Market Roundup
- NZD/USD falls to cloud top at 0.6615 then recovers to 0.6670.
- EUR/USD heavy to 1.0960 from 1.1004-1.0980 into NY.
- USD/JPY 113.15 to 113.80 and 113.50 into NY.
- Germany Jan Trade surplus narrows: Exports fall 0.5% vs -0.7% previous.
- France January Industrial Output +1.3% m/m vs -0.6% revised previous, +0.8% expected.
- Norway February Core CPI 3.4% vs 3.0% previous, 3.1% expected.
- IIF - Financial market dislocations growing - Singapore Business Times.
- ICM poll 40%b Brits was to remain in EU, 41% want to leave.
- Japan Fin Min Aso - Japan no longer in state of deflation.
- Hedge funds back off bets on China devaluation.
- China February CPI +1.6% m/m, +2.3% y/y, +1.1% and +1.9% expected.
- ECB questions banks on Brexit preparations - Handelsblat.
- RBNZ cuts OCR 25 bps to record low 2.25%
- Moody's - Credit risk to NZ banks from lower dairy payouts.
Economic Data Ahead
- (0745 ET/1245 GMT ) The European Central Bank is set to announce its rate decision, it is almost certain to cut rates deeper into negative territory and agree on some kind of adjustment to its 1.5 trillion euro asset buying program. The most likely outcome is a combination of modest measures with a strong verbal commitment to take further action if necessary.
- (0830 ET/1330 GMT) Canada's industrial capacity utilization likely fell slightly to 81.6 pct in the fourth quarter compared to its reading of 82.0 pct for the third quarter.
- (0830 ET/1330 GMT) Statistics Canada releases its New Housing Price Index wich is expected to have gained 0.2 percent in January from December.
- (0830 ET/1330 GMT) The numbers of Americans filing for Jobless benefits are expected to have decreased 3,000 to a seasonally adjusted 275,000. While the continuing claims for the week ending Feb 26 likely slipped to 2.255M from 2.257M.
- (1030 ET/1530 GMT) The Energy Information Administration reports its Natural Gas Storage for the week ending March 4.
- (1400 ET/1900 GMT) The U.S. Treasury Department is likely to show a $200 billion budget deficit in February, contrasting a $55.16 billion surplus in January.
Key Events Ahead
- (0830 ET/1330 GMT) ECB President releases the monetary policy statement and gives a press conference.
- (1145 ET/1645 GMT) Fed Trade 30-year Ginnie Mae max $1.000bln.
- (1615 ET/2115 GMT) Bank of Canada Governor Stephen Poloz will make introductory remarks at a Canadian Institute for Advanced Research lecture.
FX Recap
USD: The greenback was down by 0.3 percent at $1.0977 against Euro and 0.2 percent at 124.86 yen.
EUR/USD: The euro fell around a third of a cent against the dollar on Thursday; anticipating further policy easing by the European Central Bank. The ECB is widely expected to cut its deposit rate by 10 basis points to -0.40 percent. Expectations are high that ECB policymakers will deliver a telling blow in the central bank's campaign to get inflation rising again and drag the euro zone economy out of the mire after eight years of weak growth. The pair is currently supported below $1.10 levels. It made intraday high at $1.1003 and low at $1.0960 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. Germany's trade surplus shrank in January, data showed on Thursday. Industrial production of France rose 1.3% month-on-month during the first month of the year, up from the revised 0.6% drop seen in December.
USD/JPY: Japanese Yen erased its previous gain against US dollar and currently trading around 113.58 levels. Pair is likely to consolidate below 114.87 levels. A daily close above 114.87 is required to confirm the bullish trend. On the other side, key support level is seen at 112.60 levels. 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: A widely expected rate cut by the European Central Bank this week could nudge the Swiss National Bank towards further cutting its own negative interest rates as it seeks ways to weaken a currency it says is overvalued. A 10 basis points cut in the ECB's negative deposit rate, taking it down to -0.4 percent, would bring it closer to the SNB's -0.75 percent, making the franc a more attractive investment once again compared to the euro. The short term bias remains neutral for the parity. Swiss franc erases previous gain against US dollar and remains well supported around 1.0000 levels. Pair is currently trading around 0.9984 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.
