Spot values at a glance:
Asian equities were largely mixed as investors monitored war drills scheduled for the Korean peninsula and prepared for a key meeting of global central bankers. Benchmarks in Tokyo, Seoul and Sydney fell amid thin trading volumes, while they rose in Hong Kong, Singapore and Shanghai. Oil held gains following its rally on Friday.
- Annual military drills between the US and South Korea this week could reignite tensions after Kim Jong Un and President Donald Trump recently traded barbs. For foreign firms that count on South Korea for significant revenue, any escalation that curbs commerce could leave them vulnerable.
- A Bloomberg report has highlighted some companies which could have most of their businesses at stake should a war break out in the region. Not surprisingly, technology features prominently in the list of foreign companies that get more than $1 billion from South Korea.
- The nation of 51 million is also headquarters to some of the world’s best-known brands, many of which get a majority of revenue from overseas, such as Samsung Electronics Co. and LG Electronics Inc.
- Controversial White House chief strategist Stephen Bannon, US President Donald Trump’s primary link to nationalist elements within the Republican Party, was ousted from his position on Friday. He’s now back at Breitbart News, where he has pledged to go “to war for Trump against his opponents”.
- US stocks rallied on the news, as the advisor’s exit was seeing as reducing the likelihood that the world’s largest economy pursued protectionist policies, but reversed those gains to close in the red. The Dow Jones Industrial Average and the Nasdaq Composite fell 0.35% and 0.09% respectively, while the S&P 500 declined 0.18% to close below its 50-day moving average for the first time since early November.
- Billionaire activist investor Carl Icahn quit as a special regulatory adviser to the president on Friday in order to avoid “partisan bickering” about his role, amid concerns about possible conflicts of interest. Sebastian Gorka, one of Bannon’s allies and a counterterrorism aide, may be the next official pushed out of the White House. Meanwhile, Steven Mnuchin has elected to stay on as Treasury Secretary despite being asked by his former Yale classmates to resign.
- On the economic front, all eyes will be on Wyoming this week as the world’s top central bankers gather for this year’s Jackson Hole, which comes as central banks in advanced economies creep toward the policy exit after years of unprecedented easing, even with outlooks are clouded by stubbornly tepid inflation.
- The US dollar maintained Friday’s losses, with the Bloomberg Dollar Spot Index largely unchanged earlier today following a 0.4% decline last Friday. The more-keenly watched Dollar Index slid 0.2% to fall back below the 93.50 handle.
- The benchmark 10yr Treasury yield inched higher earlier today, rising almost 2bps to 2.21%.
- The US, Mexico and Canada ended the first round of talks on a new North American Free Trade Agreement saying they’re committed to wrapping up the negotiations quickly with a far-reaching deal, after 5 days of discussions in Washington. The next round of negotiations is scheduled for Sept. 1-5 in Mexico, with talks moving to Canada in late September and back to the US in October.
- CPI in July showed some signs of life, with year-on-year prices rising 1.2% to match expectations and improve upon June’s 1.0% gain. The report also showed a second straight gain in core inflation.
- The clearest sign that the recent weakness in prices has at least bottomed out are the rising key core inflation readings. The average of the Bank of Canada’s 3 core inflation measures was 1.5%, rising from a 1.4% pace in June and a 1.3% reading in May that was the slowest since 1999.
- Financial regulators should increase coordination and step up punishment for violators to crack down on regulatory arbitrage, says PBOC Vice-Governor Yin Yong at a forum on Saturday.
- US Trade Representative Robert Lighthizer officially started a probe into China’s intellectual-property practices.
- Spot gold briefly breached the key $1,300/Oz on Friday, but soon gave up gains to close 0.1% lower at $1,284. 13/Oz. The precious metal has managed to hold above the $1,280/Oz handle earlier today as investors monitor US and South Korea military drills, and count down towards the Jackson Hole symposium later this week.
- The short-term support at $1,270/Oz looks to hold for the time-being, as some consolidation is expected between it and the key psychological $1,300/Oz resistance.
- The precious metal has recently broken above a key downward multiyear trendline, in play since 2011. A breach above the $1,300/Oz handle should confirm the breakout and signal the start of a new long-term upward trend.
- Silver for immediate delivery has been trying to hold above its 200-day moving average of around the $17/Oz handle. The metal closed 0.5% lower at $16.9700/Oz on Friday and was relatively unchanged earlier today.
- Crude oil futures rallied 3.0% Friday to $48.51/bbl, as US drillers reduced the number of active rigs by the most since January.
- Drillers targeting crude cut the rig count by 5 to 763, the second decline this month, according to Baker Hughes Inc.
- Royal Dutch Shell Plc, the world’s largest oil trader, is said to have loaded its first crude from Libya in 5 years over the weekend.
- Spot 1.3623
- USDSGD slid 0.1% to 1.3617 following USD weakness over the weekend and as the currency pair continues to consolidate between the 1.3600 and 1.3700 handles.
- The key resistance lies at the 1.3700 level, a convincing break above may lead to further upside with the next resistance lying at 1.3860. To the downside, a decline back below the 1.3600 handle should lead to a retest of the 10-month low of 1.3543.
- Spot 0.7931
- AUDUSD recovered back above the 0.7900 handle late Friday and maintained above it earlier today.
- According to Bloomberg news last week, the bond markets show that investors have been signalling for a while that the Aussie’s climb to a 2-year high last month might have been overextended. The extra yield that local 10yr notes offer over similarly dated US Treasuries peaked at just under 50bps in mid-July, but the currency kept on appreciating.
- Spot 1.2587
- USDCAD slid 0.5% on Friday following better-than-expected inflation numbers in July, and held below the 1.2600 handle earlier today. The currency pair was also driven lower by a weaker USD and strengthening crude oil prices over the weekend.
- The 1.2800 resistance target remains.
- Spot 6.6800
- The PBOC strengthened its reference rate by 0.05% to 6.6709 per US dollar earlier today.
- USDCNH was largely unchanged on the day earlier as the currency pair continues to hold above the 6.6800 handle.
- Spot 109.24
- USDJPY declined 0.9% to 109.18 on Friday, amid broad USD weakness, and maintained losses earlier during its session earlier today.
- The key support remains at the 108 handle, last tested in April. The pair has largely ranged between 109 and 115 for most part of the last 5 months. A breakout in either direction could lead to a sustained move that could last until the end of the year.
- Spot 1.2878
- GBPUSD was largely unchanged earlier, holding below the 1.2900 for the fourth straight session as the pair continues to be supported around its 100-day moving average of 1.2872.
- The next key support below resides around the 1.2800 handle.