August 18, 2016

Daily Observations:

European shares opened higher, rising for the first time this week, while Asian shares were mixed, as the dollar fell against all of its major peers following last night’s less hawkish-than-expected Fed July minutes. Gold, crude oil and the yen gained.

US:

  • Minutes from the Fed’s July meeting were less hawkish than expected and signalled no imminent hike. According to the minutes, Fed officials had decided to keep their options open on the timing on the next rate hike.
  • The committee was divided in July over the urgency to raise rates, with some preferring to wait because inflation remained benign and others wanting to increase soon as the labour market nears full employment.
  • Treasury yields fell, erasing gains spurred by the previous day’s hawkish comments from New York Fed President William Dudley. 10yr yields fell 3bps to 1.55%.
  • Morgan Stanley has recommended buying 5yr notes, saying the absence of inflationary pressures in the US will push the odds of a Fed rate increase this year to 30% in the coming weeks. According to Blomberg Fed fund futures, the probability was 49% yesterday.
  • The Bloomberg Spot Dollar Index, which tracks the greenback against 10 major peers, declined 0.5% and looks headed for 3-month lows last reached 2 days ago.
  • The S&P 500 Index reversed early-session losses to close 0.2% higher midweek as utilities and financials led gainers.

Japan:

  • Exports slumped 14.0% year-on-year in July, while imports tumbled 24.7% over the same period, missing their respective estimated declines of 13.7% and 20.0%.

Australia:

  • Employment rose by 26,200 jobs in July, much stronger than the 10,000 forecasted, while the previous month’s gain of 7,900 was revised higher to 10,800.
  • The big beat in employment stemmed from a large jump in part-time employment, which gained 71,600. Full-time jobs, however, fell by 45,400.
  • Unemployment rate improved from 5.8% to 5.7%, also beating the consensus estimate of 5.8%.

 

Precious Metals:

  • Spot gold rose 1.0% to $1,356.18/Oz, almost erasing all of its previous day’s declines as a weaker dollar boosted precious metals’ prices.
  • Silver for immediate delivery advanced 1.7% to $19.9385/Oz but failed to test the $20/Oz level and has since pared back some of its earlier gains.

 

USDSGD:

  • Spot 1.3408
  • The Singapore dollar briefly traded below the 1.3400 level against the US dollar earlier today, strengthening 0.5% against the green back on the wake of less hawkish-than-expected FOMC minutes.

 

AUDUSD:

  • Spot 0.7710
  • A stronger-than-expected jobs report helped Australian bulls to reclaim the 0.7700 level, against the US dollar. AUDUSD surged 1.3% to 0.7723, near 4-month highs.
  • The next resistance above resides at 0.7835.

 

USDCAD:

  • Spot 1.2814
  • USDCAD resumed its recent downward trend, falling 0.7% to 1.2803 earlier today, a key support level.
  • The currency pair could consolidate a bit around these levels, ahead of tomorrow night’s release of inflation and retail data.

 

USDCNH:

  • Spot 6.6342
  • The PBOC sets its fixing rate 0.33% weaker at 6.6273 against the dollar.
  • USDCNH fell 0.3% to 6.6230, a key support level. The currency pair has since rebounded sharply paring back most of its declines.

 

USDJPY:

  • Spot 100.08
  • The yen continues to test the key 100 support level, following broad dollar weakness overnight and poorer-than-expected Japan trade data.

 

GBPUSD:

  • Spot 1.3066
  • GBPUSD rose 0.6% to 1.3088, near 1-week highs, ahead of retail sales data due later today.

 

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