Market Roundup

• Germany Dec trade balance, eur, sa decrease to 21.4 bln eu (forecast 21.7 bln eu) vs previous 22.3 bln eu
   
• Germany Dec imports mm sa decrease to 1.4 % (forecast -0.5 %) vs previous 2.3 %
   
• Germany Dec exports mm sa decrease to 0.3 % (forecast -1 %) vs previous 4.1 %
   
• Fed's Kaplan says doesn't expect market volatility spilling into financial conditions
   
• Fed's Kaplan: My base case for 3 rate hikes this year still stands
   
• ECB's Praet says forward guidance on rates will naturally increase in importance
   
• ECB's Praet says we have tools, if and when we need them. But our baseline scenario is strong
   
• UK Minister Burt says does not want to see Iran deal fail, working with Europeans to mitigate U.S. concerns
   
• UK Foreign Office Minister Burt says Iran must address concerns over its role in the region
  ​

Economic Data Ahead

• (0815 ET/1315 GMT) Canadian Mortgage and Housing Corp will report housing starts for the month of January. The indicator is expected to rise at a seasonally adjusted annualized rate of 210,000 after increasing 217,000 in the previous month.
   
• (0830 ET/1330 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 2,000 to a seasonally adjusted 232,000 for the week ended Feb. 2, while continuing claims for the week ended Jan. 26 is expected to decline to 1.945 million from previous 1.953 million.
   
• (0830 ET/1330 GMT) The Statistics Canada releases its New Housing Price Index (NHPI) for the month of December. The index rose 0.1 percent in November.
   
• (1030 ET/1530 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending February 2.
  ​

Key Events Ahead

• (0800 ET/1300 GMT) Federal Reserve Bank of Philadelphia President Patrick Harker speaks on "The Economy: Output and Impact for Colleges and Universities" before the National Association of College and University Business Officers 2018 Endowment and Debt Management Forum in New York.
   
• (0900 ET/1400 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari participates in a town hall meeting, hosted by the Pierre Chamber of Commerce in Pierre, S.D.
   
• (1245 ET/1745 GMT) Bank of Canada Senior Deputy Governor Carolyn Wilkins will give a speech in Montebello, Quebec.
   
• (2100 ET/0200 GMT) Federal Reserve Bank of Kansas City President Esther George speaks on the economic outlook before the Wichita Independent Business Association in Wichita, Kansas.
   

FX Beat

DXY: The dollar index rose to a 2-week peak on speculation that the Federal Reserve would raise interest rates at least three times this year.  The greenback against a basket of currencies traded 0.1 percent up at 90.47, having touched a high of 90.57 earlier, its highest since Jan. 23. FxWirePro's Hourly Dollar Strength Index stood at 112.57 (Highly Bullish) by 1000 GMT.

EUR/USD: The euro slumped to an over 2-week low amid persistent buying interest surrounding the greenback on firming expectations about additional Fed rate hike moves through 2018.  The European currency traded 0.2 percent down at 1.2241, having touched a low of 1.2225 earlier, its lowest since Jan. 23. FxWirePro's Hourly Euro Strength Index stood at -126.25 (Highly Bearish) by 1000 GMT. Immediate resistance is located at 1.2339 (61.8% retracement of 1.2522 and 1.2225), a break above targets 1.2399 (10-DMA). On the downside, support is seen at 1.2221, a break below could drag it lower 1.2200.

USD/JPY: The dollar rose to a 3-day high on continuous improvement in investors' risk appetite and expectations of more U.S. rate hikes this year. The major was trading 0.3 percent up at 109.62, having hit a high of 110.48 on Friday, its highest since Jan. 23. FxWirePro's Hourly Yen Strength Index stood at 19.34 (Neutral) by 1000 GMT.  Investors’ will continue to track broad-based market sentiment, ahead of U.S. unemployment claim benefits and the FOMC officials' speeches for further momentum. Immediate resistance is located at 110.02 (21-DMA), a break above targets 110.74. On the downside, support is seen at 108.59, a break below could take it lower 108.10.

GBP/USD: Sterling rebounded after falling for four straight sessions on the view that the Bank of England may soften the tone of its previously confident outlook on the economy. The major traded 0.2 percent up at 1.3902, having hit a low of 1.3836 on Tuesday, it’s lowest since Jan 18. FxWirePro's Hourly Sterling Strength Index stood at 53.69 (Bullish) by 1000 GMT. Immediate resistance is located at 1.4032 (5-DMA), a break above could take it near 1.4087. On the downside, support is seen at 1.3836, a break below targets 1.3756. Against the euro, the pound was trading 0.3 percent up at 88.12 pence, having hit a low of 89.10 pence on Tuesday, it’s lowest since Jan. 17.

