11 July, 2016

Daily Observations:

Asian stocks jumped the most since March after a bigger-than-expected pickup in US hiring last month dampened concern the world’s biggest economy is losing momentum. The S&P 500 Index flirted with a record close on Friday, while Japan indices soared 3.5% on increased stimulus speculation following Abe’s election win over the weekend.

US:

  • US nonfarm payrolls added 287,000 jobs in June, significantly better than the estimated 180,000 gain. The previous month’s gain of 38,000 was revised lower to 11,000.
  • The unemployment rate in June was 4.9%, higher than the predicted 4.8%, mainly due to an increase in the labor force participation rate from 62.6% to 62.7%.
  • Positive jobs report numbers failed to boost the dollar, as the Bloomberg Spot Dollar Index, a dollar trade-weighted gauge against 10 major currencies, slipped 0.3%.
  • While 2 year Treasuries fell, 10 year debt extended gains to send yields to record lows, suggesting demand for safe haven assets is still high among investors.
  • According to Bloomberg, Fed funds futures pricing have indicated an increase in odds of a rate hike in 2016, from 12% to 21%.

Australia:

  • Prime Minister Malcolm Turnbull has declared victory in Australia’s election and the opposition has conceded. However it still remains unclear if Turnbull has enough seats to form a majority government.
  • Home loans in May declined 1.0% from a month earlier, less the 2.0% drop estimated.

Canada:

  • Employment in June fell by 700, much worse than the estimated gain of 5,000 jobs and the previous month’s rise of 13,800. The decline capped the most sluggish quarter for payrolls in the past 2 years.
  • Unemployment rate was lower-than-expected at 6.8% (vs 7.0%); the drop was largely due to the decline in participation rate from 65.7% to 65.5%.

UK:

  • The Bank of England is said to be considering measures to stem the flood of money out of Britain’s biggest property funds that caused fresh market panic last week, the Telegraph reported.
  • Among the measures being considered include the introduction of enforced notice periods before redemptions, slashing the price for investors who rush for the door, and additional liquidity requirements for funds.

Japan:

  • Prime Minister Shinzo Abe won an upper house election and may try to revise the nation’s pacifist constitution, which could distract him from economic reforms and hasn’t been amended since it was fist enacted in 1947.

China:

  • CPI in June rose 1.9% from a year earlier, higher than the 1.8% expected.
  • PPI over the same period declined 2.6%, more than the 2.5% drop anticipated.
  • Generally steady prices in June has somewhat removed an argument for extra PBOC stimulus, said economists interviewed by Bloomberg.

Precious Metals:

  • Spot gold edged 0.1% higher on Friday to its highest weekly close since Mar 2014. The precious metal advanced 1.9% for the week, to extend its weekly winning streak to 6. A correction back to around $1,310/Oz could be due on the cards.
  • Spot silver rose 2.6% higher for the week to close at $20.2742/Oz.

 

USDSGD:

  • Spot 1.3448
  • The Singapore dollar continues to strengthen after Friday’s better-than-expected US June employment growth failed to spur US dollar demand.
  • USDSGD remains supported near its post-Brexit lows, just above the 1.3400 handle.

 

AUDUSD:

  • Spot 0.7563
  • AUDUSD declined 0.1% earlier today, following Friday’s 0.7% surge.
  • Despite a stellar US jobs report, most analysts view financial market instability as more of a concern for the FOMC following Brexit. As such the prospect for more accommodative policy stances from major central banks will be supportive for the relatively higher-yielding AUD.

 

USDCAD:

  • Spot 1.3040
  • Following Friday’s contrasting jobs reports between Canada and the US, USDCAD jumped 0.8% and extended its week’s gain to 1.0%.
  • The bias continues to remain to the upside, especially if Canada’s job market continues to sputter and oil prices continue to weaken.
  • The immediate-term resistance of 1.3188 looks likely to be tested in the near future.

 

USDCNH:

  • Spot 6.6971
  • Offshore yuan strengthened against the greenback by as much as 0.1% to 6.6963 following CPI data released over the weekend indicating the world’s second-largest economy is beginning to stabilize.

 

GBPUSD:

  • Spot 1.2958
  • GBPUSD continues to remain capped around the 1.3000 handle. The currency pair declined 0.6% on Friday despite closing above 1.3000 the day before; the rejection of the 1.3000 level could signal more downside lies in store for GBPUSD.
  • There is increasing focus on Thursday’s monetary-policy announcement, with 30 out of 54 economist surveyed by Bloomberg predicting a lowering of the benchmark rate from 0.50% to 0.25%.

 

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