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Market panorama. 22 February 2018

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I. Market focus:


At the beginning of Thursday’s session, market participants’ focus remained on the minutes from the January meeting of the Federal Open Market Committee (FOMC). The minutes, which were published yesterday afternoon, revealed the Fed officials positively assess the prospects for the U.S. economy, considering it appropriate to continue further gradual monetary policy firming. Despite the fact that a lot has happened since the regulator's meeting (the solid data on the U.S. inflation for January were released; the stock market witnessed a sharp decline and increased volatility; the Fed’s chief was replaced), the markets’ response to the minutes was quite strong. Although the document did not offer the information, answering the question whether the Fed accelerate the pace of monetary tightening, it confirmed that the regulator would stick to its plan for three rate increases this year. The U.S. dollar rose after the release of the minutes, but its increase was limited, due to pressure, caused by concerns over the growth of the U.S. debt and speculations that the forecasts for the U.S. economy could be lowered. The next important event, which can significantly change the outlook for the dollar, will be the Fed’s meeting in March.

Thursday’s session will be busy with macroeconomic data and events, the main of which will be the publication of the revised estimates on the UK’s GDP for the fourth quarter (09:30 GMT), statistics on the Canadian (13:30 GMT) and New Zealand (21:45 GMT) retail sales, the minutes from the ECB’s latest meeting (12:30 GMT), as well as data on the U.S. crude oil inventories (16:00 GMT). In addition, Japan will reveal its inflationary data at the end of today's session (23:30 GMT), which, in the case of a significant difference between the actual values and economists’ forecasts, can provoke a significant increase in the volatility of the Japanese currency.

II. The market highlights are:

  • The Federal Open Market Committee (FOMC) on Wednesday released the minutes of its meeting held on December 12-13, at which the committee decided to maintain the target range for the federal funds rate at between 1.25 percent and 1.5 percent. The minutes revealed that a majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate. The Committee’s members noted that the labor market conditions continued to strengthen, the unemployment rate remained low, consumer spending showed a solid growth, and the economic activity was rising at a solid rate. With regard to inflation, many participants noted that inflation data in recent months had generally pointed to a gradual rise in inflation and expressed expectation this tendency would continue over the medium term. Overall, the FOMC projected that total inflation would be at its 2 percent objective in 2020. Participants also said that they continued to expect economic activity to expand at a moderate pace over the medium term, while the rate of economic growth in 2018 was projected to exceed their estimates of its sustainable longer-run pace and that labor market conditions to strengthen further. A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate.

  • Preliminary data released by IHS Markit on Wednesday pointed to another solid expansion of the U.S. private sector business activity during February. According to the report, the Markit flash manufacturing purchasing manager's index (PMI) rose to 55.9 this month from 53.3 in January, marking the sharpest improvement in manufacturing business conditions since October 2014. Economists had expected the reading to come in at 55.4. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. February’s boost in the headline PMI was mainly attributable to the robust gains in new business and employment. Meanwhile, the Markit flash services purchasing manager's index (PMI) came in at 55.9 this month, up from 53.3 in January, signaling the steepest rate of growth for six months. Economists had expected the reading to increase to 54.0. A continued rebound in new order volumes helped to support business activity growth during February, the report said. The latest upturn in new work received by service sector companies was the steepest since March 2015. Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 55.9 in February, up from 53.8 in January. That was the highest reading for almost two-and-a-half years. Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit noted: “Business activity growth accelerated markedly in February, suggesting the economy is growing at its fastest pace for over two years. The upbeat February PMI surveys are indicative of GDP rising at an annualized rate of 3.0 percent.”

  • The National Association of Realtors (NAR) reported on Wednesday that the U.S. existing home sales fell 3.2 percent m-o-m to an annual rate of 5.38 mln units in January of 2018 from a revised 5.56 million in December of 2017 (originally 5.57 million). That was the slowest pace since last September. Economists had forecast home resales increasing to a 5.60 million-unit pace last month. After last month’s decline, sales were 4.8 percent below a year ago. That was the largest annual drop since August 2014. The NAR’s chief economist Lawrence Yun noted that January’s retreat in closings highlights the housing market’s glaring inventory shortage to start 2018. “The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month,” he said. “While the good news is that Realtors in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow the course and far lagged last January’s pace. It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.”

III. Market Situation
Currency Market
The currency pair EUR/USD traded in a narrow range, near its 1-1/2-week low. Market participants took a breather after yesterday's sharp fluctuations in the pair, triggered by the release of the minutes of the Fed’s January meeting and the climbs in Treasury yields, and awaited new catalysts as well. Recall, the aforementioned minutes, which were published yesterday afternoon, revealed that a number of the FOMC’s members indicated that they had marked up their forecasts for economic growth in the near term relative to those made for the December meeting in light of the strength of recent data on economic activity in the U.S. and abroad, continued accommodative financial conditions, and information suggesting that the effects of recently enacted tax changes might be somewhat larger in the near term than previously thought. Moreover, a majority of the Committee members noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate. Today, the focus will be on German data on the business climate from IFO, the minutes from the latest policy meeting of the ECB, which may clarify whether its policymakers discussed the future of its quantitative easing (QE) programme at their last gathering, and the U.S. statistics on initial jobless claims. Resistance level - $1.2434 (high of February 19). Support level - $1.2205 (low of February 9).

