April 17, 2017

Daily Observations:

Asian stocks were mixed as lingering geopolitical concerns offset data showing China’s economy accelerated more than expected last quarter. Oil, the US dollar and Treasury yields fell while gold and the Japanese yen record fresh 5-month highs.

US:

• The cost of living in the US declined in March for the first time since February 2016, showing inflation is moving up only gradually, a Labor Department report showed Friday.
• Headline CPI declined 0.3% month-on-month and rose 2.4% year-on-year, lower than the consensus estimates of 0.0% and 2.6% respectively, and slowing from the previous month’s gains of 0.1% and 2.7%.
• Stripped of food and energy prices, core CPI slipped 0.1% from a month earlier and rose 2.0% from a year ago, slower than the corresponding estimates of 0.2% and 2.3%.
• Advanced retail sales in March declines 0.2% month-on-month, matching expectations.
• US President Donald Trump explained the decision to not label China currency manipulator, which reversed a promise he made during the Election campaign, as a function of receiving Beijing’s help in reining in North Korea. The comment was Trump’s first in response to a failed missile test by North Korea over the weekend.
• The US on Friday stopped short of branding China a currency manipulator in a much-awaited annual foreign-currency report from the Treasury Department. Instead, it urged the world’s second-largest economy to let the yuan rise with market forces and embrace more trade.
• The US dollar resumed its recent downtrend, with the Bloomberg Dollar Spot Index, which tracks the USD against 10 major peers, declining 0.3% earlier today following the long weekend. The more-focused Dollar Index continues to be supported just above the 100 level.
• The benchmark 10yr Treasury yield declined to a fresh 5-month low of 2.20% earlier this morning, registering a drop of 4bps from Thursday’s close.
• The S&P 500 Index declined 0.7% last Thursday, as investors adopted a risk-off approach amid a possible confrontational between North Korea and the US over the weekend. Energy and financial shares were the biggest losers.

Canada:

• Manufacturing sales in February slid 0.2% from a month earlier, less than the 0.7% fall originally expected.

UK:

• London’s housing market is in its worst slump since the financial crisis 8 years ago. The Royal Institute of Chartered said its price balance for the city fell to the lowest since February 2009 last month. It declined to minus 49, indicating a greater percentage of agents reported drops in March.
• Jobless claims in March rose 25,500, following a 6,100 drop in February. The ILO unemployment rate remained at 4.7%, as expected.

Turkey:

• Turkey voted to hand Recap Tayyip Erdogan sweeping authority in the most radical overhaul since the republic was founded 93 years ago on the expectation he’ll safeguard security amid regional wars and kick-start the economy.
• The referendum won approval of 51.3% to 48.7% of Turks, according to the state-run Anadolu news agency, as opposition parties alleged fraud and the EU branded it as unfair. Once implemented, Erdogan will have authority to appoint ministers and top judges at his discretion and call elections at any time. It will also give him much greater sway over fiscal policy and may deepen investors’ concerns about the independence of the central bank.

China:

• China’s economy accelerated 6.9% in the first quarter from a year earlier, beating a 6.8% median estimate in a Bloomberg survey.
• Fixed-asset investment excluding rural areas expanding 9.2% for the first 3 months, accelerating from 8.1% growth last year.
• Retail sales increased 10.9% from a year earlier in March, beating the median estimate of 9.7%.
• Industrial output rose 7.6% last month from a year earlier, surpassing an estimated 6.3% rise.

Australia:

• Australian employment surged in March, underpinned by the biggest gain in full-time jobs in almost 30 years. 60,900 jobs were added last month, well above the 20,000 median estimate and improving upon February’s upwardly-revised 2,800 gain.
• Full-time jobs soared by 74,500, the biggest increase since December 1987; part-time employment fell 13,600.
• The jobless rate held at 5.9%, matching expectations. The participation rate edged higher to 64.8%, from 64.6% last month.

Singapore:

• Non-oil domestic exports in March jumped 16.5% from a year ago, slowing from a 21.1% gain in the month prior, but surpassing the median estimate of a 7.3% gain.
• Electronics exports over the same period rose 5.2%, less than the 12.7% predicted.

Precious Metals:

• Spot gold gapped 0.8% higher to $1,295.56/Oz amid increased safe haven demand on the back of heightened geopolitical tensions, before paring back some of its gains later in the session.
• Having broken the key 200-day moving average last week, the yellow metal’s recent rise could be momentarily capped at the psychological $1,300/Oz handle.
• Silver for immediate delivery edged 0.6% higher to $18.6530/Oz, rising to a fresh high since 11 Nov. last year.

Oil

• Crude oil futures expiring in May slid 1.0% to $52.63/bbl, as US explorers added 11 rigs last week, capping the longest stretch of gains since 2011, according to a report from Baker Hughes Inc. data. Prices well even after Saudi Arabian Oil Co. Chief Executive Officer Amin Nasser said the global oil market is moving closer to balance despite the US shale boom.

USDSGD:

• Spot 1.3940
• USDSGD fell 0.4% to 1.3934, with the pair threatening to break below the 200-day moving average for the second time in a week.
• The 5-month low of 1.3909 acts as the next key support level.

AUDUSD:

• Spot 0.7587
• AUDUSD rose by as much as 0.2% to 0.7594 earlier today, on the back of renewed USD weakness today.
• However, better-than-expected Chinese GDP released earlier today failed to lift the currency pair by much, with the 0.7600 resistance holding strong.

USDCAD:

• Spot 1.3302
• USDCAD reversed from a 0.6% gain last Friday, sliding 0.2% back to the 1.3300 handle.
• Continued USD weakness, coupled with CAD strength after the BoC last week took the possibility of a rate cut off the table, may drive the currency pair lower to test its 200-day moving average of 1.3225 again.

USDCNH:

• Spot 6.8797
• The PBOC earlier weakened to 6.8785 to the US dollar, from 6.8740 last Friday.
• USDCNH slid 0.2 % to 6.8754 earlier, falling back to the 50-day moving average.

USDJPY:

• Spot 108.13
• USDJPY slid 0.5% to 108.13, a 5-month low as Treasury yields slid after the long weekend following a report that US inflation fell for the first time in more than a year and continued safe haven-buying amid increased geopolitical tensions.

GBPUSD:

• Spot 1.2542
• GBPUSD edged 0.2% higher to 1.2545, with the 1.2600 resistance looming above and the currency pair entering a phase of upside consolidation amid stalled USD selling across the board.