• The euro hit a fresh one-month low on Wednesday as an ongoing dollar short squeeze and reaction to the German election encouraged investors to take profits on one of the best performing currency trades this year.
The euro slipped 0.4 percent to $1.1747 in early trades, its lowest level since Aug. 23. It has fallen more than 1.5 percent this week against a resurgent greenback. While dollar index rises at 93.487.
Having gained more than 14 percent this year, the single currency has given back nearly 3 percent since hitting a January 2015 peak of $1.2092 earlier this month as investors rapidly repriced expectations of a U.S. rate increase in the coming days.
Futures markets have increased the likelihood of a U.S. rate rise by December to as much as 70 percent, compared to less than 20 percent only a month ago, and overnight hawkish comments by Fed Chair Janet Yellen have only boosted those bets.
A big focus for currency markets on Wednesday will be the announcement of a tax plan by the U.S. administration and Republicans in Congress.
• The dollar could be headed for a rebound this year after a decline that has left it near its lowest level in more than two years, BlackRock's chief fixed-income strategist said on Tuesday.
Jeffrey Rosenberg said he views a resurgent dollar as a possibility in light of recent political developments in Europe putting pressure on the euro.
• Government bond yields in the euro zone rose on Wednesday after U.S. Federal Reserve chief Janet Yellen said the central bank needs to continue gradual interest-rate hikes even though there is uncertainty about the inflation outlook.
Two-year U.S. Treasury yields climbed to around 1.47 percent US2YT=RR, their highest level since October 2008, setting the tone for bond trading in Europe.
• The Trump administration plans to cap the number of refugees admitted to the United States in the coming year at 45,000, two people with knowledge of the decision said on Tuesday, and advocates said this historically low level is insufficient in the face of growing humanitarian crises worldwide.
That figure would be the lowest ceiling for refugee admissions since the U.S. Refugee Act was signed in 1980. Since then, the ceiling has never been set below67,000 and in recent years has been around 70,000 to 80,000.
• Annual profits at China’s industrial companies rose 24 percent in August, accelerating from the previous month in an indication economic growth remains in good heart even as signs emerge of fading momentum following a robust first half.
Profits in August jumped 24 percent to 672 billion yuan ($101.21 billion), the biggest percentage jump since the January-Feb period, the National Bureau of Statistics (NBS) said on Wednesday. Annual profit growth was 16.5 percent in July.
• Federal Reserve Chair Janet Yellen essentially warned markets Tuesday not to underestimate the likelihood of another rate hike before year-end, says Royce Mendes of CIBC Economics. “Indeed, the speech certainly had a hawkish tone to it,” Mendes says. “Despite sluggish inflation, Chair Yellen made clear that the committee will not be waiting to see the whites of inflation's eyes before tightening policy further, calling it 'imprudent to stay on hold until inflation' reaches target. Taking it a step further, she cautioned that without modest hikes the economy could be in a position to overheat, while also exacerbating financial stability risks. That being said, the text of the speech continues to point to a gradual tightening path.”
• Tokyo governor Yuriko Koike on Wednesday formally launched a new party promising conservative reform, stepping up her challenge to Prime Minister Shinzo Abe and adding to uncertainty about the outlook for a general election widely expected next month.
• Germany could face months of coalition talks following last weekend's election, increasing uncertainty. That could also refocus investor attention on other political events in Europe, such as an independence referendum in Spain and Italian elections next year, driving the euro lower.
• The Spanish police detained more than a dozen people in the region of Catalonia on Wednesday, drastically escalating tensions between the national government and Catalan separatists. The episode occurred less than two weeks before a highly contentious referendum on independence that the government in Madrid has vowed to block.
With the backing of the constitutional court, Prime Minister Mariano Rajoy has been stepping up efforts to prevent the referendum, scheduled for Oct. 1.
• There is no one factor to explain the rising independence movement in the region. But experts say the fall-out of the global financial crash in 2008 played an important role.
The financial crisis led to rising unemployment and debt in the country, which irked independence supporters who believed Madrid was responsible for the crisis and that Catalonia was paying more taxes to bolster Spain's poorer regions than it was getting in return. The region pays $12 billion more taxes to Madrid each year it gets back, according to Reuters, while Andalusia, Spain's poorest region, receives around $9.5 billion more than it pays in.
• No one knows yet. Catalan separatists are certain that the illegal plebiscite will happen on Oct. 1, and are playing a cat and mouse game with the police. Local activists told Bloomberg that more than 6,000 ballot boxes have been stashed away in secret locations, which they aim to deploy for this Sunday's vote.
• Oil prices rose on Wednesday, with the Brent benchmark hovering near a 26-month high hit in the previous session, after U.S. oil inventories unexpectedly declined as refiners raised output and amid threats from Turkey to cut crude exports from Iraq.
Brent crude for November delivery was up 29 cents, or 0.5 percent, at $58.73 a barrel, as of 0603 GMT. It settled down 1 percent on Tuesday, after earlier hitting $59.49, its highest since July 2015 and more than 34 percent above its 2017 low.
U.S. crude for November delivery rose 34 cents, or 0.7 percent, to $52.22 a barrel, having settled down 0.7 percent in the previous session after hitting a five-month high of $52.43.
Reference: Reuters, New York Times, Kitco,Bloomberg,Time
Thai
Eng