Americas Roundup: Dollar index hits 11-day high, Sterling snaps 3-day climb, Wall Street rises to record highs again, extends 2018 rally, U.S. crude hits 3-year high as prices climb in tight market-January 10th, 2018

Market Roundup

• US Dec NFIB Business Optimism, 104.90, 107.50 previous.

• US w/e Redbook MM, 0.1%, 0.3% previous.

• US w/e Redbook YY, 3.4%, 5.0% previous.

• US Nov JOLTS Job Openings, 5.879 mln, 6.038 mln forecast, 5.996 mln previous, 5.925 mln revised.

• Fed's Kashkari: Keep interest rates low to boost wages, inflation.

• Trump to attend Davos economic forum – White House.

• Trump pushes bipartisan immigration deal, but renews demand on border wall.

• Canada Dec House Starts, Annualized, 217.0k, 212.5k forecast, 252.2k previous, 251.7k revised.

• British Brexit minister complains about EU's planning for no-deal.

• German parties inch closer to coalition with deal on skilled immigrants.

• Berlusconi says Italy can't leave euro; coalition ally disagrees.

Looking Ahead – Economic Data (GMT)

• 01:30 China Dec PPI YY, 4.8% forecast, 5.8% previous

• 01:30 China Dec CPI YY, 1.9% forecast, 1.7% previous

• 01:30 China Dec CPI MM, 0.4% forecast, 0.0% previous

Looking Ahead – Events, Other Releases (GMT)

• 08:30 Swedish Central Bank to publish the minutes of its monetary policy meeting – Stockholm

• 14:00 Fed's Charles Evans participates in moderated discussion on current economic conditions and monetary policy – Illinois

• 14:10 Fed's Robert Kaplan participates in moderated discussion on Weitzman Annual Retail Forecast – Dallas

• 15:15 Fed's Robert Kaplan participates in moderated discussion at the Urban Land Institute Emerging Trends Breakfast – Dallas

• 18:30 Fed's James Bullard gives a presentation on the U.S. economy and monetary policy – St. Louis, Missouri

Currency Summaries

EUR/USD is likely to find support at 1.1875 levels and currently trading at 1.1928 levels. The pair has made session high at 1.1934 and hit lows at 1.1913 levels. The euro declined against the U.S. dollar on Tuesday as stronger dollar and concerns about political uncertainty in Europe weighed on the single currency. In recent weeks, the euro rallied on expectations for a shift in European Central Bank monetary policy this year, but weakened on Tuesday as trader’s dumped euro on concerns about upcoming Italian elections, problems forming a German government and lingering Brexit concerns. The euro extended losses from the previous session and slipped 0.38 percent to $1.192. On Thursday, it had hit a nearly four-month high of $1.2089. The greenback kicked off the year on negative tone as weaker than expected payrolls data drove investors away from the greenback. But, that move faded on optimism that the U.S. Federal Reserve will increase rates three times in 2018.The dollar index, which measures the greenback against six rival currencies, was up 0.18 percent at 92.524. The index fell to 91.751 on January 2, its lowest since September 20.

GBP/USD is supported in the range of 1.3490 levels and currently trading at 1.3531 levels. It reached session high at 1.3538 and dropped to session low at 1.3503 levels. Britain's pound declined against the dollar on Tuesday snapping a three-day rising streak as investors took profits, although expectations that Brexit talks will have a positive outcome continued to underpin the British currency. External factors have also proved supportive for the pound, recently with the U.S. dollar struggling to gain much traction against its rivals in the opening days of the year. Sterling weakened as much as 0.4 percent to $1.3538 but remained within striking distance of a four-month high of $1.3614 hit last week. Against the euro, it has been a more mixed picture, with sterling oscillating around the 88 cents line over the last month. With better-than-expected economic data in recent months and growing expectations a Brexit deal can be forged, traders have turned more positive on the pound. But some investors remain unconvinced that sterling is a buy, pointing to structural weaknesses of the British economy such as widening deficits.

