FX & CFD OBCHODOVÁNÍ NESE VYSOKOU MÍRU RIZIKA
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I. Market focus:
The main event of Wednesday’s morning session was the announcement about some progress in the renegotiation of the North American Free Trade Agreement (NAFTA). The media reported that the U.S. is ready to drop a demand that all vehicles made in Canada and Mexico for export to the United States contain at least 50 percent U.S. content. However, official statements on this matter have not yet been received. Confirmation of such reports will have a positive impact on the market sentiment, providing long-term support to the Canadian dollar and the Mexican peso.
The focus of the market participants is on the meeting of the Federal Open Market Committee (FOMC), which began, and its outcomes will be announced today at 18:00 GMT. It is expected that the U.S. central bank will make a decision to increase its interest rates at the meeting (the Fed funds futures signal that investors are now pricing in a 94.4 percent chance of a hike of policy interest rates to 1.50-1.75 percent from the current 1.25-1.50 percent) and will provide updated macroeconomic forecasts (given the substantial fiscal stimulus, it is highly probable that the projections for the growth rate of the U.S. economy will be increased). It will be Jerome Powell’s first meeting as chairman of the Federal Reserve. In late February, Powell made it clear that he was open to lifting the policy rate four times this year. Confirmation of such signals will significantly support the U.S. dollar, as the majority of market participants currently expect only three increases.
Apart from the Fed, the Reserve Bank of New Zealand (RBNZ) will also announce its decision on monetary policy. It is widely expected that the New Zealand regulator will not make any changes to the parameters of its monetary policy, leaving its cash rate at 1.75 percent. The main thesis of the accompanying statement, saying that the Bank’s “monetary policy will remain accommodative for a considerable period,” is also expected to be reiterated. The RBNZ decision will be announced at 20:00 GMT.
Among the most important macroeconomic reports, attention should be paid to the UK labor market statistics (09:30 GMT), as well as the U.S. data on existing home sales (14:00 GMT) and crude oil inventories (14:30 GMT).
II. The market highlights are:
Statistics Canada reported on Tuesday that the Canadian wholesale sales edged up in January. Wholesale sales rose 0.1 percent m-o-m to CAD63.29 billion in the first month of 2018, after dropping 0.2 percent m-o-m in December of 2017 (revised from an initially estimated 0.5 percent m-o-m decrease). Economists' had forecast an advance of 0.1 percent m-o-m for January. According to the report, increases were recorded in four of seven subsectors, accounting for 66% of total wholesale sales. Food, beverage and tobacco (+3.1 percent m-o-m) and the machinery, equipment and supplies (+1.6 percent m-o-m) subsectors posted the biggest gains, which, however, were offset by declines in the building material and supplies (-4.0 percent m-o-m) and the motor vehicle and parts (-1.6 percent m-o-m) subsectors. In y-o-y terms, wholesale sales surged 6.4 percent in January.
The European Commission released on Tuesday its preliminary consumer confidence data for the Eurozone. According to the release, a measure of consumer confidence across the 19 eurozone countries stood at +0.1 points in March, flat m-o-m. Economists had expected the reading to remain at +0.1 this month. Across the 28-member EU as a whole, consumer confidence index was also unchanged at -0.3 points in March.
Westpac Bank reported on Tuesday its leading index for the Australian economy rose 0.29 percent in January of 2018, following a drop of 0.25 percent in December of 2017, which marked the sharpest contraction since December of 2015. The Bank also noted that its leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, jumped to 1.30 percent in January from 0.68 percent in December. According to the report, seven of the index’s eight components made a positive contribution to the headline reading in February, led by the U.S. industrial production and commodity prices in AUD terms. Westpac’s Chief Economist, Bill Evans noted, “The level of the Index is well above trend indicating improving prospects for growth in the first half of 2018. Following the release of the December quarter national accounts which registered a disappointing overall growth rate of 2.4 percent for 2017, Westpac modestly raised its forecast for growth in 2018 from 2.5 percent to 2.7percent. That change mainly reflected better than expected momentum in consumer spending in 2017.”
III. Market Situation
The currency pair EUR/USD traded slightly higher, due to a partial profit-taking after yesterday's tumble, and adjustments of the positions ahead of the announcement of the outcomes of the U.S. Federal Reserve’s meeting later today. The March meeting of the Fed is extended, so it will be accompanied by the update of economic outlooks and the press conference of the regulator’s chair. It is widely expected that the U.S. central bank will lift its benchmark interest rate to a range of 1.5 percent to 1.75 percent. Investors will closely examine the comments of the Fed’s new chairman Jerome Powell for clues whether the regulator can raise the rates more than three times this year. In late February, Powell made it clear that he was open to lifting the policy rate four times this year. The Fed funds futures signal that investors are now pricing in a 94.4 percent chance of a rate hike in March compared to 87.4 percent a week ago. Apart from the Fed meeting, investors will also pay attention to the U.S. existing home sales. It is expected that home sales rose to 5.40 million units in February compared to 5.38 million units in January. Resistance level - $1.2357 (high of March 19). Support level - $1.2154 (low of March 1).
