Key overnight events:
- The S&P 500 Index slid 1.0% last night, halting the longest streak of calmness in 13 months. The US benchmark is down 1.3% so far this week, the biggest 2-day slump since 9th Feb. Banks led decliners as volumes hit a 2-week high into the session’s close.
- ISM non-manufacturing rose to 54.5 from 53.4, higher than the expected 54.2.Markit services PMI meanwhile rose from 51.0 to 51.3, marginally beating the expected 51.2 figure.
- WTI futures expiring in May settled 0.5% higher at $35.89/bbl, on speculation that a pact to freeze crude output may be reached without the participation of Iran. The rally carried on into Asia’s morning session as futures rebounded back to around 37/bbl.
- FOMC minutes are due later tonight and investors will be looking for clarity on the future path of interest rate hikes, given that Fed speakers since last month’s meeting have provided mixed signals.
- Atlanta Fed researchers have cut their US 1Q GDP estimate for the second time in 8 days, citing slowing factory orders and light vehicle sales.
- USDJPY sank briefly below 110 for the first time since 2014, raising the risk of FX intervention by the BOJ.
- The IMF’s Lagarde said that weakness in growth, jobs and inflation is hurting global outlook, suggesting the IMF will lower global economic forecasts.
- Iceland’s Prime Minister has quit, marking the first casualty of the Panama Papers leak that exposes alleged tax evasion by world leaders.
USDSGD:
- Spot 1.3549
- The Singapore dollar strengthened for the first time in 4 days; USDSGD retraced from the high of 1.3593 which was reached yesterday.
- The medium-term downtrend for the currency pair since mid-January remains intact for now.
AUDUSD:
- Spot 0.7563
- RBA kept its cash target rate unchanged at 2.0%, as expected, yesterday.
- Governor Stevens acknowledged that the Aussie dollar has appreciated somewhat recently and warned that further appreciation could complicate the adjustment underway in the current economy.
- In yesterday’s statement, the RBA removed its previous statement’s reference to financial turbulence stemming from weaker global and domestic demand.
USDCAD:
- Spot 1.3126
- USDCAD reached a 1 week high of 1.3219 last night before paring some if its gains this morning.
- Canada’s trade deficit grew to C$1.9 billion in February, more than triple the shortfall of C$628 million the month before, and more than the expected deficit of C$900 million. Exports declined 5.4% month-on-month, the largest decrease since 2009, due to a combination of lower prices and a 2.2%-decrease in volumes. Imports declined 2.6% over the same period, suggesting that demand at home was weak as well.
- The Bank of Canada’s Deputy Governor Wilkins said that Canada is well-positioned to ride out any economic shocks from China, even after the world’s second-largest economy has become Canada’s second-biggest trading partner. She added that if growth in China comes in 1 percentage point lower than projections, then Canadian growth would only slip one-tenth of a percentage point.
USDCNH:
- Spot 6.4839
- Caixin China PMI Services for March rose to 52.2 from 51.2, while the PMI Composite rose to 51.3 from 49.4.
- USDCNH remains largely unchanged, as it continues to trade around the 1-week high of 6.4869.
USDNOK:
- Spot 8.3307
- USDNOK looks poised to snap 4-day winning streak as overnight gains of up to a high of 8.3802 have been given up, as the currency pair sinks back below the previous short-term resistance of 8.3500.
- Norway plans to boost investments in unlisted real estate to 7%, from 5%, of its wealth fund, according to a white paper published on the government’s website.