News

America's Roundup: Dollar sinks as benign wage inflation, tariff action weigh, Wall Street edges down, Oil down 1 percent on continued concerns over U.S. output, Gold prices dip-March 13th, 2018

Market Roundup

• Trump charges Ross with pushing EU to lower tariffs, EU objects.

• U.S. inflation expectations rise -NY Fed survey.

• Seoul sees N.Korea caution in talks silence; Tillerson expects contact.

• U.S. Feb Employment Trends, 107.7, 106.9 prev, 106.5 revised.

• Eurozone inflation could take longer to rise: Smets.

• EU wants capital market plan in place before Brexit.

• Eurozone without breakthrough on deposit guarantee despite ECB call.

• Eurozone to unlock new loans to Greece, works on debt relief.

Looking Ahead – Economic Data (GMT)

• 12 Mar 21:45 New Zealand Feb Food Price Index, 1.2% previous

• 12 Mar 23:50 Japan Feb Corp Goods Price MM, 0.2% forecast, 0.3% previous

• 12 Mar 23:50 Japan Feb Corp Goods Price YY, 2.6% forecast, 2.7% previous

• 13 Mar 00:30 Australia Feb NAB Business Conditions, 19 previous

• 13 Mar 00:30 Australia Feb NAB Business Confidence, 12 previous

• 13 Mar 00:30 Australia Jan Housing Finance, -2.3% previous

• 13 Mar 00:30 Australia Jan Invest Housing Finance, -2.6% previous

Looking Ahead – Events, Other Releases (GMT)

• 12 Mar N/A/ Participation by ECB's Mario Draghi, Benoit Coeure in the Eurogroup meeting – Brussels

• 12 Mar N/A Eurogroup meeting – Brussels

• 13 Mar N/A Participation by ECB's Vitor Constancio in the ECOFIN meeting – Brussels

• 13 Mar N/A UK Finance Minister Philip Hammond delivers spring statement on updated fiscal forecasts – London

• 13 Mar N/A Economic and Financial Affairs Council – Brussels

• 13 Mar 14:30 Bank of Canada's Stephen Poloz speaks at Queen's University – Kingston, Ontario

Currency Summaries

EUR/USD is likely to find support at 1.2265 levels and currently trading at 1.2332 levels. The pair has made session high at 1.2341 and hit lows at 1.2285 levels. Euro edged higher against the dollar on Monday as the greenback was pressured by data showing persistently low wages that will likely constrain the Federal Reserve from raising interest rates more than three times this year. U.S. nonfarm payrolls expanded by 313,000 jobs last month, boosted by the largest gain in construction jobs since 2007. The increase in payrolls last month was the biggest since July 2016.The average hourly earnings, however, edged up four cents, or just 0.1 percent, to $26.75 in February, a slowdown from the 0.3 percent rise in January. That lowered the year-on-year increase in average hourly earnings to 2.6 percent from 2.8 percent in January. The dollar also struggled as a result of uncertainty about U.S. trade protectionism, analysts said, after President Donald Trump imposed tariffs on steel and aluminum imports, except those from Mexico and Canada. The euro, inched up against the dollar to $1.2332 pushing the dollar index down 0.1 percent at 90.0122.

GBP/USD is supported in the range of 1.3778 levels and currently trading at 1.3906 levels. It reached session high at 1.3910 and dropped to session low at 1.3835 levels. Sterling strengthened against the dollar on Monday as risk appetite prompted investors to buy the currency but concerns over progress in Brexit negotiations limited the gains. The pound rose 0.4 percent to $1.3905, broadly in line with gains registered by other currencies against the dollar, but it is still some way below a post-Brexit referendum high of $1.4346 in late January. Strong U.S. job growth data on Friday was balanced by slower increases in wages, resulting in money market traders sticking to bets that the Federal Reserve would raise interest rates three times this year. This encouraged investors to add bets against the struggling dollar. Worries have grown that Britain and EU officials would fall short of securing a transition arrangement at a March 22-23 summit as differences have grown in recent days. Such an outcome would question market expectations of a 25 basis point rate increase by the Bank of England in May. Money markets are pricing in a 70 percent probability of another UK rate rise by May, compared with virtually nil in January.