The currency pair GBP/USD consolidated near the opening level, as investors were cautious ahead of the release of the UK labor market statistics. Economists believe that these data will reveal a stabilization of the unemployment rate at 4.4 percent, a decrease in the number of people claiming unemployment benefits by 5,000, and the acceleration in average earnings growth to 2.6 percent from 2.5 percent. Tomorrow, the Bank of England (BoE) will announce its interest rate decision. The UK’s regulator is not expected to make any changes to its policy stance. Resistance level - $1.4087 (high of March 19). Support level - $1.3888 (low of March 16).
The currency pair AUD/USD traded slightly higher, helped by a new wave of the U.S. dollar depreciation, and partial profit-taking after hitting a three-month low. Investors also digested Westpac Bank’s latest report, which revealed that the Westpac-Melbourne Institute leading index for the Australian economy rose 0.29 percent in January of 2018, following a drop of 0.25 percent in December of 2017, which marked the sharpest contraction since December of 2015. The Bank also noted that its leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, jumped to 1.30 percent in january from 0.68 percent in December. According to the report, seven of the index’s eight components made a positive contribution to the headline reading in February, led by the U.S. industrial production and commodity prices in AUD terms. Westpac’s Chief Economist, Bill Evans noted, “The level of the Index is well above trend indicating improving prospects for growth in the first half of 2018. Following the release of the December quarter national accounts which registered a disappointing overall growth rate of 2.4 percent for 2017, Westpac modestly raised its forecast for growth in 2018 from 2.5 percent to 2.7percent. That change mainly reflected better than expected momentum in consumer spending in 2017.” Resistance level - AUD0.7803 (high of March 16). Support level - AUD0.7652 (low of December 21, 2017).
The currency pair USD/JPY declined slightly, retreating from a one-week high. Market participants were awaiting the U.S. Federal Reserve’s policy decision. The U.S. regulator is widely expected to raise its rates for the first time this year at its March meeting and may signal more hikes are coming to prevent overheating of the economy. The comments of the Bank of Japan (BoJ) governor Haruhiko Kuroda were also in investors’ focus. He noted that the he did not think that the policy normalisation of major central banks could directly hurt global growth. “Fed or any other central bank will undoubtedly normalize monetary policy if their economies are in good shape and they achieve their price targets”, Kuroda added. Resistance level - Y107.27 (high of March 13). Support level - Y105.24 (low of March 2).
U.S. stock indexes closed higher on Tuesday, as the energy shares rallied on a surge in oil prices, but another slump in Facebook (FB) stock curbed gains. Facebook extended Monday's declines, dropping 2.6%, following Bloomberg’s report that the U.S. Federal Trade Commission (FTC) is probing the company for use of personal data. Market participants also were anticipating the Federal Reserve's two-day policy meeting, which started in the early afternoon. Investors are watching for signs that the U.S. central bank will take a more aggressive path toward normalizing its monetary policy.
Asian stock indexes closed mixed on Wednesday, following modest rebound in the U.S. Investors remained cautious ahead of the announcement of the Fed's latest policy policy decision and and updated economic projections. The Japanese stock market was closed due to Vernal Equinox Holiday.
European stock indexes are expected to trade lower in the morning trading session.
Yields of US 10-year notes hold at 2.90% (0 basis points)
Yields of German 10-year bonds hold at 0.59% (0 basis points)
Yields of UK 10-year gilts hold at 1.49% (0 basis points)
Light Sweet Crude Oil (WTI) futures traded higher. Crude oil for delivery in May settled at $63.70 (+0.25%). The crude oil prices rose, helped by the U.S. dollar weakness and the latest report the American Petroleum Institute (API), which showed that the U.S. crude supplies decreased by 2.7 million barrels for the week ended March 16. Analysts had forecast a gain of 2.6 million barrels. Meanwhile, gasoline stockpiles fell by 1.1 million barrels, and inventories of distillates dropped by 1.9 million barrels. Market participants are now awaiting weekly data on U.S. crude inventories from the U.S. Energy Information Administration (EIA).
Gold traded at $1,314.60 (+0.29%). Gold prices rose moderately, due to the weakening of the U.S. currency and the adjustments of the positions by investors before the Federal Reserve’s policy decision. The index, measuring the value of the U.S. dollar relative to a basket of six major currencies, fell 0.16 percent to 90.23. Since gold prices are tied to the dollar, a weaker dollar makes the precious metal cheaper for holders of foreign currencies.
IV. The most important scheduled events (time GMT 0)
Average earnings ex bonuses
ILO Unemployment Rate
CBI industrial order books balance
SNB Quarterly Bulletin
Existing Home Sales
Crude Oil Inventories
Fed Interest Rate Decision
FOMC Economic Projections
Federal Reserve Press Conference
RBNZ Interest Rate Decision
RBNZ Rate Statement
|remaining time till the new event being published|
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