Issue#: 291/2017

Spot values at a glance:

USDSGD

USDCNH

AUDUSD

USDJPY

USDCAD

GBPUSD

Daily Observations:

Asian stocks were mostly lower after a recent rally, as investors were left underwhelmed by the Trump administration’s tax overhaul proposal which were found lacking in details. The US dollar weakened in Asian trade after the White house dispelled speculation over the fate of NAFTA.

US:

  • President Donald Trump’s much-anticipated tax reform bill underwhelmed markets after details were left out of the one-pager list of bullet points which amounted to fewer than 250 words.
  • One key point omitted was whether the proposed cuts for businesses and individuals would increase the federal deficit. The answer to that may determine whether Trump’s recommended 15% corporate tax rate, a huge cut from the current 35%, would be permanent or temporary.
  • US stocks, which have hit record highs recently, reversed course and erased daily gains. The benchmark S&P 500 Index slid 0.1%, halting a 2-day rally and retreating from the 2,400 resistance earlier in its session.
  • Republicans and Democrats worked to put the final touches on a $1.1 trillion spending bill needed to avert a US government shutdown after the White House appeared to satisfy Democrats’ demand that President Donald Trump and Republicans protect the continuation of payments at issue which are used to subsidize coverage of lower-income Americans – a key feature of Obamacare.
  • The US dollar reversed overnight gains, as the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, declined 0.2% earlier after rising last night for the third straight day.
  • Treasuries rallied after the Trump administration summarized its tax reform plan, signalling that investors became dubious about its prospects in Congress and its efficacy if passed. The benchmark 10yr Treasury yield fell 2bps to 2.30%, reversing from an earlier session high of 2.35%, its most since Apr 11.

Canada:

  • Retail sales in February fell 0.6% from a month earlier, reversing from a 2.3% rise in January; economists were expecting no change.
  • In a statement issued by the White House earlier today, President Trump won’t immediately terminate US participation in NAFTA after he spoke with the leaders of Mexico and Canada about ways to renegotiate the accord.

Japan:

  • The BoJ kept is stimulus policies unchanged while lowering its inflation forecast, highlighting the fact that any exit from its accommodative monetary easing remains far away. In a statement released earlier today, the central bank said it will continue to use its 2 policy rates and asset purchases to spur prices higher. The BoJ made a small increase to its growth forecasts for this fiscal year and next.

China:

  • Industrial profits in March jumped 23.8% from a year earlier to 688.7 billion yuan, the National Bureau of Statistics said earlier, accelerating from the 2.3% gain in the month prior.
  • Confidence of small- and medium-sized enterprises, a gauge of manufacturing based on satellite imagery and a steel sentiment index edged lower in April, providing early indications that the momentum of China’s economy this quarter may ease.
  • The Chinese government’s campaign to reduce risk in the financial system is weighing on the country’s stocks, which rank among the world’s worst performers this month, according to Bloomberg. The Shanghai Composite Index, which had climbed 6% this year early April, had dipped into the red for 2017 in intraday trading earlier today.

Australia:

  • Australia’s government is signalling it wants more leeway in next month’s budget to borrow for large infrastructure projects, taking up proposals from both the central bank and IMF. Treasurer Scott Morrison will split government debt into funding for day-to-day spending and borrowing for projects like road and rail.

Singapore:

  • Industrial production in March jumped 10.2% from a year ago and 5.0% from a month before, surpassing the median estimates of 5.8% and 0.5% respectively.
  • Singapore is creating a S$1 billion fund, the Makara Innovation Fund – a collaboration between the Intellectual Property Office of Singapore and local private equity firm Makara Capital, to help innovative companies develop their businesses and expand overseas, as part of the nation’s drive to boost growth. The fund aims to invest S$30 to S$150 million each in 10 to 15 companies with globally competitive technologies over the next 8 years.

Precious Metals:

  • Spot gold was largely steady from its previous day’s close, after briefly trading above the $1,270/Oz earlier. After declining for the 7 out of its past 8 sessions, the precious metal looks set for some consolidation above its 200-day moving average of $1,254.38/Oz; to the upside, the psychological resistance at $1,300/Oz remains.
  • Silver for immediate delivery fared worse, declining as much as 1.6% to $17.3275/Oz overnight, before paring losses back to $17.50/Oz today.

Oil

  • Crude oil futures expiring in June was little changed earlier today, after bouncing off the $50/bbl resistance overnight. Crude oil is currently consolidating between the $49/bbl and $50/bbl handles, as the market weighs the prospects of extended OPEC output cuts and expanding US crude production.
  • According the Energy Information Administration last night, crude output in the US rose a tenth week to the highest since Aug 2015, while inventories dropped by more than double what analysts had forecast.
  • Meanwhile, energy ministers of Saudi Arabia and Venezuela plan to meet with their Russian counterparts to discuss extending supply cuts.

USDSGD:

  • Spot 1.3950
  • USDSGD reversed overnight gains following a weaker USD after an underwhelming tax reform plan was proposed by Trump’s administration.
  • The pair was 0.1% lower at 1.3944 earlier; the 200-day moving average of 1.3969 continues to act as a region of resistance.

 

AUDUSD:

  • Spot 0.7486
  • AUDUSD earlier sank by as much as 0.5% to 0.7455, the pair’s lowest level since January, before paring back most of its decline on the back of surging industrial profits in China – Australia’s largest trading partner.
  • 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.

 

USDCAD:

  • Spot 1.3533
  • USDCAD swung from a 0.5% gain to decline 0.4% to 1.3530, following the latest statement from the White House indicating US President Trump has agreed not to terminate NAFTA at the current time.
  • The pair had previously risen to its highest level since Feb. 2016, but has since retreated back below the key 1.3600. The momentum has shifted significantly to the downside, with a reversion back to 1.3400 looking likely.

 

USDCNH:

  • Spot 6.9018
  • The PBOC earlier weakened its reference rate by 0.07% to 6.8896 to the US dollar, from 6.8845 yesterday.
  • USDCNH edged past the 6.9000 handle, 0.1% higher to 6.9040 earlier.

 

USDJPY:

  • Spot 111.17
  • USDJPY barely moved after the BoJ kept key policy tools unchanged earlier today; the pair continues to fluctuate around its previous day’s close of 111.18.
  • Immediate resistance can be found at 111.60 – a previous support which held for 4 months until it was broken last month.

 

GBPUSD:

  • Spot 1.2867
  • GBPUSD gained 0.4% to 1.2876 as the pair neared its upper bound of its narrow range over the past week.
  • Polls released yesterday showed Conservatives maintaining a healthy lead with 49% support. The market is already seeing a Theresa May win as a sure thing and is implying it will improve her negotiating position.
  • 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.
© Jachin Capital Pte Ltd

UEN: 201419754M


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