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Markets Update, Feb 2

 

 

 

  • Dollar Selloff Resumed after FOMC
  • Asian stocks close lower on Thursday

 

Dollar’s decline extended overnight after Fed left interest rates unchanged as widely expected. While painting a relatively upbeat picture of the U.S. economy, the Fed gave no firm signal on the timing of its next rate move with the economic impact of Trump’s policies yet to be seen.

There was not a hint on whether the 4.5 trillion US balance sheet would be trim . Following the Fed, the 10-year U.S. Treasury yield stepped back to 2.460 percent from Wednesday’s high of 2.518 percent.

“We’ve been expecting the Fed’s next rate hike to come in June and there was nothing from the Fed indicating a hike in March,” said HSBC’s Shirota.

That dented the dollar, which had bounced earlier on upbeat Institute for Supply Management’s (ISM) index of manufacturers and ADP National Employment Report data.

Dollar remains the weakest major currency this week. On the other hand Yen stays the strongest , followed closely by Canadian and Australian  dollar (Loonie and Aussie).

In other markets, Gold rides on Dollar weakness and surges to as high as 1210.2 so far today, and is set to take on 1220.1 resistance. WTI crude oil stays in familiar range and hovers around 53.5.

Global macro risks at a glance:

gmm-2-feb

 

“For the time being, markets will continue to be driven by what Trump will say. It’s Trump-on, Trump-off, rather than risk-on, risk-off,”said Shuji Shirota, head of macro strategy group in Tokyo at HSBC.

Hong Kong’s Hang Seng slipping 0.6 percent and Singapore down 0.8 percent.           Japan’s Nikkei lost 1 percent on a stronger yen.

The dollar traded at 112.820 yen, having slipped from Wednesday’s high of 113.95 yen.

“The dollar looks capped despite strong U.S. data. Concerns about Trump’s policy are outweighing,” said Ryuta Taketomi, manager of market trading at Resona Bank.

Trump also lashed out at Japan and China earlier this week, saying they are engaged in currency devaluation.

Sterling hit a 1 1/2-month high of $1.2680 on Wednesday as solid UK economic data and greater political certainty over the Brexit process encouraged a trimming of big financial bets against the currency.

The Bank of England, due to issue its inflation report later in the day, is expected to stick to a neutral policy stance.

The dollar index against a basket of six major currencies stood at 99.556, having slipped almost 4 percent from its 14-year high of 103.82 set on Jan 3.

bfm7b45

Earnings are coming thick and fast, with mixed results clouding the picture on the state of the global economy. While Facebook Inc.’s sales topped forecasts, Sony Corp. and Mazda Motor Corp. cut their profit outlooks. In Europe, Deutsche Bank AG and Royal Dutch Shell Plc missed estimates. Due later on Thursday are earnings from Amazon.com Inc.

What’s coming up in the markets:

  • Bank of England Governor Mark Carney faces a delicate balancing actwhen policy makers meet to decide interest rates on Thursday. The BOE is expected to raise predictions while keeping the key interest rate at a record low and bond purchases unchanged.
  • Economists expect a 175,000 increase in U.S. nonfarm payrolls for January, in line with the recent trend, when the Labor Department releases jobs data on Friday. With both hiring and unemployment likely to remain relatively stable, the focus on the jobs report will center on wage pressures.
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