Market Roundup
• NY Fed Empire State business conditions index +6.5 in Jan vs Dec +7.6.
• Fed’s Dudley: US economy in quite good shape, US inflation consistent running at 2% rate in next few years.
• Fed’s Brainard: Joins Fed chorus warning about fiscal stimulus risks.
• Britain will leave EU single market as May sets aim for «hard Brexit»; unveils 12-point Brexit plan.
• UK’s May outlined 12 negotiating priorities, including limiting immigration, exiting jurisdiction of the European Court of Justice, and ending full membership of the customs union that sets external tariffs; May still wants a deal to keep trade with Europe as «frictionless as possible».
• Scotland’s Sturgeon: Scotland must have choice on independence if Brexit wishes ignored.
• Davos: Xi makes case for Chinese leadership role, warns against trade war in apparent message to Trump.
• Davos: Trump adviser Scaramucci administration wants independent Fed, need to be careful about rising USD.
• Davos: UBS’ Weber doesn’t expect ECB/BOJ to join Fed hiking rates soon.
• Dollar dips on Trump comments; sterling heads for biggest rise since 2008, hits weeks-long lows vs EUR, JPY.
Looking Ahead — Economic Data (GMT)
• 21:00 New Zealand NZIER Confidence* Q4 26%-previous
• 21:00 New Zealand NZIER QSBO Capacity* Q4 92.5%-previous
• 00:00 Australia Consumer Sentiment Jan -3.9%-previous
Looking Ahead — Events, Other Releases (GMT)
• No significant events
Currency Summaries
EUR/USD is likely to find support at 1.0622 levels and currently trading at 1.0702 levels. The pair has made session high at 1.0716 and hit lows at 1.0687 levels. Euro rose against the dollar on Tuesday as the dollar declined on concerns about protectionist trade policies by U.S. President-elect Donald Trump, which hurt the U.S. dollar. Trump’s campaign calls for tax cuts and more infrastructure spending, but his protectionist statements and a flurry of off-the-cuff Tweets have kept many investors from adding to risky positions. U.S. dollar surged since Trump’s election on bets that he would usher in an era of economic growth through fiscal stimulus. However, the rally has hit a speed bump ahead of Friday’s inauguration as investors are increasingly nervous about what his policies could mean to world trade. The euro rose above $1.07 for the first time since Dec. 8 and the dollar dipped below 113 yen to its lowest level against the Japanese currency since November. The dollar surged at the end of 2016 on expectations that stimulus promised by Trump on the campaign trail would boost U.S. economic growth and feed demand for the dollar. But Trump has continued to strike a harsh tone towards Beijing and his protectionist rhetoric is beginning to play a larger role in investors’ thinking.
GBP/USD is supported in the range of 1.2300 levels and currently trading at 1.2396 levels. It reached session high at 1.2397 and dropped to session low at 1.2329 levels. Sterling surged against the dollar on Tuesday as sterling was boosted after Prime Minister Theresa May promised a parliamentary vote on Britain’s deal to leave the EU and sought to draw a line under discussion of a «hard» or «soft» Brexit. Prime Minister Theresa May said Britain would make a definitive exit from the European Union and parliament would be given a vote on its final terms, seen as a steadying influence, and sending the pound higher. May also said she wanted to avoid a «disruptive cliff edge» for businesses when Britain leaves the European Union and backed a phasing-in of changes in immigration, customs and regulation in areas such as financial services. Sterling rose nearly 3 percent against the dollar, touching its highest in nearly two weeks and on pace for its biggest gain in more than eight years. The pound spiked higher after May pledged to hold a parliamentary vote on whatever deal Britain eventually reaches to leave the European Union.
USD/CAD is supported at 1.3000 levels and is trading at 1.3056 levels. It has made session high at 1.3072 and lows at 1.3036 levels. The Canadian dollar strengthened to a three-month high against its U.S. counterpart on Tuesday as oil rallied and greenback selloff deepened. The U.S. dollar fell along with stocks and bond yields after U.S. President-elect Donald Trump said the strong greenback was hurting the nation’s competitiveness. Recent domestic data has shown a surge in jobs in December and the first trade surplus in more than two years in November, while a Bank of Canada survey last week pointed to improving business conditions. Still, the possibility that Trump will follow through on protectionist rhetoric has clouded the outlook for Canada’s economy, with nearly half of economists polled recently paring back growth forecasts. Analysts expect the Bank of Canada to announce on Wednesday that it would leave its policy rate on hold at 0.5 percent. The Canadian dollar was last trading at C$1.3050 to the greenback, or 76.64 U.S. cents, much stronger than Monday’s close of C$1.3187, or 75.83 U.S. cents.
AUD/USD is supported around 0.7498 levels and currently trading at 0.7560levels. It hit session high at 0.7565 and made session lows at 0.7540 levels. The Australian dollar strengthened against US dollar on Tuesday as the greenback lost ground against a basket of currencies after investors turned skittish following President-elect Donald Trump’s remarks on the dollar. U.S. dollar had surged since Trump’s election on bets that he would usher in an era of economic growth through fiscal stimulus. However, the rally has hit a speed bump ahead of the Jan. 20 Inauguration Day as investors are increasingly nervous about what his policies could mean to world trade. The Australian dollar was last trading at $0.7549, having hit high at 0.7562. The Aussie has benefited in recent weeks from rising iron ore prices, boosting the country’s exports and national income, making it the best performing major currency so far this month.
Equities Recap
European shares ended flat on Tuesday, coming off lows after British Prime Minister Theresa May provided some clarity on her country’s plans to leave the European Union.
UK’s benchmark FTSE 100 closed down by 1.3 percent, The pan-European FTSEurofirst 300 ended the day down by 0.17 percent, Germany’s Dax ended flat, France’s CAC finished the day down by 0.4 percent.
US Stocks fell on Tuesday, weighed down by financial and healthcare stocks, as investors turned cautious following President-elect Donald Trump’s remarks on the dollar and drug pricing.
Dow Jones closed down by 0.28 percent, S&P 500 ended down 0.31 percent, Nasdaq finished the day up by 0.65 percent.
Treasuries Recap
U.S. Treasury prices gained on Tuesday on concerns about protectionist trade policies by U.S. President-elect Donald Trump, which hurt the U.S. dollar and increased demand for U.S. bonds.
Benchmark 10-year notes gained 14/32 in price to yield 2.33 percent, down from 2.38 percent late on Friday. The yields earlier fell to 2.305 percent, the lowest since November
Commodities Recap
Oil prices edged higher on Tuesday propped up by a decline in the U.S. dollar and comments by Saudi Arabia that it would adhere to OPEC’s commitment to cut output.
Brent futures lost 39 cents, or 0.7 percent to settle at $55.47 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 11 cents, or 0.2 percent to settle at $52.48 per barrel. Both contracts were up by $1 earlier Tuesday.
Gold jumped more than 1 percent to an eight-week high on Tuesday as stocks and the dollar fell after U.S. President-elect Donald Trump said the greenback was «too strong» and British Prime Minister Theresa May promised a parliamentary vote on Brexit.
Spot gold rose for the seventh straight session, and was 1.05 percent higher at $1,215.39 an ounce by 3:12 p.m. EST (2012 GMT) after touching a Nov. 22 high of $1,218.64 an ounce. U.S. gold futures settled up 1.4 percent at $1,212.9 per ounce.
Americas Roundup
