Americas Roundup: Euro firms against dollar before ECB meeting, Wall Street surges to new highs, Oil slips on bearish U.S. inventory report, doubts over OPEC cut-December 8th, 2016

Market Roundup

•    BoC holds rates steady at 0.50%, cites economic slack; current state of Monetary Policy remains appropriate.

•    Euro firms against the dollar before ECB meeting, GBP weakens after industrial output drop.

•    U.S. crude draws down -2.4mn bbls, products build as refiners ramp up, Gasoline stocks up 3.4mn bbls – EIA.

•    Monte de Paschi has asked ECB for extension of deadline for rescue plan to Jan 20.|

•    Brazil real up on easing political concerns, global risk appetite; BCB expected to resume easing in Jan.

•    Italian Prime Minister Renzi resigns, consensus growing for elections next year.
•    Italian govt bond yields fall on Monte dei Paschi rescue reports; Gap between IT-DE yields tightest in a month.

•    Euro zone will survive politics but banking a concern -ex-ECB head Trichet.

Looking Ahead – Economic Data (GMT)

•    –:– China Exports YY* Nov forecast -5%, -7.3%-previous

•    –:– China Imports YY* Nov forecast -1.3%, -1.4%- previous

•    –:– China Trade Balance USD* Nov forecast 46.30b, 49.06b- previous

•    23:50 Japan Bank Lending YY Nov 2.4%- previous

•    23:50 Japan Foreign Bond Investment w/e 112.3b- previous

•    23:50 Japan Foreign Invest JP Stock w/e 330.5b- previous

•    23:50 Japan Current Account NSA JPY* Oct forecast 1577.2b, 1821.0b- previous

•    23:50 Japan GDP Rev QQ Annualized* Q3 forecast 2.4%, 2.2%- previous

•    23:50 Japan GDP Revised QQ* Q3 forecast 0.6%, 0.5%- previous

•    23:50 Japan GDP Cap Ex Rev QQ* Q3 forecast 0.2%, 0%- previous

•    23:50 Japan GDP QQ Pvt Consumption Rev Q3 0.1%- previous

•    23:50 Japan GDP QQ Ext Demand Rev Q3 0.5%- previous

•    0:30 Australia Trade Balance G&S (A$)* Oct forecast -800m, -1227m- previous

•    0:30 Australia Goods/Services Imports* Oct -1%- previous

•    0:30 Australia Goods/Services Exports* Oct 2%- previous

•    5:00 Japan Economy Watchers Poll* Nov 49.3- previous

Looking Ahead – Events, Other Releases (GMT)

•    21:00 RBNZ Gov Wheeler gives a speech on “Some thoughts on New Zealand's Economic Expansion”

Currency Summaries

EUR/USD is likely to find support at 1.0701 levels and currently trading at 1.0765 levels. The pair has made session high at 1.0767 and hit lows at 1.0730 levels. The euro inched higher against US dollar in the US session as investors focused on Thursday's European Central Bank meeting for possible indications on when the central bank may begin paring bond purchases under its quantitative easing program. The European Central Bank is expected to extend its quantitative easing program when it meets on Thursday, but questions remain over whether it will scale back its monthly asset purchases and send a formal signal on the eventual end of that program. The euro has been the main focus for traders this week after Italian Prime Minister Matteo Renzi's loss in a referendum over constitutional reform on Sunday. The euro edged up 0.4 percent to $1.076. The dollar fell 0.3 percent against a basket of six major peers, as investors looked to next week’s U.S. Federal Reserve meeting. The Fed is expected to raise interest rates but adopts a cautious tone on the economy.

GBP/USD is supported in the range of 1.2523 and currently trading at 1.2625 levels. It reached session high at 1.2626 and hit low at 1.2567 levels. The Sterling slipped lower against the greenback after poor British industrial output data added to a sense that a month-long recovery in the currency may have run out. British industrial output suffered its biggest monthly drop in more than four years in October after the temporary shutdown of a major oilfield, while factory output also sagged, official figures showed on Wednesday. Figures for October showed industrial output fell 1.3 percent month-on-month after a 0.4 percent decline in September. The weak performance by manufacturers may raise doubts about how much of a boost factories are getting from the big fall in sterling since Britain voted in June to leave the European Union .The pound fell 1 percent to a one-week low of 85.50 pence per euro, extending a slide triggered by another round of Brexit-related political turbulence late on Tuesday. Against the dollar, it fell 0.6 percent to dip back below $1.26 after October output data showed the biggest monthly fall in four years.

