Spot values at a glance:
Asian stocks extended a global rally after strong earnings from McDonald’s, Caterpillar and DuPont, coupled with hopes of US tax reform, boosted optimism for global growth. Weakness in safe haven assets such as the yen and gold continued.
- New home sales in March gained 5.8% from a month ago, surging past the 600,000 mark for only the second time since 2008; analysts were predicting a 1.4% decline.
- The Conference Board Consumer Confidence index fell to 120.3 in April, from 124.9 in the month prior, declining lower than the expected 122.5.
- President Donald Trump plans to propose a 10% tax on more than $2.6 trillion in earnings that US companies have stockpiled offshore, said a White House official familiar with matter. Proceeds from the so-called “repatriation tax” would represent a one-time source of sorely needed revenue, which could offset some of the deep tax cuts Trump has proposed for businesses or towards bipartisan initiatives such as infrastructure spending.
- Republicans voiced relief last night that Trump appears to be relenting from a government shutdown fight by retreating on his demand that Congress immediately starts funding a border wall, after the president signalled to conservative media outlets that the wall could be funded later in the year instead.
- US equities continued to rally, enjoying their best 2-day performance under Trump’s presidency, with the Nasdaq Composite Index topping 6,000 for the first time ever and the Dow Jones Industrial Average surging 200 points higher following stellar earnings from Caterpillar and McDonald’s. The benchmark S&P 500 Index added 0.6% by its close and lies a mere 0.5% off its record high set in early March.
- The US dollar mainly gained against the yen and the loonie, but weakened against a surging euro and Nordic currencies. The broad-based Bloomberg Dollar Spot Index, which tracks the USD against 10 major peers, edged 0.1% higher overnight.
- US yields gained across the curve after Trump made a promise to deliver long-awaited details on his tax-reform proposal, which may include slashing the corporate tax rate to 15%. The benchmark 10yr Treasury yield rose 6bps to 2.33% in New York.
- According to a study by economists at the Fed, shrinking its bloated balance sheet to a more normal size, which may begin as early as this year, would lift the yield on 10yr Treasury notes by about an estimated 75 basis points. The study examined the impact of cutting the $4.5 trillion balance sheet to $2.3 trillion over 5 years.
- According to a Reuters report, US Commerce Secretary Wilbur Ross announced that the US will impose preliminary anti-subsidy duties averaging 20% on imports of the softwood lumber from Canada.
- Last month, at least 64 cities announced new or tougher property-buying restrictions. The measures are beginning to bite, with a Bloomberg leading index showing new home sales growth by volume will probably slow this month to less than a third of the pace in March. The index tracks the production of washing machines, which are a predictor as each machines correlates almost one-to-one with completed new homes.
- Annual core inflation accelerated last quarter to just below the lower end of the RBA’s target, underscoring its decision to leave rates unchanged at its most recent meeting.
- Inflation gained 0.5% quarter-on-quarter and 2.1% year-on-year, less than respective median estimates of 0.6% and 2.2%; last quarter’s year-on-year gain of 2.1% was an acceleration the previous quarter’s 1.5% gain.
- According to Capital Economics, the rise in underlying inflation last quarter, coupled with the RBA’s financial stability concerns, dramatically reduces the chances of further interest rate cuts.
- Spot gold looks set to decline for the seventh out of its past 8 sessions, after declining 0.8% to a 2-week low of $1,261.33/Oz earlier today, following renewed risk-on sentiment spurred by speculation Trump’s planned tax growth reforms will spur growth.
- Gold is expected to be supported above its key 200-day moving average at $1,255/Oz for the time being; to the upside, the psychological resistance at $1,300/Oz remains.
- Silver for immediate delivery recovered by as much as 1.1% to $18.0085/Oz, but failed to hold above the $18/Oz handle and currently trading around its 50-day moving average of $17.9232/Oz.
- Crude oil futures expiring in June declined by as much as 0.8% to $49.19/bbl earlier today after closing higher on Tuesday for the first time in 7 sessions.
- Crude supplies rose by 897,000 barrels last week, the American Petroleum Institute was said to report. Government data due later today is expected to show stockpiles slid for a third week.
- Spot 1.3928
- USDSGD rebounded off its 1.3900 support yesterday, and remained mostly unchanged earlier today as the pair continues to teeter on the brink of breaking below its key support.
- To the upside, the resistance of 1.4000 remains.
- Spot 0.7513
- AUDUSD slipped 0.3% to the 0.7500 handle after first quarter CPI numbers missed estimates.
- The pair has largely traded sideways, mostly within the range of 0.7500 and 0.7750 over the past 3 months. A breakout in either direction could bring AUDUSD to either 0.7200 to the downside, or 0.8000 to the upside.
- Spot 1.3569
- USDCAD surged to its highest level in 15 months, rising 0.4% to 1.3626 last night, before erasing gains to end up relatively unchanged earlier this morning.
- A convincing break above the important 1.3600 level, and the pair could rise further quickly to the next resistance of 1.4000, last traded in Feb 2016.
- Spot 6.8896
- The PBOC earlier weakened its reference rate to 6.8845 to the US dollar, from 6.8830 yesterday.
- USDCNH edged 0.1% higher to 6.8910 earlier; the pair continues to fluctuate around its 100-day moving average of 6.8831. Yuan volatility has been greatly subdued despite a recent slump in Chinese equities.
- Spot 111.23
- USDJPY gained 0.9% to 111.39, after a risk-on rally pushed the 10yr Treasury yield to a 2 week high of 2.34%.
- Immediate resistance can be found at 111.60 – a previous support which held for 4 months until it was broken last month.
- Spot 1.2846
- GBPUSD rose 0.2% to 1.2846 as the pair continued to remain supported at the 1.2800 handle.
- European currencies like the pound have been buoyed since Macron beat Le Pen in the first round of the French election.
- The momentum continues to remain to the upside for the currency pair, with the 1.3000 psychological level providing some short-term resistance; over the longer-term, the key level to watch is 1.3500.