Americas Roundup: Dollar edges up as optimism about progress on U.S. tax supports greenback, Gold hovers near two-month lows, Wall Street indexes little changed, Oil falls after surprise rise in US fuel inventories-December 7th 2017

Market Roundup

• US Nov ADP National Employment, 190k, 185k forecast, 235k previous.

• US Q3 Labor Costs Revised, -0.2%, 0.2% forecast, 0.5% previous.

• US Q3 Productivity Revised, 3.0%, 3.3% forecast, 3.0% previous.

• US w/e MBA Mortgage Applications, 4.7%, -3.1% previous.

• US w/e Mortgage Market Index, 408.3, 390.0 previous.

• Trump recognizes Jerusalem as Israel's capital, in reversal of policy.

• U.S. Senate poised for vote on tax bill negotiations with House.

• S&P says U.S. fiscal loosening could spell ratings action.

• Trump warns of government shutdown threat ahead of meeting with lawmakers.

• Canada BoC Rate Decision, 1.00%, 1.00% forecast, 1.00% previous.

• Canada Q3 Labor Productivity Rate, -0.6%, -0.1% previous, -0.2% revised.

• EU exec proposes deeper euro zone integration to unite EU.

• Britain has not formally assessed the impact of Brexit on the economy -Brexit minister.

Looking Ahead – Economic Data (GMT)

• 6 Dec 22:30 Australia Nov AIG Construction Index, 53.2 previous

• 6 Dec 23:00 Japan Dec Reuters Tankan DI, 27 previous

• 6 Dec 23:50 Japan w/e Foreign Bond Investment, 135.6 bln previous

• 6 Dec 23:50 Japan w/e Foreign Invest JP Stock, -156.2 bln previous

• 6 Dec 23:50 Japan Nov Foreign Reserves, 1,260.90 bln previous

• 7 Dec 00:30 Australia Oct Trade Balance G&S (A$), 1,375 mln forecast, 1,745 mln previous

Looking Ahead – Events, Other Releases (GMT)

• 08:00 ECB General Council meeting in Frankfurt

• 13:30 New York Fed releases Dudley's remarks before a closed event in New York

• 15:00 Draghi holds a news conference in Frankfurt followed by another press conference hosted at the ECB

Currency Summaries

EUR/USD is likely to find support at 1.1740 levels and currently trading at 1.1792 levels. The pair has made session high at 1.1808 and hit lows at 1.1778 levels. Euro edged lower against the dollar on Wednesday as the dollar strengthened on optimism about progress on U.S. tax legislation and lawmakers' efforts to avert a U.S. government shutdown on Saturday. Republicans in the U.S. House of Representatives began staking out their positions on final tax legislation on Tuesday, days ahead of talks with the Senate to shape the tax package. Republicans hope to approve a final bill and deliver it to President Donald Trump's desk before Christmas. If they succeed, it would be the first major U.S. tax overhaul in 31 years and the first big Republican legislative victory since Trump took office in January. Democratic leaders in Congress on Monday accepted an invitation to meet Trump and Republicans for talks to avert a shutdown, even as the Democrats pressed demands on funding priorities and protecting young immigrants. The dollar index moved higher after data from payrolls processor showed U.S. private-sector employment growth eased in November even as the manufacturing sector added the most jobs in at least 15 years. 

GBP/USD is supported in the range of 1.3307 levels and currently trading at 1.3332 levels. It reached session high at 1.3391 and dropped to session low at 1.3356 levels. Britain's pound declined against the dollar on Wednesday as Brexit deadlock fears weighed on British Pound. Brexit negotiations can move to phase two next week only on the basis of a tentative Irish border agreement that collapsed on Monday, otherwise talks to break the impasse will resume in the new year, Irish Prime Minister Leo Varadkar said on Wednesday. The Northern Irish party that props up May's minority Conservative government rejected a proposal this week on the post-Brexit border with Ireland that could have helped move forward negations on Britain's exit from the European Union. Market bets on sterling had shifted considerably in recent weeks towards betting on a breakthrough in Brexit negotiations, with sterling rising to more than a two-month high last Friday. The British pound fell 0.6 percent to an intraday low of $1.3358 on the day. It trimmed some losses in US trading to stand 0.5 percent down at $1.3373.Against the euro, sterling was down 0.2 percent on the day at 88.11 pence.