GBP/USD: Sterling was slightly lower at $1.42 against the US dollar. In addition, The euro was down 0.25 percent against the pound and lower across the board amid expectations that ECB policymakers will take rates deeper into negative territory and announce more asset purchases. Sterling rose against the euro on Thursday, with investors focussed on a European Central Bank meeting later in the day, and offering some respite to the pound that has been dogged by concerns about a potential British exit from the European Union. 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: Australian counterpart hovered near eight-month highs on expectations that rates will remain steady for at least the next couple of months. The Aussie has gained 4.5 percent so far this month and charts point to a test of $0.7653, the 61.8 percent retracement of the May 2015-January 2016 move. A sustained close above $0.7486 took the parity towards key resistance at $0.7507and $0.7653 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 kiwi dropped a cent and a half to $0.6642 after the Reserve Bank of New Zealand cut rates to a record low of 2.25 percent, citing a material decline in a range of inflation expectation measures. The central bank also signalled there would be at least one more rate cut to come. Concerns over the global economy, weak inflation expectations and low dairy prices are responsible factors for the sudden rate cut. Key support was found at $0.6633, with resistance at $0.6717 levels.
Equities Recap
The expectations of more easing from the European Central Bank drove the euro and government bond yields lower, while the European stock markets moved higher at the start with Europe's FTSEurofirst 300, UK's FTSE, Germany's DAX and France's CAC40 gaining between 0.1 and 0.3 percent.
Tokyo's Nikkei advanced 1.26 pct at 16,852.35, MSCI's broadest index of Asia-Pacific shares outside Japan nudged up 0.3 percent.
China's CSI300 Index declined 1.9 pct at 3,013.15 points, Shanghai Composite Index plunged 2.0 pct at 2,804.73 points. HK's Hang Seng Index edged down 0.1 pct at 19,984.42 points.
Commodities Recap
Oil prices dropped after hitting 3-month highs this week. Brent crude futures were at $40.62 per barrel at 1011 GMT, down 45 cents from their last close, having earlier this week peaked at $41.48, the highest level since Dec. 9. U.S. crude was down 34 cents at $37.95 per barrel, having hit $38.51 on Tuesday and also it's highest since Dec. 9.
Gold declined 0.6 percent to $1,245.41 an ounce by 0650 GMT, pulling away from a 13-month peak of $1,279.60 reached on March 4. U.S. gold for April delivery fell 0.9 percent to $1,246.70 per ounce.
Treasuries Recap
Euro zone bond yields dropped on Thursday ahead of the ECB meeting that is expected to deliver a further dose of monetary stimulus to boost inflation and economic growth. 10-year bonds yields were 1-3 bps lower across the region, with Germany's benchmark 10-year Bund yield down 1.5 bps at 0.22 pct and heading towards 10-month lows hit last week at about 0.10 percent. The 2-year German Schatz yield was at -0.54 percent and within sight of last week's record low of -0.58 pct.
Japanese government bond prices were mostly lower on Thursday, although the futures ended higher in a divided market driven more by trading flows than any fundamentals. The 30-year JGB yield rose 5.0 basis points to 0.760 percent, to stand 30 basis points up from a record low hit just on Tuesday. The 20-year yield rose 2.0 basis points to 0.490 percent, compared to Tuesday's record low of 0.305 percent. The 5-year yield rose 0.5 basis point to minus 0.16 percent while the 2-year yield also went up 0.5 basis point to minus 0.18 percent. The yield on bonds with 7 to 8 years to maturity fell 0.5 basis points. The yield on the benchmark 10-year bonds was flat at minus 0.020 percent. The benchmark March contract ended up 0.05 point at 151.66.
Gilts opened 9 ticks higher than the settlement of 120.58 buts screens have remained inside the body of yesterday's candlestick indicating a rather conservative session. 10-year cash yields did break yesterday's lows of 1.45% but the stiffer test lies at 1.42%, which is a run of recent lows noted since the start of the month.
Australian government bond futures were mixed, with the 3-year bond contract up 3 ticks at 98.060. The 10-year contract shed 1 tick to 97.4325, while the 20-year contract was half a tick lower at 96.9250. The spread between 10-year and 3-year government bonds bounced to 63 basis points, from a near one-year low of 59 basis points touched on Wednesday. New Zealand government bonds gained, sending yields 11 basis points lower at the long end of the curve.