USD/CHF: The Swiss franc tumbled to a 2-week low as the greenback rallied on bets that the United States could see at least three interest rate hikes in 2018. The major trades 0.2 percent up at 0.9454, having touched a high of 0.9469 earlier, it’s highest since Jan. 24. FxWirePro's Hourly Swiss Franc Strength Index stood at 53.69 (Bullish) by 1000 GMT. On the higher side, near-term resistance is around 0.9512 (38.2% retracement of 0.9666 and 0.9255) and any break above will take the pair to next level till 0.9572 (23.6% retracement). The near-term support is around 0.9345 (10-DMA) and any close below that level will drag it till 0.9306.

Equities Recap

European shares declined after posting a modest recovery the previous day, while the greenback rallied to a 2-week peak on expectations that the Federal Reserve would raise interest rates at least three times this year.

The pan-European STOXX 600 index slumped 0.7 percent to 377.58 points, while the FTSEurofirst 300 index lost 0.7 percent to 1,482.33 points.

Britain's FTSE 100 trades 0.6 percent lower at 7,237.45 points, while mid-cap FTSE 250 eased 0.1 percent to 19,661.60 points.

Germany's DAX declined 1.1 percent at 12,451.33 points; France's CAC 40 trades 0.8 percent down at 5,213.82 points.

Commodities Recap

Crude oil prices declined to their lowest in six weeks after data showed U.S. crude output rose to record highs and the North Sea's largest crude pipeline reopened following an outage. International benchmark Brent crude was trading 0.5 percent up at $65.11 per barrel by 1021 GMT, having hit a low of $65.03 earlier, its lowest since Dec. 26. U.S. West Texas Intermediate was trading 0.6 percent down at $61.39 a barrel, after falling as low as $63.23 on Tuesday, its weakest since Jan. 22.

Gold prices slumped for a third straight session to hit a fresh four-week low, as the greenback rose to a 2-week high on expectations of more U.S. rate hikes this year. Spot gold was down 0.6 percent at $1,310.04 per ounce as of 1024 GMT, having hit a low of 1,309.10 earlier in the session, lowest since Jan 10. U.S. gold futures for April delivery were nearly flat at $1,314.50 per ounce.

Treasuries Recap

The U.S. Treasuries steadied ahead of the country’s initial jobless claims and a host of FOMC members’ speeches scheduled for later in the day. Also, the 30-year auction, scheduled to be held today at 18:00GMT will add further direction to the debt market. The yield on the benchmark 10-year Treasuries hovered around 2.83 percent, the super-long 30-year bond yields rose nearly 1-1/2 basis points to 3.12 percent and the yield on the short-term 2-year traded nearly 1 basis point lower at 2.12 percent.

The UK gilts traded narrowly mixed as investors await the Bank of England’s (BoE) monetary policy decision, scheduled to be unveiled today by 12:00GMT and the central bank’s Inflation Report, due at the same time for detailed insight into the bond market. The yield on the benchmark 10-year gilts, rose 1/2 basis point to 1.55 percent, the super-long 30-year bond yields remained tad higher at 1.97 percent and the yield on the short-term 2-year too slightly up at 0.63 percent.

The German bunds plunged during the mid-European session after the country’s trade surplus for the month of December exceeded market expectations, as investors keep a close eye on a host of speeches by European Central Bank (ECB) policymakers for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, jumped nearly 2-1/2 basis points to 0.75 percent, the yield on 30-year note surged nearly 2 basis points to 1.39 percent and the yield on short-term 2-year traded tad higher at -0.54 percent.

The New Zealand government bonds ended Thursday’s session on a flat note after the Reserve Bank of New Zealand (RBNZ) remained pat in its monetary policy decision, unveiled late yesterday while maintaining forecasts for rate rises in Q2 2019. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, remained flat at 2.98 percent, the yield on 20-year also steadied at 3.49 percent while the yield on short-term 2-year slumped 2 basis points to 1.88 percent.

The Japanese government bonds traded tad lower as stock prices rebounded after witnessing heavy sell-off as the country’s domestic stock index, Nikkei 225 was seen hovering higher at around 1 percent early in the session. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1/2 basis point to 0.07 percent, the yield on the long-term 30-year note also traded tad higher at 0.82 percent and the yield on short-term 2-year remained flat at -0.14 percent.

The Australian bonds slid during early Asian session tracking similar movement in U.S. Treasuries as investors are awaiting the Reserve Bank of Australia’s (RBA) monetary policy statement, scheduled to be released today by 00:30GMT. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 2 basis points to 2.85 percent, the yield on the long-term 30-year note surged 3 basis points to 3.49 percent and the yield on short-term 2-year rose nearly 1 basis point to 2.01 percent.

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