USD/CAD is supported at 1.2376 levels and is trading at 1.2457 levels. It has made session high at 1.2478 and lows at 1.2416 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as a stronger dollar across the board offset higher prices oil prices, one of Canada's major exports. The U.S. dollar rose to an 11-day high against a basket of major currencies, continuing a recovery from four-month lows plumbed at the start of the year. The loonie touched its strongest level in three months at C$1.2355 on Friday after stronger-than-expected domestic jobs data prompted investors to bet on a Bank of Canada interest rate hike as soon as Jan. 17. Chances of a rate hike next week have more than doubled to 80 percent since the jobs data, the overnight index swaps market indicated. They got a further boost from a Bank of Canada business survey on Monday that showed optimism. Oil rose to its highest since May 2015, supported by OPEC-led production cuts and expectations U.S. crude inventories fell for the eighth week. The Canadian dollar was last trading at C$1.2463 to the greenback, down 0.2 percent. The currency traded in a range of C$1.2399 to C$1.2448.

USD/JPY is supported around 112.00 levels and currently trading at 112.62 levels. It peaked to hit session high at 112.77 and made session lows at 112.35 levels. The U.S. dollar declined against the Japanese yen on Tuesday after the Bank of Japan said it will trim its purchases of Japanese government bonds and U.S. corporate debt hit the market. The Japanese announcement raised speculation the country's central bank may wind down its monetary stimulus this year. Although the move was in line with the BOJ's planned reduction in bond buying, it highlights the sensitivity of markets to global monetary policy. Traders appeared to latch on to the BOJ announcement that it will buy less of the long-dated bonds, sending the dollar down about 0.5 percent against the yen and the longer-dated 20- and 40-year bond yields up to their highest in a month. While the move was in line with the BOJ's subtle reduction in its bond buying, the so-called 'stealth tapering', traders said it highlighted how sensitive markets are to a pullback in the massive stimulus that has been the centrepiece of Prime Minister Shinzo Abe's 'Abenomics' policies of the past 4-1/2 years. The Japanese yen strengthened 0.39 percent versus the greenback at 112.65 per dollar. It was last trading at 112.59 in the late US session.

Equities Recap

European shares rose for a fourth straight session on Tuesday, lifted by strength among cyclical stocks and optimism about further growth in company earnings.

UK's benchmark FTSE 100 closed up by 0.40 percent, the pan-European FTSEurofirst 300 ended the day up by 0.44 percent,Germany's Dax ended up by 0.18 percent, France’s CAC finished the day up by 0.70 percent.

Wall Street's major indexes extended the New Year rally to close at record levels on Tuesday on investor optimism ahead of quarterly earnings reports and hopes for easing tensions with North Korea.

Dow Jones closed up by 0.41 percent, S&P 500 ended up 0.14 percent, Nasdaq finished the day up by 0.09 percent.

Treasuries Recap 

Yields on the 10-year U.S. Treasury note reached a 10-month high on Tuesday after the Bank of Japan said it will trim its purchases of Japanese government bonds and U.S. corporate debt hit the market.

The U.S. 10-year note yielded 2.546 percent, the highest since March 15.

The 3-year note yield, which is sensitive to traders' views on Fed policy, was 2.074 percent, its highest since the instrument was reissued in 2007.

Commodities Recap

Gold edged lower on Tuesday, weighed down by a stronger U.S. dollar on the back of concerns about political uncertainty in Europe, while a buoyant stock market also drained enthusiasm for bullion.

Spot gold was down 0.6 percent at $1,312.58 per ounce by 1:36 p.m. EST (1836 GMT). Prices last week touched their highest since Sept. 15 at $1,325.86.

U.S. gold futures for February delivery settled down $6.70, or 0.5 percent, at $1,313.70 per ounce.

Oil prices edged higher on Tuesday, with U.S. crude touching its highest since December 2014, supported by OPEC-led production cuts and expectations that U.S. crude inventories have dropped for an eighth week in a row.

U.S. West Texas Intermediate (WTI) crude rose $1.23, or 2 percent, to settle at $62.96 a barrel after touching its highest since December 2014 at $63.24.

Brent crude ended the session up $1.04, or 1.5 percent, at $68.82 per barrel after hitting a session high of $69.08, its highest since May 2015.

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