Issue #120/2016

Daily Observations:

Gold extended gains near its highest price in more than two years while the yen continued to climb, amid safe haven inflows. Investors’ concerns over Brexit begin to manifest and the Fed’s June minutes showed US policymakers’ uncertainty over the labor market and economic outlook.


  • The US trade deficit in May widened more than expected to $41.1 billion from $37.4 billion; a deficit of $40 billion was expected.
  • ISM non-manufacturing PMI in June rose to 56.5 from 52.9, beating the median estimate of 53.3.
  • The Markit US Services PMI over the same period rose marginally from 51.3 to 51.4, its best reading in three months.
  • The Fed’s June minutes showed rates were kept on hold last month as uncertainty over the labor market and financial stability threatened to derail the US’ economic outlook. While services data last night signaled the US economy may have been gaining traction before Brexit, payrolls figures due this Friday will be key to predicting where the Fed stands on its projected rate hike path this year.


  • S&P Global Ratings has lowered the outlook on Australia’s AAA credit rating to negative from stable after the outcome of Saturday’s election, potentially denting the government’s prospects for narrowing its budget deficit.
  • The ratings agency added that there is “a one-in-three chance” they could lower the rating within the next 2 years if they believe parliament is unlikely to legislate savings or revenue measures.


  • Four more UK property funds have frozen withdrawals amid “panic selling” and forecasts of up to a 20% drop in London office values.
  • Henderson Global Investors, Columbia Threadneedle Investments and Canada Life have suspended trading in at least £5.7 billion of funds, while Aberdeen Fund Managers Ltd briefly halted redemptions and cut the value of a property fund by 17%.


  • BOJ Governor Kuroda said Japan’s CPI is likely to be slightly negative for the time being.
  • Prime Minister Abe’s adviser, Satoshi Fukii, commented that a 20 trillion yen stimulus package this year could lead to 2% inflation in 2017.


  • The PBOC has extended the reserve requirement to offshore banks trading FX forwards, in a move designed to shore up the yuan and make it more costly for traders to bet on swings in the currency.

Precious Metals:

  • Spot gold climbed 1.8% to close at $1,373/Oz last night, its highest level in more than 2 years amid increasing haven-asset demand.
  • Global gold holdings topped 2,000 metric tons for the first time since July 2013, according to data compiled by Bloomberg.
  • Spot silver added 2.6% to $20.3331/Oz.



  • Spot 1.3501
  • After 4 days of weakening, the Singapore dollar retreated as much as 0.3% this morning back towards the 1.3500 handle.
  • The currency pair looks to be middling out, after hitting a high of 1.3884 and a low of 1.3313 over the past 4 months.



  • Spot 0.7509
  • The Aussie fell as much as 0.7% against the dollar following S&P’s credit rating outlook cut this morning, although it has since pared losses.
  • Most analysts surveyed on Bloomberg revealed AUDUSD shouldn’t be impacted too much by the cut; demand for AUD should still prevail due to its high AAA status and relatively higher yield among developed countries.



  • Spot 1.2964
  • USDCAD retreated 0.5% to 1.2948 overnight, following its 1% gain over the past 2 days.
  • Saxo Bank has predicted a run up for the currency pair, with a target of 1.3300, citing USD safe-haven demands and concerns on an over-leveraged Canadian economy with structural shortcomings.



  • Spot 6.6949
  • Onshore yuan gained for the first time in 6 days after the PBOC lifted its fixing earlier today.
  • USDCNH slipped 0.1%, falling back below the 6.7000 level.



  • Spot 1.2980
  • GBPUSD slumped 2.7% yesterday to a low of 1.2798, its lowest level in more than 30 years. The currency pair has since trimmed losses, although it continues to trade below the 1.3000 handle.
  • A multi-year resistance trend line coincides with the 1.2798-low made overnight. However, we should see some further consolidation around the 1.3000 handle before any more future upward or downward moves.


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