Market Roundup
- US Fed raises FF rate 25bps, sets RRP rate at 0.25%, sees inflation rising to 2% target by 2018.
- Wall St rallies as Fed points to gradual tightening.
- Fed’s Yellen: if inflation failed to rise & USD stabilized would take appropriate action, doesn’t contemplate negative rates.
- U.S. housing starts surge, permits hit 5-month high.
- Markit Mfg flash PMI even worse than expected, 3-year low of 51.3.
- Dollar Libor highest since early 2012 before Fed meeting. EIA- wkly crude stocks up 4.8 mio bbls vs forecast of 1.4 mio bbl draw.
- Germany plans to borrow more in 2016, to repay debt, refugee costs.
- Merkel wants to avoid “Brexit” but won’t compromise core EU principles.
- Fitch Downgrades Brazil to ‘BB+’, Outlook Negative.
- Fitch downgrade reflects deep recession, adverse fiscal developments, and political uncertainty.
- Brazil FinMin: says loss of investment rating is ‘serious’, silent after asked if he will stay in position.
- Moody’s says Latin American banks are less resilient to withstand stressed conditions than other emerging markets.
Looking Ahead – Economic Data (GMT)
- 21:45 New Zealand GDP Production QQ* Q3 forecast 0.8%, 0.4%-previous
- 21:45 New Zealand GDP – Annual-Avg, Prod-Bas Q3 forecast 2.7%, 3%- previous
- 21:45 New Zealand GDP – Annual*Q3 forecast 2.3%, 2.4%- previous
- 21:45 New Zealand GDP Expenditure QQ*Q3 forecast 0.8%, 0.2%- previous
- 23:50 Japan Foreign Bond Investment w/e 73.1b- previous
- 23:50 Japan Foreign Invest JP Stock w/e 104.6b- previous
- 23:50 Japan Exports YY* Nov forecast -1.5%, -2.1%- previous
- 3:50 Japan Imports YY*Nov forecast -8.3%, -13.4%- previous
- 23:50 Japan Trade Balance Total Yen* Nov forecast -446.2b, 111.5b-previous
Looking Ahead – Events, Other Releases (GMT)
- No Significant EventsCurrency SummariesEUR/USD is likely to find support at 1.0850 levels and currently trading at 1.0906 levels. The pair has made session high at 1.1016 and hit lows at 1.0908 levels. The U.S. dollar slipped lower against euro on Wednesday after Federal Reserve’s raised the benchmark interest rate hike in nearly a decade, erasing gains made immediately after the decision. The U.S. central bank’s policy-setting committee raised the range of its benchmark rate by a quarter percentage point to between 0.25 and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs. The dollar index, which hit a more than one-week high of 98.558 after the Fed rate decision, was last down 0.43 percent at 97.806. The euro was last up 0.47 percent against the dollar at $1.09850 after hitting a session low of $1.08880 immediately after the Fed decision. To the upside, immediate resistance can be seen at 1.0880. To the downside, immediate support level is located at 1.0850 levels.GBP/USD is supported in the range of 1.4955 and currently trading at 1.4980 levels. It reached session high at 1.5099 and hit low at 1.4995 levels. Sterling hit four month low against the dollar on Wednesday after Federal Reserve raised interest rate for the first time in almost a decade. The rate hike signaled faith that the U.S. economy had largely overcome the 2007-2009 financial crisis. Higher U.S. rates are expected to support the dollar, which should pressure oil prices, making oil costlier for holders of other currencies. The dollar firmed modestly after the rate rise. Based on interest rate futures markets, traders expected a second rate hike in April. Sterling dipped to $1.4955 after interest rate hike by Federal Reserve, the lowest since Aug. 8. Meanwhile, the regular earnings of British workers, excluding bonuses, rose by just 2.0 percent in the three months to October, its slowest since the three months to February, keeping pressure off the Bank of England to raise interest rates any time soon. To the upside, immediate resistance can be seen at 1.5000. To the downside, immediate support level is located at 1.4950 levels.USD/JPY is supported around 121.33 levels and currently trading at 122.22levels. It hit session high at 122.45 and made session lows at 121.33 levels. The dollar rose higher against Japanese Yen on Wednesday after the Federal Reserve increased its benchmark rate by 0.25 percentage point, its first hike in