Americas Roundup: Dollar index hits fresh 3-year low, Sterling up more than one percent vs dollar, Gold hits 1-1/2 year peak, Oil rallies after record 10th straight fall in U.S. inventories-January 25th, 2018

Market Roundup

• US Nov Monthly Home Price MM, 0.4%, 0.5% previous, 0.6% revised.

• US Nov Monthly Home Price YY, 6.5%, 6.6% previous.

• US Dec Existing Home Sales, 5.57M, 5.70M forecast, 5.81M previous.

• US Jan Markit Comp Flash PMI, 53.8, 54.1 previous.

• US Jan Markit Mfg PMI Flash, 55.5, 55.0 forecast, 55.1 previous.

• US Jan Markit Svcs PMI Flash, 53.3, 54.0 forecast, 53.7 previous.

• US w/e Mortgage Market Index, 424.4, 406.3 previous.

• US w/e MBA 30-Yr Mortgage Rate, 4.36%, 4.33% previous.

• U.S. defends America First agenda ahead of Trump visit to Davos.

• U.S. official backs weak dollar amid fears of trade war.

• U.S. not starting trade war, but sees China tech threat – Ross.

• Mueller asked U.S. intelligence officials about Trump –sources.

• U.S. imposes more North Korea sanctions; urges China, Russia expulsions.

• Britain is not a vassal state, says minister defending EU transition deal.

• Membership momentum sparks race to settle German coalition deal.

• Euro moves a side effect, not the objective of ECB policy: Draghi.

• Eurozone businesses start 2018 on decade high as work floods in.

Looking Ahead – Economic Data (GMT)

• 21:45 Australia Q4 CPI QQ, 0.4% forecast, 0.5% previous

• 21:45 Australia Q4 CPI YY, 1.9% forecast, 1.9% previous

• 21:45 Australia Q4 CPI Index Number, 1,232.0 previous

• 23:50 Japan w/e Foreign Bond Investment, 953.5B

Looking Ahead – Events, Other Releases (GMT)

• N/A Riksbank Deputy Governor Cecilia Skingsley attends the World Economic Forum (to Jan. 26). – Davos, Switzerland

• N/A ECB Governing Council meeting, followed by an interest rate announcement and a press conference by President Mario Draghi – Frankfurt

• 07:30 Riksbank Governor Stefan Ingves and Director of Communication Ann-Leena Mikiver will describe plans for the Riksbank's anniversary year – Stockholm

• 09:00 Norway Central Bank interest rate decision – Oslo

Currency Summaries

EUR/USD is likely to find support at 1.2296 levels and currently trading at 1.2400 levels. The pair has made session high at 1.2412 and hit lows at 1.2323 levels. Euro rose against the dollar on Wednesday after the U.S. Treasury secretary said he welcomed weakness in the currency, and as investors worried about U.S. President Donald Trump's protectionist agenda. Speaking at the World Economic Forum in Davos on the eve of Trump's arrival at the Swiss resort, Treasury Secretary Steven Mnuchin said the weaker dollar was positive for U.S. trade. Mnuchin's comments provided a fresh trigger for selling after dollar bears were already emboldened by Trump's executive order imposing steep import tariffs on washing machines and solar panels, a move condemned by China and South Korea, analysts said. White House officials said on Tuesday that Trump would use his speech at Davos on Friday to stress his “America First” policies. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.99 at 89.23, slipping below 90 for the first time since December 2014. The euro was up 0.84 percent against the greenback. Eurozone businesses kicked off 2018 at a better-than-expected pace, ramping up activity at the fastest rate since mid-2006, a survey showed. Investors awaited the European Central Bank's meeting on Thursday for any signals that policymakers are becoming concerned with the recent rally in the euro.

GBP/USD is supported in the range of 1.4079 levels and currently trading at 1.4215 levels. It reached session high at 1.4241 and dropped to session low at 1.4128 levels. The British pound jumped above the $1.42 against the greenback on Wednesday as strong British employment data and broad-based dollar weakness prompted investors to ramp up long positions in the currency. In recent days, sterling has notched up a series of fresh highs since the vote to exit the EU in June 2016 sent the pound tumbling. The latest boost was provided by upbeat jobs data which allayed fears the economy was struggling and fuelled some bets the central bank may raise interest rates more than once this year. The pound is up as much as 1.6 percent on Wednesday, on track for its best month against the U.S. currency since the middle of 2010, rising more than five percent so far this month. Official data showed that UK employment surged to a record high and regular wages rose at their fastest rate in almost a year. The British currency rose as high as $1.4232. Against the euro, the pound was trading at 87.11 pence per euro. Brexit minister David Davis said on Wednesday that he expects Britain and the European Union will agree to a transition deal on exiting the bloc by the end of March. With traders believing that the risks of a disorderly exit from the EU are receding, investors are looking for signs the Bank of England could hike interest rates more than the single raise this year that the market has currently priced.

