal Reserve Bank of New York.
- (1500 ET/1900 GMT) Federal Reserve Bank of St. Louis President James Bullard is scheduled to speak on the U.S. economy and monetary policy before the Ninth Conference of the International Research Forum in Frankfurt, Germany.
FX Beat
USD: The dollar index trades 0.30% higher at 95.052, recovering from a 5-month low hit on Friday, but was still on track to end the week 1.2 percent lower. The short term trend is slightly weak as long as resistance 95.81 holds. Any break above major resistance 95.81 will take the index till 96.55/97.10. On the lower side any break below 94.50 will drag the pair till 94/93.16.
EUR/USD: The euro retreated from a 5-week high of 1.1342, but was still on track to gain 1.2 percent on the week. Intraday trend is slightly weak as long as resistance 1.1350 (trend line joining 1.1495 and 1.1376) holds. Any break above 1.1350 will take the pair to next level till 1.1380/1.14375. On the lower side major support is around 1.12750 and break below targets 1.1200/1.1155. The short term trend reversal is only above 1.1380.
USD/JPY: The yen was flat against the dollar, having hit a 17-month high on Thursday, with traders concerned that a sharp rise in the Japanese currency would draw out intervention from the Bank of Japan. The dollar was trading around 111.43 yen, off a low of 110.67 plumbed in the previous session, its weakest since October, 2014. The pair has broken major support 111.00 and declined till 110.82. The short term trend is slightly weak as long as resistance 112.70 holds. On the lower side major support is around 110 and break below targets 108.85/106. The major resistance is around 112.70 and break above targets 113.60/114.25, while the minor resistance is around 112.
GBP/USD: Sterling retreated on Friday from its strongest levels in a month against the dollar, hit by a recovery for the U.S. currency against its major peers after 2 days of broad weakness. It has gained almost exactly as much as the euro against the dollar over the past 2 weeks, having declined 9 percent since December. The pound dropped 0.4 percent to $1.4420 and was flat at 78.10 pence per euro. The pair has broken major resistance 1.4400 and trades around 1.4442. Intraday trend is slightly bullish as long as support 1.4350 holds. Any break below 1.4350 will take the pair to next level 1.4280/1.4225. On the higher side major resistance is around 1.4500 and break above targets 1.4580/1.4600/1.4660. While minor support is around 1.4400
USD/CHF: The pair has made a low of 0.9651 and slightly recovered from that level. It trades 0.10% higher at 0.9684. The major support is around 0.9600 (trend line joining 0.90719 and 0.9156) and any further weakness is only below 0.9600. Any break below will drag the pair down till 0.9528/0.9500 level. On the higher side minor resistance is around 0.9708 and any break above targets 9750/0.9780. The short term bearish invalidation is only above 0.9780.
USD/AUD: The Australian dollar advanced to a fresh 8-month peak of 0.7680, having gained a cent-and-a-half so far this week. The Aussie was strengthened after prices of iron ore, Australia's top export earner, climbed 5 percent. It has gained an impressive 7.2 percent so far this month and looked set to test the June 2015 peak of 0.7849. The pair has broken major resistance 0.7650 and is trading around 0.7624. The short term trend is slightly bullish as long as support 0.7570 holds. On the higher side major resistance is around 0.7680 and break above targets 0.7725/0.7750. The major support is around 0.7570 and break below will drag the pair till 0.7500/0.7430.
USD/NZD: The New Zealand and dollar touched multi-month peaks as a slide in the U.S. dollar sharpened risk appetites and boosted commodity prices. The kiwi climbed to its highest this year at 0.6866, having gained 1.9 percent on Thursday and was on track to post a weekly gain of 1.7 percent. The pair trades around 0.6802 levels, having touched session's high of 0.6874. Immediate resistance is located at 0.6874 (Session High), while support is seen at 0.6728 (5-DMA).
Equities Recap
World shares headed for a fifth straight week of gains as this week's thumping for the dollar, subdued global interest rates and higher oil prices, boosted confidence.
Europe's FTSEurofirst 300 gained 0.23 pct to 1,343.08 points, France's CAC 40 rose 0.16 pct, Britain's FTS 100 edged up 0.04 pct, while Germany's DAX was 0.04 pct down. MSCI's 46-country 'All World' index is set for its fifth week of gains.
Tokyo's Nikkei declined 1.25 pct at 16,724.81. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8 percent on Friday, entering positive territory for the year for the first time.
Shanghai Composite index and CSI 300 advanced roughly 1.6 percent each, with gains of about 6.4 percent for the week. HK’s Hang Seng Index edged up 0.8 pct at 20,671.63 points.
Commodities Recap
Oil steadied around its 2016 high, supported by expectations of a production freeze by major exporters and dollar weakness that have pushed prices towards a fourth straight weekly gain. Brent crude's front-month contract touched $41.86 a barrel, its highest this year, in early trading, and was at $41.85 by 1039 GMT. U.S. crude was up 3 cents at $40.23 a barrel, after rising as high as $40.55. The benchmark had surged by 4.5 percent to close the previous session at $40.20.
Gold edged up with the market on track to end the week on a firmer note as the dollar hovered near its lowest in 5 months. Spot gold gained around half a percent to $1,263.30 an ounce earlier in the session and was at $1, 253.91 an ounce by 1044 GMT, while U.S. gold was little changed at $1,264.30 an ounce. Spot gold has risen more than 1 percent this week after closing down 0.9 percent in the previous week.
Treasuries Recap
The U.S. 10-Year Treasuries Yield stood at 1.8714 percent down by 0.032 bps.
The Eurozone bond yields declined after comments from the European Central Bank appeared to put further interest rate cuts back on the table. The yield on Portugal's 10-year bond dropped more than 5 basis points to 2.675 percent, its lowest level in about 7 weeks. Ten-year yields in Germany, France and Spain all fell to their lowest levels since last Thursday's ECB meeting.
JGB prices ended the day higher across the curve, with the benchmark 10-yr and 20-yr JGB yields briefly hitting their fresh record lows of -0.135% and -0.29%, respectively. The 30yr yields were down 18bp to a new record low around 0.42% before holding.
Gilts opened 12 ticks higher than the settlement of 120.72 as core fixed income markets remain supported by thoughts of the more Central Bank stimulus after the dovish FOMC statement earlier this week.
Australian government bond futures eased, with the 3-year bond contract off 4 ticks at 98.040. The 10-year contract declined 2.5 ticks to 97.4200, while the 20-year contract shed 4.5 ticks to 96.8450. The spread between 10-year and 3-year government bonds widened to 59 basis points, having earlier shrunk to the smallest in nearly a year at 57 basis points. New Zealand government bonds gained a tad, pushing yields half a basis point lower at the short end and 1.5 basis points lower at the long end.
