Here are the latest developments in global markets:
- FOREX: The US dollar traded higher against the Japanese yen by 0.28% during the early European afternoon as risk-off sentiment continued to ease while encouraging data out of the US on Tuesday increased confidence on the US economy even further. Sterling plummeted near to a one-week trough of 1.4172 (-0.73%) versus the greenback today after UK CPI figures missed expectations, falling to one-year lows. The yearly Eurozone CPI (second estimate) also ticked below expectations today, adding some pressure to euro/dollar, but headlines stating that the President of the center-right Forza Italian party is meeting the Italian President on Wednesday in an effort to break the deadlock that has prevented the formation of a government, provided some support to the pair, driving it up to 1.2365 (-0.04%). Dollar/loonie extended gains towards 1.2584 (+0.33%) ahead of a policy meeting by Bank of Canada. Kiwi/dollar and aussie/dollar slipped by 0.46% and 0.21% respectively on the back of a stronger dollar. Swiss Franc was one of the worst performers. Euro/swissie rallied towards a fresh three-year peak of 1.1980, its highest level in three years – ever since the SNB removed the floor in the pair.
- STOCKS: European markets were on the forefront on Wednesday at 0930 GMT, as investors monitored a fresh batch of corporate earnings and economic data. The benchmark European STOXX 600 rose by 0.09%. The blue-chip Euro STOXX 50 was up by 0.33%, while the German DAX 30 climbed by 0.07%. The French CAC 40 headed higher by 0.36%, the Spanish IBEX 35 rose by 0.19% and the British FTSE 100 moved up by 0.76%. In Asia, Japan’s Nikkei 225 and Topix surged by 1.42% and 1.14% respectively. In the US, the S&P, Dow Jones and the Nasdaq all surged yesterday, futures tracking these indices are currently in the red, pointing to a lower open today.
- COMMODITIES: Oil prices extended their uptrend after the API report showed a surprising decline in US crude inventories on Tuesday. WTI crude surged by 1.17% to $67.30 per barrel and Brent moved up by 1.0% to $72.30 Gold fell by 0.19% to $1,344 per ounce.
Day ahead: Bank of Canada to stand pat on rates; Trump-Abe meeting concludes
A policy meeting by the Bank of Canada (BoC), discussions between the US President and the Japanese Prime Minister, as well as a Parliamentary Brexit vote in the UK will be the main economic events of the day.
At 1400 GMT, the BoC will reveal its decision on interest rates and expectations are for the central bank to keep rates unchanged at 1.25% after raising borrowing costs three times since July 2017. Although economic growth slowed down in Canada, the economy showed some positive signs since the previous policy gathering, including a pickup in inflation, a decline in the unemployment rate and an improvement in manufacturing activity, all of which could keep policymakers optimistic about the path of policy normalization. Moreover, and perhaps most importantly, NAFTA talks are seemingly showing progress lately, a fact that could give some relief to the central bank and be a reason for the BoC Governor, Steven Poloz, to use a more hawkish tone at his press conference today at 1515 GMT. However, Poloz could remain cautious on the face of trade uncertainties arising from the US trade policy which has spread fears of a global trade war. Should the BoC send hawkish messages, the loonie could erase today’s losses, while if the central bank gives more weight on trade risks, the currency could extend its losses.
In the US, the US President, Donald Trump, and the Japanese Prime Minister, Shinzo Abe, are concluding their two-day meeting and it would be interesting to see whether discussions have brought the countries closer on the trade front, as well their stance on North Korea. Earlier, Trump expressed his dissatisfaction with the Pacific free-trade pact which Japan is a proponent of, saying that he did not like the deal despite recent headlines supporting that he was thinking of re-join the partnership. On the other hand, his views on North Korea were more positive, commenting that “high level of talks” are underway between the US and North Korea, while also stating that five places are considered for the crucial summit between Trump and the North Korean leader, Kim Yong Un. Any references to China’s growing economic and military power could also attract attention.
Meanwhile in the UK, the House of Lords, the upper house of Parliament, where May’s Conservatives don’t hold a majority, is expected to vote on a Brexit bill on Wednesday. If the Lords oppose May’s proposal to exit the customs union with the EU, then the Prime Minister’s efforts to unify her party over Brexit could get more difficult given that some Conservatives also favour tariff-free trade with the EU.
Turning to data releases, the Energy Information Administration will report on US crude oil stocks for the week ending April 13 at 1430 GMT before the Federal Reserve’s Beige Book, which gives an overview on the current economic conditions in the US, comes into view at 1800 GMT. At 2245 GMT, New Zealand’s CPI readings are anticipated to indicate that inflation has picked up, rising by 0.5% q/q in the first quarter of 2018 compared to the 0.1% seen in the previous quarter, while on a yearly basis, the gauge is forecasted to slow down from 1.6% to 1.1%. Early on Thursday ( 0130 GMT), Australia will see the release of employment figures. Projections are for the number of positions added to the economy to increase by 21,000 in March – more than in February – and the unemployment rate to inch down by 0.1 percentage points to 5.5%.
In equity markets, eyes will be on Morgan Stanley’s earnings release delivered before Wednesday’s US market open.
In today’s public appearances, the New York Fed President William Dudley and Fed Vice Chair for Supervision Randal Quarles will be making comments at 1900 GMT and 2015 GMT respectively. Both hold permanent voting rights within the FOMC.