Market Roundup
• Canada annual inflation hits 2-yr high +2.1% v 1.6% forecast, 1.5% previous; driven by gasoline.
• Univ of Michigan Sentiment final 96.3 v 96 forecast 95.7 previous.
• Univ of Michigan: Expectations final 86.5 v forecast 86.5, 85.7 previous.
• Univ of Michigan: 1-yr inflation final 2.7% v 2.8% previous.
• Trump: Pledges to repeal/replace Obamacare, conviction to put US citizens first, will start building wall soon.
• Stocks fall, bond markets rally as Trump optimism pauses.
• EGB yields fall sharply as risk-off trade reverses, German 2-year yield hits record low.
• Bitcoin hits record high above USD 1,200 on talk of ETF approval.
• Bundesbank official warns London banks against post-Brexit tricks, Banks must set up real operations, not 'letterboxes' in EU.
• China says no intention of using CCY devaluation to its advantage, to improve bond market access for foreigners.
• Mexico's Carstens: new FX hedges does not mean no more hikes.
Looking Ahead - Economic Data (GMT)
• 00:30 Australia Business Inventories* forecast 0.5%, 0.8%-previous
• 00:30 Australia Gross Company Profits* Q4 forecast 8%, 1%-previous
• 00:30 Australia Company Profits Pre-Tax* Q4 3.6%-previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.0535 levels and currently trading at 1.0560 levels. The pair has made session high at 1.0615 and hit lows at 1.0556 levels. Euro declined against the dollar on Friday as greenback clawed back into positive territory as investors scaled back bets U.S. President Donald Trump's policies would promote faster economic growth. The dollar reversed earlier losses, eking out gains for a third straight week even as the Trump administration's lack of details on fiscal reforms raised doubts about the chances for improved domestic growth in 2017. The euro slipped 0.2 percent against the dollar in afternoon trading to a session low of $1.0558. That put it on course for a 0.5 percent decline since Friday, for the third straight weekly slide. The euro's modest drop helped put the dollar index, which measures the greenback against a basket of six major currencies, on course for its third straight weekly gain. The gain was small at just 0.2 percent, with the index last up only slightly at 101.110 after recovering from a one-week low of 100.660 earlier.
GBP/USD is supported in the range of 1.2393 levels and currently trading at 1.2454 levels. It reached session high at 1.2549 and dropped to session low at 1.2447 levels. British pound declined sharply against the dollar on Friday after hitting a two-week high as dollar recovered from earlier losses and concerns about politics in the United States and Europe pressured the British pound. British banks approved the most mortgages in a year last month and consumer borrowing saw some of its fastest growth of the past decade, industry data showed on Friday, contrasting with earlier signs of slowing momentum. Strong consumer demand has driven Britain's economy since June's Brexit vote, but in the past couple of months retail sales have dipped and house price growth has been slowing, as higher inflation gnaws at Britons' disposable income. The pound fell 0.5 percent against the dollar to $1.2496 by 1619 GMT, having touched a 15-day high of $1.2570 in morning trade in London. It was down nearly half a percent at 84.59 pence per euro. For the week, that still gave it a 0.8 percent gain against the basket of currencies that measures its broader strength.
USD/CAD is supported at 1.3048 levels and is trading at 1.3106 levels. It has made session high at 1.3109 and lows at 1.3072 levels. The Canadian dollar strengthened against its U.S. counterpart on Friday after data showed a spike in domestic inflation, but some gains were pared ahead of a Bank of Canada interest rate decision next week. Canada's annual inflation jumped in January to 2.1 percent from 1.5 percent in December, with prices for transportation and shelter accounting for most of the rise, Statistics Canada said on Friday. CPI median, which shows the median inflation rate across CPI components, remained at 1.9 percent while CPI trim, which excludes upside and downside outliers, increased to 1.7 percent from 1.6 percent. Gains for the Canadian dollar on Friday came even as prices of oil, one of Canada's major exports, fell. U.S. crude prices settled 46 cents lower at $53.99 a barrel on worries about rising U.S. supplies. The U.S. dollar edged higher against a basket of major currencies, but was restrained by investors' doubts about the likelihood of swift U.S. tax reform. The Canadian dollar ended at C$1.3109 to the greenback, or 76.28 U.S. cents, slightly stronger than Thursday's close of C$1.3114, or 76.25 U.S. cents.
AUD/USD is supported around 0.7648 levels and currently trading at 0.7672 levels. It hit session high at 0.7691 and made session lows at 0.7664 levels. Australian dollar declined against greenback as Australian dollar took a breather on Friday against their U.S. counterpart after running into light profit-taking. The Australian dollar eased to $0.7668, from a three-month peak of $0.7741 on Thursday. Since November, it has met a wall of resistance around $0.7707-$0.7778. The head of Australia's central bank said on Friday he would like the local dollar to be lower but was hard to say the currency was overvalued. Speaking at a semi-annual parliamentary economics committee, the central bank chief also said it was "reasonable" that the market was pricing in steady interest rates for this year. New U.S. single-family home sales rose less than expected in January, likely held back by heavy rains and flooding in California, but continued to point to a strengthening housing market despite higher prices and mortgage rates. The Commerce Department said new home sales increased 3.7 percent to a seasonally adjusted annual rate of 555,000 units last month. Economists had forecast single-family home sales, which account for about 9 percent of overall home sales, surging 6.3 percent to a 570,000-unit rate.
Equities Recap
European shares dropped on Friday with banks and miners falling as a raft of disappointing earnings updates and political worries dented sentiment.
UK's benchmark FTSE 100 closed down by 0.3 percent, the pan-European FTSEurofirst 300 provisionally closes down the day down by 0.70 percent, Germany's Dax ended down by 1.1 percent, France’s CAC finished the day down by 0.8 percent.
Wall Street edged higher on Friday, with the Dow extending its streak of record-setting gains to 11 days, as increases in utilities and other safety plays outweighed declines in financials.
Dow Jones closed up by 0.03 percent, S&P 500 ended up by 0.13 percent, Nasdaq finished the day up by 0.14 percent.
Treasuries Recap
U.S. benchmark 10-year Treasury note yields dropped to five-week lows on Friday, pressured by declines in Europe amid persistent political uncertainty and a soft batch of U.S. data that suggested a more mixed outlook for the world's largest economy.
In afternoon trading, U.S. 10-year notes were up 18/32 in price to yield 2.322 percent, compared with 2.388 percent late Thursday. Yields fell as low as 2.313 percent, the lowest since Jan. 17.
U.S. 30-year bond prices also rose, up more than 1 point, yielding 2.958 percent, down from Thursday's 3.023 percent. U.S. 30-year yields also touched a two-week low of 2.955 percent.
Commodities Recap
Gold reached its highest in 3-1/2 months on Friday as the dollar fell to a one-week low after the new U.S. Treasury chief poured cold water on the "Trumpflation trade" that had boosted the greenback this year.
Spot gold was up 0.6 percent at $1,256.75 an ounce by 2:26 p.m. EST (1926 GMT), having touched its highest since Nov. 11 at $1,260.10 earlier, zeroing in on the 200-day moving average. It was on track to finish the week higher for the fourth straight week. U.S. gold futures settled up 0.55 percent at $1,258.30.
Oil prices fell about 1 percent on Friday as worries about rising U.S. supplies outweighed OPEC pledges to boost compliance with output curbs.
Brent crude oil settled down 59 cents, or 1.04 percent, at $55.99 a barrel, while U.S. West Texas Intermediate ended the session 46 cents lower at $53.99 a barrel.