USD/CAD is supported at 1.2771 levels and is trading at 1.2826 levels. It has made session high at 1.2841 and lows at 1.2812 levels. The Canadian dollar weakened modestly against the greenback on Monday, consolidating after last week's rally and as oil prices slipped on expectations that U.S. output will rise this year. The loonie pulled back from a more than one-week high hit on Friday amid improved risk appetite and after U.S. President Donald Trump said Canada and Mexico would be exempt from tariffs on steel and aluminum as long as talks to update the North American Free Trade Agreement progressed Still, investors were likely to remain wary over the risk of a global trade war after Trump's tariffs were met with criticism from Germany and China. Canadian markets were also looking ahead to Tuesday's speech on the labor market by Bank of Canada Governor Stephen Poloz, likely the main domestic economic event of the week. The central bank held interest rates steady last week as expected, while a speech from Deputy Governor Tim Lane on Thursday stuck to the bank's dovish message that it will be cautious in considering further increases. The Canadian dollar was last trading 0.1 percent lower at C$1.2826 to the greenback, or 77.95 U.S. cents.

AUD/USD is supported around 0.7829 levels and currently trading at 0.7875 levels. It hit session high at 0.7879 and made session lows at 0.7851 levels. The Australian dollar strengthened against US dollar on Monday as risk appetite improved following strong U.S. payrolls data that eased worries about inflation and faster rate hikes in the world's largest economy. Nonfarm payrolls jumped by a steep 313,000 last month, but annual growth in average hourly earnings slowed to 2.6 percent after a spike in January. The pullback in wages tempered speculation the Federal Reserve would project four rate hikes at its policy meeting next week, instead of the current three. It was the fear of higher inflation in the United States that had caused a financial markets rout in February, sending equities into a tailspin and causing a major sell-off in bonds. With inflationary worries fading, the antipodean currencies rallied. The mood in markets had already brightened on Friday after North Korean leader Kim Jong Un offered to stop nuclear and missile testing and to meet with U.S. President Donald Trump. Investors will keep an eye on a slew of central bank speeches in Australia, including by Deputy Governor Guy Debelle on Friday, for further trading cues.

Equities Recap

European shares hit their highest level in almost two weeks on Monday, boosted by gains among German utilities after the sector's leading players announced a major overhaul of the industry.

UK's benchmark FTSE 100 closed down by 0.2 percent, the pan-European FTSEurofirst 300 ended the day up by 0.23 percent, Germany's Dax ended up by 0.6 percent, France’s CAC finished the day flat.

The S&P 500 and the Dow Jones Industrial Average fell on Monday as worries about the metal tariffs signed into law last week by President Donald Trump weighed on industrial stocks.

Dow Jones closed down by 0.61 percent, S&P 500 ended up by 0.38 percent, Nasdaq finished the day down by 0.11 percent.

Treasuries Recap

Yields on the three-year and 10-year U.S. Treasury notes hovered near multiyear highs ahead of auctions of both maturities later on Monday, which may be pressured up further if demand for the increased supply is weak.

The yield on the three-year note was last at 2.436 percent, slightly off the 10-year high of 2.455 percent hit on Friday. The benchmark 10-year government note was last at 2.890 percent, just below the 2.957 percent hit on Feb. 21, its highest since trading above 3 percent in January 2014.

Commodities Recap

Gold prices dipped on Monday as the previous session's upbeat U.S. payrolls data sparked a fresh rally in equities, shoring up expectations that the U.S. Federal Reserve would press ahead with further interest rate rises this year.

Spot gold lost 0.2 percent at $1,320.78 per ounce by 1:33 p.m. EST (1733 GMT), while U.S. gold futures for April delivery settled down $3.20, or 0.2 percent, at $1,320.80 per ounce.

Oil prices fell on Monday as investors grappled with ongoing concerns over rising U.S. output and tight OPEC supply, while last week's data showing speculators cut bets on oil suggested more selling could be seen.

Brent crude futures slipped 54 cents, or 0.8 percent, to settle at $64.95 per barrel. U.S. West Texas Intermediate (WTI) crude futures fell 68 cents, or 1.1 percent, to settle at $61.36 per barrel.
 


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