1 February 2017. Daily Market Updates

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HEADLINES – INTERNATIONAL
Euro-area inflation accelerated to 1.8% after the bloc’s economy recorded its strongest expansion in three quarters, which may intensify a debate within the European Central Bank about its stimulus program French race blown open by scandal as Le Pen, Macron Eye Gain, Fillon’s campaign deeper in trouble over use of public funds to employ family members Dollar tumbled after Trump accused other countries of devaluing their currencies and an adviser called the euro “grossly undervalued”;
Treasuries rose, benefiting from haven flows as standoff over Trump cabinet nominees persisted and some U.S. data were weaker than expected.
Democrats continue to battle against Trump’s nominees, preventing a quorum on Tuesday
Fed starts rates meeting; futures market pricing in 15% chance of an increase, rising to 48% by May
U.S. President Donald Trump fired acting Attorney General Sally Yates as conflict escalated over his executive order banning entry to the U.S. by citizens of seven predominantly Muslim nations
Prospect that escalating tension with Senate Democrats over cabinet nominees may delay action on tax cuts is among other factors curbing risk appetite
MARKETS IN DETAIL
FX:
Bloomberg’s dollar spot index trades little changed as the Fed starts two-day rates meeting.
USD tumbled after Trump criticized Japan and an adviser knocked Germany for having currencies that are too weak, USD was little changed after reversing early losses, with month-end flows capping upside;
USD/JPY fell as low as 112.08
EUR/USD rose as high as 1.0812
Pound dropped for fourth dayThe pound is the worst performer among G-10 currencies
RATES:
Bund futures closed higher, supported by UST rally; core EGBs slipped early in session after stronger-than-expected inflation from France and Spain UST yields were ~2bp-5bp lower; rally accelerated as Trump’s comments coincided with unexpected drop in Chicago PMI; 5s30s curve traded above 115bp for first time since Dec. 14. The 10-year yield was lower by about 3 basis points at 2.46 percent at 4:34 p.m. in New York, after reaching its lowest since Jan. 24. The rally began to accelerate at about 9:45 a.m
The 5s30s yield curve retreated from session highs in the rally, remaining steeper by about 2bp; it traded above 115bp for the first time since Dec. 14 after the AT&T deal announcement, aided by large sellers of Ultra Bond futures and a 10s30s futures block steepener
EQUITIES:
Stoxx Europe 600 Index fell 0.7% to new YTD low, extending declines in the afternoon and closing at the low U.S Stocks trimmed losses, led by health-care shares after Trump said cutting regulations and taxes will offset lower prices
COMMODITIES:
Gold rose more than 1% in a second day of gains
WTI settles below $53/bbl
Regards All.
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