USD/CAD is supported at 1.3210 levels and is trading at 1.3230 levels. It has made session high at 1.3295 and lows at 1.3231 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday after Bank of Canada's left interest rate unchanged off setting lower oil prices. The central bank pointed to undiminished uncertainty and a “significant amount” of slack in the Canadian economy as it held interest rates steady, noting that inflation is below expectations and growth set to slow as 2016 draws to a close. Oil prices fell on bearish U.S. petroleum inventory data and doubts that production cuts promised by Organization of the Petroleum Exporting Countries (OPEC) and Russia would be enough to drain a global crude glut. The loonie, as the currency is colloquially known, has appreciated 4 cents since mid-November on a spike in oil prices and hopes that U.S. stimulus spending will boost Canadian exports. The Canadian dollar was trading at C$1.3230 to the greenback, or 75.55 U.S. cents, stronger than Tuesday's close of C$1.3284, or 75.28 U.S. cents.

USD/JPY is supported around 113.24 levels and currently trading at 113.74 levels. It peaked to hit session high at 114.12 and made session lows at 113.36 levels. The Japanese yen strengthened against the dollar on Wednesday as appetite for the safe-haven currencies increased as investors looked to next week’s U.S. Federal Reserve meeting. The Fed is expected to raise interest rates but adopts a cautious tone on the economy. The dollar declined to trade at 113.78 yen. The yen had weakened earlier on Wednesday after Bank of Japan Deputy Governor Kikuo Iwata said the central bank had not shifted its focus away from the pace of money printing, contradicting the governor's view and exposing a rift in the board on how best to break the country's deflation shackles. BOJ Governor Haruhiko Kuroda meanwhile said the central bank may slow the pace of money printing if it can hit its interest rate targets, set under a policy revamp in September, with fewer asset purchases. The gap in view between Kuroda and Iwata, one of his two deputy governors, may complicate the BOJ's task of communicating its policy intentions to markets as it struggles to reflate growth with its dwindling policy options. The dollar index, which measures the greenback against a basket of six major currencies, fell 0.12 percent to 100.37, after dropping to 99.849 on Monday, the lowest level since Nov. 15.

Equities Recap

European shares climbed on Wednesday, with the regional banking index hitting an 11-month peak after Credit Suisse announced further cost cuts and Italian banks surged in their best two-day run since mid-2011.

UK's benchmark FTSE 100 closed up by 1.7 percent, the pan-European FTSEurofirst 300 ended the day up by 0.84 percent, Germany's Dax ended up by 1.9 percent, France’s CAC finished the day up by 1.2 percent.

U.S. stocks rose along with bond prices on Wednesday as investors prepared for the European Central Bank to signal an extension of its bond-buying at its Thursday meeting.

Dow Jones closed up by 1.50 percent, S&P 500 ended down by 1.29 percent, Nasdaq finished the day down by 1.12 percent.

Treasuries Recap

U.S. Treasury yields fell on Wednesday, with the 30-year yield on track for its biggest drop in more than three months, as disappointing overseas economic data reduced optimism about global growth ahead of a European Central Bank meeting.

The benchmark 10-year Treasury note yield was down 5 basis points from late Tuesday at 2.342 percent. It had reached 2.492 percent on Dec. 1, the highest since July 2015. 

The 30-year yield was 3.020 percent, down 6 basis points, on track for the biggest one-day drop since Aug. 29 when it fell 7.9 basis points.

Commodities Recap

Oil prices slid on Wednesday on bearish U.S. petroleum inventory data and doubts that production cuts promised by OPEC and Russia would be deep enough to end a supply overhang that has weighed on markets for more than two years.

Brent futures fell 93 cents, or 1.7 percent, to settle at $53.00 a barrel, while U.S. crude lost $1.16, or 2.3 percent, to settle at $49.77.

Gold extended its rise on Wednesday, rebounding from this week's 10-month low as the dollar eased against the euro ahead of a European Central Bank meeting and on the view that a U.S. rate rise next week was already reflected in prices.

Spot gold was up 0.3 percent at $1,173.32 an ounce by 2:47 p.m. EST (1947 GMT), up 0.6 percent, up from Monday's 10-month low at $1,157.

U.S. gold futures for February delivery settled up 0.6 percent at $1,177.50.

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