The currency pair GBP/USD traded slightly lower, due to the strengthening of the U.S. currency in response to the release of the minutes from the Fed’s January meeting, which indicated the U.S. regulator plans further gradual adjustments in the stance of monetary policy. Investors also adjusted their positions ahead of the publication of the revised data on the UK’s GDP for the fourth quarter. According to the forecast, GDP grew 0.5 percent q-o-q and 1.5 percent y-o-y in the final quarter of 2017. Recall, in the third quarter the UK economy recorded an increase of 0.4 percent q-o-q and 1.7 percent y-o-y. Apart from the GDP data, investors will also focus on the dynamics of the U.S. currency and the general market sentiment toward risky assets. Resistance level - $1.4143 (high of February 16). Support level - $1.3763 (low of February 9).

The currency pair AUD/USD fell slightly at the beginning of the session, but then erased all the losses, due to the partial profit-taking by investors after a significant fall in the pair in the previous day. Market participants also digested the comments of the Fed’s Vice Chair for Supervision Randal Quarles, who delivered an optimistic assessment of the U.S. economy and endorsed a “gradual” path for hiking interest rates in the U.S. “The U.S. economy appears to be performing very well and, certainly, is in the best shape that it has been in since the crisis and, by many metrics, since well before the crisis,” Quarles said. “With a strong labor market and likely only temporary softness in inflation, I view it as appropriate that monetary policy should continue to be gradually normalized,” he added. Resistance level - AUD0.7934 (high of February 19-20). Support level - AUD0.7758 (low of February 9).

The currency pair USD/JPY decreased moderately, stepping back from its high of February 14. The yen, which is traditionally considered a safe haven asset, received support due to a new wave of risk aversion. Traders were also awaiting the release of the inflation data in Japan (due at 23:30 GMT). The January CPI report is expected to help assess the success of the Bank of Japan (BoJ) in its attempts to boost inflation to its 2-percent target. According to economists’ forecasts, the Japanese CPI rose by 1.3 y-o-y in January, following an increase of 1.0 percent y-o-y in the previous month. Resistance level - Y109.30 (high of February 9). Support level - Y105.56 (low of February 16).

Stock Market
















Hang Seng









U.S. stock indexes closed lower on Wednesday as the yields on the benchmark 10-year U.S. Treasury note jumped to a four-year high after the release of the minutes from the Federal Reserve’s January meeting. Although the document did not offer the information, answering the question whether the Fed accelerate the pace of monetary tightening, it confirmed that the regulator would stick to its previous plans for rate hikes.

Asian stock indexes closed mixed on Thursday on the back of the negative signals from Wall Street. Equities in Shanghai surged after missing out on an Asian stock rally because of a week-long Chinese holiday. The Japanese stocks fell, as the yen strengthened against the dollar, putting pressure on the Japanese export-oriented companies.  

European stock indexes are expected to trade lower in the morning trading session.

Bond Market
Yields of US 10-year notes hold at 2.94% (-1 basis points)
Yields of German 10-year bonds hold at 0.72% (0 basis points)
Yields of UK 10-year gilts hold at 1.56% (0 basis points)

Commodity Markets
Light Sweet Crude Oil (WTI) futures traded lower. Crude oil for delivery in April settled at  $61.12 (-0.91%). The crude oil prices fell, as the U.S. dollar strengthened. Market participants also digested the latest data from the American Petroleum Institute (API), which showed the U.S. oil inventories fell by around 900,000 barrels last week. At the same time, gasoline inventories rose by 1.5 million barrels, while distillate inventories dropped by 3.5 million barrels. Market participants are now awaiting weekly data on the U.S. crude oil stockpiles from the American Petroleum Institute (API).

Gold traded at $1,321.20 (-0.24%). Gold prices dropped slightly, due to the positive dynamics of the U.S. currency, and the release of the minutes from the January FOMC meeting, which confirmed the Fed would continue further gradual policy firming. The index, measuring the value of the U.S. dollar relative to a basket of six major currencies, rose by 0.25 percent to 90.23. Since gold prices are tied to the dollar, a stronger dollar makes the precious metal more expensive for holders of foreign currencies.

IV. The most important news that are expected (time GMT0)






IFO - Current Assessment



IFO - Expectations



IFO - Business Climate


United Kingdom

Business Investment


United Kingdom

GDP (Revised)


United Kingdom

CBI retail sales volume balance



ECB Monetary Policy Meeting Accounts



Retail Sales



Retail Sales ex Autos



Continuing Jobless Claims



Initial Jobless Claims



Business Climate



FOMC Member Dudley Speak



Leading Indicators



Crude Oil Inventories



FOMC Member Bostic Speaks


New Zealand

Retail Sales



FOMC Member Kaplan Speak



National CPI

Market Focus

  • U.S building permits and housing starts rose more than expected in January
  • Chicago Business Barometer rose to 67.6 in December, up from 63.9
  • U.S import and export prices rose more than expected in January
  • Canadian manufacturing sales declined 0.3% to $55.5 billion in December
February 2018
  • 2018
  • 2017
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  • 2014
  • 2013
  • 2012
  • 2011
  • 2010
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  • 2006
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