Daily Observations:

Crude oil’s selloff into bear market territory weighed on US and Asian equities, while Japan shares extended declines ahead of details on the BOJ’s fiscal stimulus plans. Yields on Australian government debt sank to record lows as investors await the results of the RBA’s policy decision.


  • ISM manufacturing in July fell to 52.6 from 53.2 previously, worse than the expected 53.0. Markit’s manufacturing PMI, however, managed to remain steady and matched expectations at 52.9. Both readings remain in growth territory.
  • The Fed’s Dallas President Kaplan, who doesn’t vote on the committee this year, said a September hike is still possible even after 2Q GDP has week was weaker than expected. He stated that growth data will be revised and the Fed will get two more employment reports before the next meeting.
  • New York Fed President Dudley said traders are underestimating how many times the Fed will hike over the next 18 months. Odds of a Fed hike this year have slipped below 40%.
  • The S&P 500 Index edged 0.1% lower after earlier rising to an intraday record. Around 58% of index members that have reported so far have beaten sales projections, while 80% topped profit estimates, according to Bloomberg data.
  • Treasuries fell as their appeal waned amid a nearly-$20 billion debt offering by Microsoft in order to help finance its planned LinkedIn Corp. purchase; US 10-year yield rose 7bps to 1.52%.
  • The US dollar rebounded from Friday’s sell-off, as the Bloomberg Spot Dollar Index rose 0.3% last night and a further 0.1% earlier today. The greenback however continues to remain near its weakest level in a month.


  • July PMI fell to 48.2 from 49.1 the previous month, missing consensus estimates of 49.1. The contraction is the fastest pace in over three years


  • The BOJ will give details on its 28 trillion yen stimulus package later day; it is speculated that actual spending will only make up about 7 trillion yen, with the rest consisting of loans and other financing, probably spread over several years.


  • The RBA meets today and interest rate swaps on Bloomberg indicate a 75% chance of a 25bps rate cut.
  • The nation’s 3-year sovereign yield sank to an unprecedented 1.40%, while that on the 10-year touched an all-time low of 1.83%.


  • PMI for July ticked lower to 49.5, from 49.6 the previous month.
  • MAS chief Ravi Menon said policy makers around the world should explore more radical ideas such as a global coordinated FX system to help limit currency volatility, such as “target zones” for currencies.

Precious Metals:

  • Spot gold remains little changed after its rally on Friday but has struggled to hold above the $1,350/Oz handle over the past 2 days.
  • Spot silver pared almost all of Monday’s gains, falling 0.7% to $20.3390/Oz earlier today.
  • Both precious metals remain bullish over the long term, having recently broke above their respective 200-week moving averages for the first time since 2013.


  • WTI oil futures expiring in September resumed its downtrend, sliding 3.7% to settle at $40.06/bbl after breaking below the $40/bbl handle for the first time in almost 4 months.
  • It has declined 22% from the June peak and is technically in a bear market.



  • Spot 1.3431
  • USDSGD failed to close below the 1.3400 handle yesterday, paring losses towards the end of its session. The currency pair extended its rebound today by another 0.3% to 1.3444.



  • Spot 0.7539
  • AUDUSD extended yesterday’s declines, falling another 0.7% earlier today to 0.7523, as investors await the RBA’s policy decision due 1230pm Singapore time.



  • Spot 1.3130
  • The Canadian dollar weakened overnight, together with crude oil prices, dropping 0.5% against the US dollar to 1.3142.
  • Further weakening of oil below the $40/bbl handle could result in USDCAD rallying its 4 month-high of 1.3253.



  • Spot 6.6544
  • The PBOC weakened its reference rate for the first time in six days, by 0.26% to 6.6489 versus the US dollar.
  • USDCNH extended its previous session’s gain of 0.3% by a further 0.2% this morning to 6.6606 and has pared most of last Friday’s declines.



  • Spot 1.3191
  • Weaker-than-expected UK PMI offset the effects of a US dollar rebound overnight, as the GBPUSD dropped 0.4% to 1.3181.
  • All but 2 out of 41 economists surveyed by Bloomberg forecast the BOE to cut rates later this week. The median estimate in a separate survey was for the BOE to maintain its asset-purchase target at 375 billion pounds.
  • Swaps pricing on Bloomberg reflect a 98% chance of a BOE rate cut. With such a high probability priced in, investors should pay heed to the vulnerability of policy disappointment, which could send GBPUSD through the rood should it happen.
© Jachin Capital Pte Ltd

UEN: 201419754M

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