Americas Roundup: Euro hits lowest vs dollar since December 2002, Oil dives 2 pct, strong dollar knocks crude off 18-month high-January 4th, 2017

Market Roundup

•    US Markit Mfg PMI Final 54.3 v 54.2 previous.

•    US construction spending 0.95% V 0.6% forecast 0.6% previous.

•    US ISM Mfg PMI 54.7 v 53.6 forecast, 53.2 previous.

•    US ISM Mfg prices paid 65.5 v 55.5 forecast, 54.5 previous.

•    US ISM Mfg new orders 60.2 v 53.0 previous.

•    Atlanta Fed’s GDPNow sees US Q4 GDP growing 2.9% v 2.5% on Dec 22.

•    Trump assails GM over car production in Mexico, threatens tax.

•    Ford cancels USD1.6 billion Mexican plant after Trump criticism.

•    Britain's EU envoy abruptly resigns just months before formal Brexit talks.

•    German inflation hits the highest level since July 2013, Ifo chief says data should signal ECB policy shift.

•    Oil touches 18-mth highs before paring gains on strong dollar, USD rallies to 14-year high after strong Mfg data.

Looking Ahead – Economic Data (GMT)

•    00:30 Japan Nikkei Japan PMI Mfg Dec 51.9-previous

Looking Ahead – Events, Other Releases (GMT)

•    No significant events

Currency Summaries

EUR/USD is likely to find support at 1.0327 levels and currently trading at 1.0406 levels. The pair has made session high at 1.0434 and hit lows at 1.0337 levels. The euro declined to hit 14 years low against the U.S. dollar on Tuesday as positive U.S. economic data boosted the greenback. U.S. data showed factory activity accelerated to a two-year high in December amid a surge in new orders and employment. The Institute for Supply Management (ISM) said its index of national factory activity rose 1.5 percentage points to 54.7 last month, the highest level since December 2014. Indications from the U.S. Federal Reserve that it would press ahead with further interest rate rises this year are also buoying the dollar and pressuring euro. The growing consistency of strong U.S. economic reports has led to expectations of increased tightening of U.S. interest rates from the Fed and rosier outlooks on the overall health of the world's largest economy. The euro fell to a 14-year low against the dollar, dropping to $1.0342 after the data's release.

GBP/USD is supported in the range of 1.2194 levels and currently trading at 1.2235 levels. It reached session high at 1.2273 and dropped to session low at 1.2199 levels. Sterling declined against the dollar on Tuesday as sterling was weighted down by stronger dollar across the board. The pound earlier in the European session traded higher against the greenback after a survey suggested British manufacturing growth had climbed to a two-and-a-half-year high last month. But as the dollar surged after the equivalent U.S. manufacturing PMI hit a two-year high, sterling weakened against the greenback, falling to $1.2200 its weakest since the end of October before recovering to $1.2237, still down 0.2 percent on the day. The pound tumbled 16 percent against the dollar and 14 percent against the euro in 2016, its worst annual performance in eight years, with the bulk of those falls coming after Britain voted on June 23 to leave the European Union. Uncertainty over how Britain leaves the bloc and worries over the likely economic impact are continuing to weigh on the currency and mean that even positive data surprises tend to have only a limited and temporary – impact on the pound.

USD/CAD is supported at 1.3356 levels and is trading at 1.3433 levels. It has made session high at 1.3458 and lows at 1.3398 levels. The Canadian dollar declined against its U.S. counterpart on Tuesday as loonie was pressured by a firmer dollar. Oil prices declined by more than 2 percent on the first trading day of 2017, knocked off 18-month highs hit in early trade as the U.S. dollar strengthened to its highest level since 2002 and traders took profits. Non-OPEC Middle Eastern oil producer Oman told customers last week that it would cut its crude oil term allocation volumes by 5 percent in March. Elsewhere, Libya, one of two OPEC countries exempt from the output cuts, has increased its production to 685,000 bpd, from around 600,000 bpd in December, an official at the National Oil Corporation said on Sunday. The Canadian dollar was last trading at C$1.3444 to the greenback, or 74.38 U.S. cents, slightly weaker than Monday's close of C$1.3438, or 74.42 U.S. cents.

AUD/USD is supported around 0.7179 levels and currently trading at 0.7221 levels. It hit session high at 0.7241 and made session lows at 0.7196 levels. The Australian dollar declined modestly against US dollar on Tuesday as the Australian dollar was weighted down as greenback strengthened following positive U.S. data and upbeat economic reports from China and Germany. The dollar rose boosted by the strong U.S. data and on continued bets that the Federal Reserve will have to raise rates this year to keep up with inflation and growth brought by a planned fiscal stimulus from the incoming Trump administration. Oil prices fell after hitting an 18-month high. Traders said crude prices were buoyed earlier in the day by hopes that a deal between OPEC and other big oil exporters to cut production, which kicked in on Sunday, will drain a global supply glut. The Australian dollar was at 0.7196, within touching distance of a seven-month low of $0.7163 hit last week.

Equities Recap

Strength in financials and commodity-related stocks continued to underpin European equity markets on Tuesday, with Britain's blue-chip index starting the New Year at a record high and other major indexes hitting fresh peaks.

The UK's benchmark FTSE 100 closed up by 0.5 percent, FTSEurofirst 300 ended the day up by 0.48 percent, Germany's Dax ended down 0.1, and France’s CAC finished the day up by 0.4 percent.

Wall Street rose on Tuesday as a post-election rally extended into the New Year, even as some investors warned they need to see results from President-elect Donald Trump before pushing stock prices significantly higher.

Dow Jones closed up by 0.58 percent, S&P 500 ended up 0.83 percent, Nasdaq finished the day up by 0.82 percent.

Treasuries Recap

U.S. Treasury debt yields were mostly higher on Tuesday after three days of losses, supported by positive U.S. data and upbeat economic reports from China and Europe

In late trading, the U.S. 10-year note was down 4/32 in price to yield 2.446 percent, compared with 2.432 percent late on Friday.

U.S. 30-year bond prices were up 4/32, yielding 3.044 percent, down from Friday's 3.051 percent.

U.S. two-year note prices were down 1/32, with a yield of 1.218 percent, compared with 1.198 percent on Friday.

Commodities Recap

Gold prices rose 1 percent to a near 3-week high on Tuesday as early gains in stocks and other assets perceived as risky gave up gains and investors fled to save-haven bullion.

Spot gold was up 0.6 percent at $1,159.06 an ounce by 2:17 p.m. EST (1917 GMT), while U.S. gold futures for February delivery ended the session up 0.9 percent at $1,162.

Oil prices slid more than 2 percent on the first trading day of 2017, knocked off 18-month highs hit in early trade as the U.S. dollar rallied to its highest level since 2002 and traders took profits.

Brent futures fell $1.35, or 2.4 percent, to settle at $55.47 a barrel, while U.S. West Texas Intermediate (WTI) crude lost $1.39, or 2.6 percent, to settle at $52.33, its lowest close in two weeks.

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