USD/CAD is supported at 1.2643 levels and is trading at 1.2791 levels. It has made session high at 1.2807 and lows at 1.2650 levels. The Canadian dollar declined against its U.S. counterpart on Wednesday after the Bank of Canada held interest rates steady and showed enough caution to dampen expectations for a hike early next year. The central bank left its benchmark interest rates on hold at 1 percent, as expected. Despite rising employment and participation rates, other indicators point to ongoing albeit diminishing slack in the labor market, the central bank said. Investors had been interested in how the Bank of Canada would characterize the labor market after data on Friday showed much stronger-than-expected jobs gain in November. Chances of a rate hike in January fell to 28 percent from 41 percent before the announcement, the overnight index swaps market indicated. The central bank raised rates in July and September for the first time in seven years but has since worried about a number of uncertainties that could have an impact on the economy, including renegotiation of the North American Free Trade Agreement. The Canadian dollar was trading at C$1.2794 to the greenback, down 0.6 percent. The currency's strongest level of the session was C$1.2654, while it touched its weakest since Friday at C$1.2807.

AUD/USD is supported around 0.7550 levels and currently trading at 0.7563 levels. It hit session high at 0.7596 and made session lows at 0.7557 levels. The Australian dollar declined against the greenback on Wednesday as the country's economic growth just missed forecasts for last quarter, while weakness in consumer spending underlined the case against a rise in interest rates for months to come. Australia's economy expanded in over a year last quarter thanks to a long-awaited jump in business investment, though marked weakness in household spending cast a cloud over the outlook for growth. Wednesday’s data from the Australian Bureau of Statistics showed gross domestic product (GDP) grew by 0.6 percent in the third quarter, from the previous quarter when it rose 0.9 percent. Growth for the year sprang ahead to 2.8 percent, from 1.9 percent, in part because a rare contraction suffered in the third quarter of last year dropped out of the calculation. The result would be no surprise to the Reserve Bank of Australia (RBA) which only Tuesday kept interest rates steady at 1.5 percent in anticipation of faster growth and a gradual revival in inflation. The Aussie slipped a quarter of a U.S. cent to $0.7564 and left behind Tuesday's all-too-brief top at $0.7654, which will now act as chart resistance.

Equities Recap

European shares recovered most of their earlier “risk-off” losses on Wednesday, with an easing euro and a positive open on Wall Street offsetting falls in richly valued tech stocks.

UK's benchmark FTSE 100 closed up by 0.3 percent, the pan-European FTSEurofirst 300 ended the day down by 0.03 percent, Germany's Dax ended down by 0.4 percent, France’s CAC finished the day down by 0.1 percent.

Wall Street's main indexes were little changed on Wednesday, with technology stocks clinging on to modest gains and helping offset losses in energy shares after oil prices slipped more than 2 percent.

Dow Jones closed down by 0.15 percent, S&P 500 ended at 0.00 percent, Nasdaq finished the day up by 0.22 percent.
Treasuries Recap 

U.S. Treasury yields fell across the board on Wednesday as risk appetite slid after a global sell-off in equities, with investors looking for the next positive driver to push yields higher.

U.S. benchmark 10-year yields were down at 2.329 percent, from 2.356 percent late on Tuesday, while the two-year slid to 1.806 percent, from Tuesday's 1.826 percent.

U.S. 30-year yields, meanwhile, dropped to three-month lows and were last at 2.714 percent, down from 2.732 percent on Tuesday.

Commodities Recap

Gold dipped slightly and held near a two-month low on Wednesday, under pressure from a firmer U.S. dollar ahead of a vote on the U.S. tax reform plan, but a potential government shutdown lent support to prices.

Spot gold was down 0.1 percent at $1,264.57 an ounce by 1:41 p.m. EST (1841 GMT). A day earlier, it hit its weakest since Oct. 6.

U.S. gold futures for February delivery edged higher to settle up $1.20, or 0.1 percent, at $1,266.10 per ounce.

U.S. crude on Wednesday slid nearly 3 percent on Wednesday, its biggest daily decline in more than two months, after a sharp rise in U.S. inventories of refined fuel suggested demand may be flagging, while U.S. crude production hit another weekly record.

U.S. West Texas Intermediate crude futures settled down $1.66, or 2.9 percent, to $55.96 a barrel. It marks the lowest close for the benchmark since Nov. 16 and the biggest one-day decline for WTI since Oct. 6.

Brent crude futures ended down 2.6 percent, or $1.64 a barrel to $61.22, for its lowest close since Nov. 2.


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