nearly a decade. The Fed said the economy is expected to continue to perform well and a slight increase in the fed funds rate was appropriate, while it recognized that even after this hike monetary policy remains accommodative. Most of major pair declined turned lower against the dollar after the decision was announced, but sharply changed direction within five minutes of the U.S. central bank’s statement. Meanwhile, data on Wednesday showed the industrial sector continuing to struggle under the weight of a strong dollar, cutbacks in inventory investment as well as spending cuts by energy firms in response to persistently low oil prices. Other data on Wednesday showed U.S. housing starts in November rebounded from a seven-month low and permits surged to a five-month high, signs of strength in the housing market. Housing starts jumped 10.5 percent to a seasonally adjusted annual pace of 1.17 million units last month dollar was last mostly flat against the yen at 121.600 yen after hitting a one-week high against the Japanese currency of 122.300 immediately after the Fed decision.USD/CAD is supported at 1.3725 levels and is trading at 1.3783 levels. It has made session high at 1.3840 and lows at 1.3702 levels. The Canadian dollar weakened to a new 11-1/2-year low against its U.S. counterpart on Wednesday as crude oil prices fell, but the currency recovered somewhat after the U.S. Federal Reserve raised rates for the first time in more than nine years. Oil prices headed back toward 11-year lows, pressured by U.S. government data showing a huge build in crude inventories, while the greenback was stronger against a basket of currencies after the Fed news. The U.S. central bank’s policy-setting committee raised the range of its benchmark rate by a quarter percentage point to between 0.25 and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs. Markets judged the Fed’s statement to be dovish, supportive of risk assets including equities. The Fed made clear that the 25-basis point rate hike was a tentative beginning to a gradual tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target. The currency’s strongest level of the session was C$1.3729, while its weakest level was C$1.3848, a fresh 11-1/2-year low.Equities RecapEuropean shares closed higher on Wednesday as the investors predicted rate hike by the Federal Reserve.UK’s benchmark FTSE 100 closed up by 0.68 percent, the pan-European FTSEurofirst 300 ended the day up by 0.24 percent, Germany’s Dax ended up by 0.16 percent, France’s CAC finished the day up by 0.23 percent.U.S. stocks rallied in volatile trading on Wednesday after the Federal Reserve announced it is raising its key policy rate for the first time in nearly a decade.Dow Jones closed up by 1.27 percent, S&P 500 ended up by 1.44 percent, Nasdaq finished the day up by 1.52 percent.Treasuries RecapYields on U.S. Treasuries rose on Wednesday after the Federal Reserve increased its benchmark rate by 0.25 percent, its first hike in nearly a decade.U.S. benchmark 10-year Treasury notes were last down 6/32 in price to yield 2.288 percent, up from 2.266 percent late on Tuesday.The U.S. 30-year bond was last down 4/32 in price to yield 2.99 percent, up from 2.991 percent late TuesdayCommodities RecapGold held gains on Wednesday, after the Federal Reserve raised U.S. interest rates for the first time in nearly a decade, as expected, making clear it was a tentative beginning to a “gradual” tightening cycle.Spot gold was up 1.2 percent at $1,072.71 an ounce at 2:40 p.m. EST (1940 GMT), below the session high of $1,078.20. U.S. gold futures for February delivery settled up 1.4 percent at $1,076.80 an ounce.Oil fell more than 3 percent on Wednesday, snapping a two-day rebound after U.S. government data showed a surprise weekly build in crude inventories and the Federal Reserve raised interest rates for the first time in nine years.Brent January futures, which close on Wednesday, fell $1.26, or more than 3 percent, to settle at $37.19 a barrel. U.S. crude futures settled down nearly 5 percent, or $1.83, at $35.52 a barrel, not far from the $32.40 hit during the financial crisis in 2008.
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