USD/CAD is supported at 1.2312 levels and is trading at 1.2332 levels. It has made session high at 1.2365 and lows at 1.2312 levels. The Canadian dollar strengthened to a nearly four-month high against its U.S. counterpart on Wednesday, supported by upbeat signs on talks to renegotiate NAFTA and as the greenback broadly fell. The U.S. dollar slid to a three-year low against a basket of major peers after the U.S. Treasury secretary said he welcomed weakness in the currency. The price of oil, one of Canada's major exports, climbed as the greenback lost ground. U.S. crude prices were up 0.40 percent to $64.73 a barrel. On Tuesday, officials opened a key round of negotiations to modernize NAFTA amidst optimistic signs, as U.S. President Donald Trump said the talks were going “pretty well” and Canada's chief negotiator said he had high hopes for progress. Canada has responded to the lack of clarity over the future of the 1994 agreement by attempting to diversify its trade. It and 10 other nations have agreed to sign a reworked Asia-Pacific trade pact. The Canadian dollar was last trading 0.7 percent higher at C$1.2328 to the greenback, or 81.10 U.S. cents. The currency's weakest level of the session was C$1.2428, while it touched its strongest since Sept. 25 at C$1.2318.Investors are awaiting domestic data later in the week which could help guide expectations for further Bank of Canada interest rate hikes.

USD/JPY is supported around 108.57 levels and currently trading at 109.14 levels. It peaked to hit session high at 109.52 and made session lows at 108.95 levels. The U.S. dollar weakened against the Japanese yen on Wednesday as greenback was weighed down on worries about potential trade wars. The dollar touched a four-month low against the yen on simmering concerns that the U.S. currency's yield advantage will start to erode as major central banks head toward unwinding their massive stimulus. On Tuesday, U.S. President Donald Trump imposed import tariffs on washing machines and solar panels, putting a cloud over global trade at a time when its revival has fuelled hopes for a stronger world economy. The dollar has been pressured for months by the view that the Federal Reserve is no longer the only central bank seeking to tighten monetary policy as growth in other regions, Europe in particular, picks up speed. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.99 at 89.235, slipping below 90 for the first time since December 2014. The dollar was down about 1 percent against the yen.

Equities Recap

A slump in the dollar hit European shares on Wednesday and dragged most of the continent's indexes into negative territory as Wall Street rose.

UK's benchmark FTSE 100 closed down by 0.9 percent, the pan-European FTSEurofirst 300 ended the day up by 0.33 percent, Germany's Dax ended down by 0.8 percent, France’s CAC finished the day down by 0.6 percent.

The S&P 500 was little changed on Wednesday while the Nasdaq lagged in choppy trading in the wake of comments by U.S. Commerce Secretary Wilbur Ross which hinted at action against China in a trade war.

Dow Jones closed up by 0.20 percent, S&P 500 ended up by 0.44 percent, Nasdaq finished the day up by 0.54 percent.

Treasuries Recap

U.S. Treasury debt prices slumped on Wednesday, after Treasury Secretary Steven Mnuchin backed a weaker dollar to help boost America's global trade, breaking from the traditional strong currency policy of past administrations.

In late trading, U.S. 10-year Treasury yields rose to 2.652 percent, from 2.622 percent late on Tuesday.

U.S. 30-year bond yields, meanwhile, hit a 3-1/2-month peak of 2.956 percent and were last at 2.933 percent, up from 2.902 percent on Tuesday.

Commodities Recap

Gold prices rose on Wednesday, hitting their highest since August, 2016, as investors sought insurance against possible inflation after U.S. Treasury Secretary Steven Mnuchin welcomed a weaker dollar.

Spot gold was up 1.4 percent $1,360.23 an ounce at 2:05 p.m. EST (1905 GMT). U.S. gold futures for February delivery settled up $19.60, 1.5 percent, at $1,356.30 per ounce.

Oil prices rallied on heavy volume on Wednesday, boosted by a record 10th straight weekly decline in U.S. crude inventories, though reduced refining activity and rising production signaled U.S. stocks could rise in coming weeks.

U.S. West Texas Intermediate (WTI) futures settled up $1.14, or 1.8 percent, to $65.80. Brent futures gained 57 cents to $70.53 a barrel. Both benchmarks were at their highest since December 2014.

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