Market Roundup
• US Markit Mfg PMI flash Jan 55.1 v 54.5 forecast, 54.3 previous; new orders 57.3 v 55.8 in Dec highest since Sep ‘14
• US existing home sales 5.49m v 5.52m forecast, 5.65m previous; -2.8%
• UK Supreme Court: Parliament must vote before UK can trigger Brexit, Bill to go before parliament «within days».»
• ECB’s Lautenschlaeger: EUR not in danger will not fail, structural reform needed for growth.
• ECB’s Praet: Public backstop for banks in euro zone necessary.
• Trump signs order to move controversial oil pipelines forward.
• Wall St edges higher, U.S. yields rise after Brexit ruling, USD steadies as investors eye earnings.
• Trump urges US automakers to make big push for new plants.
• Econonomy minister Guajardo: Mexico may leave NAFTA if renegotiation unfavorable.
• Gold retreats from late 2016 highs on USD recovery; DXY back from over 7-wk low in prior session.
• Brazil stocks at highest in nearly 5-yrs on rising commodities.
Looking Ahead — Economic Data (GMT)
• 23:50 Japan Exports YY* Dec forecast 1.2%, -0.4%-previous
• 23:50 Japan Imports YY* Dec forecast -0.8%, -8.8%- previous
• 23:50 Japan Trade Balance Total Yen* Dec forecast 270.0b, 152.5b- previous
• 00:30 Australia CPI QQ* Q4 forecast 0.7%, 0.7%- previous
• 00:30 Australia CPI YY* Q4 forecast 1.6%, 1.3%- previous
• 00:30 Australia RBA Weightd Medn CPI QQ Q4 forecast 0.5%, 0.3%- previous
• 00:30 Australia RBA Weightd Medn CPI YY Q4 forecast 1.4%, 1.3%- previous
• 00:30 Australia RBA Trimmed Mean CPI QQ Q4 forecast 0.5%, 0.4%- previous
• 00:30 Australia RBA Trimmed Mean CPI YY Q4 forecast 1.7%, 1.7%- previous
• 00:30 Australia CPI Index Number* Q4 109.4- previous
Currency Summaries
EUR/USD is likely to find support at 1.0688 levels and currently trading at 1.0730 levels. The pair has made session high at 1.0775 and hit lows at 1.0717 levels. Euro declined against the dollar on Tuesday as the dollar strengthened across the board after several days of losses in the wake of President Donald Trump’s inaugural speech promising more trade protectionism, with the U.S. economic outlook still seen as better than that of Europe or Japan. Investors bet his promised infrastructure spending and tax cuts would boost economic growth and inflation, leading the Federal Reserve to raise interest rates faster. After peaking in early January, that rally has stalled for now, with the dollar down 3.5 percent against a basket of major currencies the past three weeks. The dollar index last traded flat at 100.13. The euro, which had looked as if it was headed toward parity with the dollar at the end of 2016, has recovered above $1.07 and hit seven-week highs of $1.0774 in early Asian trading on Tuesday. By late US trading, the euro was down marginally at $1.0731.
GBP/USD is supported in the range of 1.2416 levels and currently trading at 1.2505 levels. It reached the session high at 1.2542 and dropped to the session low at 1.2454 levels. Sterling declined against the U.S. dollar on Tuesday as sterling was weighted down after Supreme Court ruled that the government must go through parliament, but not the UK’s regional assemblies, to trigger talks on leaving the European Union. The pound jumped to five-week highs after the first sections of the ruling were read, but was then hit by a wave of profit-taking, fuelled partly by investor worries about how politicians and the public in Northern Ireland and Scotland will respond. The decision overall was seen as clearing the way for Prime Minister Theresa May to get on with launching Brexit talks which investors would rather were not taking place at all, albeit with a handful of procedural hurdles. Sterling slipped 0.5 percent to $1.2493 after Britain’s Supreme Court ruled that the government would need approval from Britain’s parliament before formally triggering the country’s departure from the European Union.
USD/CAD is supported at 1.3060 levels and is trading at 1.3157 levels. It has made session high at 1.3266 and lows at 1.3105 levels. The Canadian dollar strengthened against its U.S. counterpart on Tuesday higher oil prices and the prospect of advanced construction of the Keystone XL pipeline supported oil co-related Canadian dollar. The U.S. dollar recovered from a dip on fears that Trump’s focus on protectionism over fiscal stimulus suggested his administration might be content to gain a competitive advantage through a weaker currency. Trump’s push to renegotiate the North American Free Trade Agreement threatens the Canadian economy. Canada sends more than 75 percent of its exports to the United States. On the data front, U.S. home resales fell more than expected in December as the supply of houses on the market dropped to levels last seen in 1999, but the housing market recovery remained intact against the backdrop of a tightening labor market. The National Association of Realtors said on Tuesday existing home sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million units.
AUD/USD is supported around 0.7517 levels and currently trading at 0.7582 levels. It hit session high at 0.7603 and made session lows at 0.7570 levels. The Australian dollar declined slightly against US dollar on Tuesday as concerns on the impact of U.S. President Donald Trump’s protectionist trade stance. Trump formally withdrew the United States from the Trans-Pacific Partnership trade deal on Monday, distancing America from its Asian allies even as China’s influence in the region rises. The Australian dollar initially rose as far as $0.7609, a level last seen on Nov. 11 but declined slightly to trade at 0.7582. Investors had been looking to Trump to highlight his plans for fiscal spending, tax cuts and regulatory reforms at his various public addresses in recent days, but he has instead focussed on his «America first» campaign catchphrases. That uncertainty has pushed the greenback to near seven-week lows. The Aussie, on the other hand, is up 5.4 percent so far in January and among the best performing major currencies this year. On the data front, inflation data due is on Wednesday. Analysts believe CPI picked up a little, but core inflation remained around a record low of 1.5 percent for a second straight quarter.
Equities Recap
Europe’s earnings season got off to a rocky start on Tuesday with profit warnings from BT Group and Aryzta sending their shares sharply lower.
UK’s benchmark FTSE 100 closed flat, the pan-European FTSEurofirst 300 provisionally closes up the day down by 0.26 percent, Germany’s Dax ended up by 0.4 percent, France’s CAC finished the day up by 0.1 percent.
The S&P 500 and Nasdaq set record highs on Tuesday in a broad rally led by financial and technology stocks.
Dow Jones closed up by 0.57 percent, S&P 500 ended up by 0.65 percent, Nasdaq finished the day up by 0.86 percent.
Treasuries Recap
U.S. Treasury yields rose on Tuesday as investors snapped up equities on improved outlook on corporate profits, trimming their safe-haven demand for bonds spurred by U.S. President Donald Trump’s protectionist trade stance.
The yield on benchmark 10-year Treasury notes was up 6 basis points at 2.465 percent. German 10-year Bund and British 10-year Gilt yields were up about 4 basis points.
Commodities Recap
Gold fell nearly 1 percent on Tuesday, sliding from a two-month peak as investors took stock of U.S. President Donald Trump’s first policy moves and the dollar stabilized after plumbing seven-week lows this week.
Spot gold was down 0.77 percent at $1,208 an ounce after peaking at $1,219.59. U.S. gold futures slipped 0.4 percent to settle at $1,210.8.
Oil prices edged higher on Tuesday ahead of weekly U.S. inventory data on evidence the global market is tightening as lower production by OPEC and other exporters drains stocks.
Brent futures gained 21 cents, or 0.4 percent, to settle at $55.44 a barrel, while U.S. West Texas Intermediate gained 43 cents or 0.8 percent, to $53.18 per barrel