The dollar strengthened against all of its major peers as recent hawkish comments from US central bankers boosted the likelihood of a rate hike this year. Most Asian shares were lower as oil declined together with gold. Silver led losses among precious metals.
- San Francisco President John Williams said a return to rate hikes “makes sense”, citing full employment and inflation that are well within sight of, and on track to reach their respective targets.
- The Fed’s Vice Chairman Stanley Fischer signalled that a 2016 hike is still under consideration, and that the US economy is close to meeting its targets for full employment and 2% inflation.
- The 2 Fed officials echoed the sentiments of their colleagues Dudley and Lockhart, who earlier last week indicated borrowing costs might be lifted by as soon as September.
- Benchmark 10yr yields rose 4bp to 1.58%. According to Fed funds futures, the probability of a US rate hike by year-end increased to about 51%, up from 45% a week ago.
- The US dollar rebounded sharply from more than 3 month lows, with the Bloomberg Spot Dollar Index rising 0.4% earlier today.
- Retail sales in June slipped unexpectedly by 0.1% from a month earlier, less than the 0.5% gain predicted by economists, while the previous month’s figure was revised downwards to 0.0% from 0.2%.
- Headline CPI in July declined 0.2% month-on-month, less than the 0.0% expected. Core CPI over the same period remained stagnant, matching expectations.
- Canada may consider relaxing its foreign investment rules, including steps to open up to state-owned enterprises in china, in a bid to attract more capital and spur economic growth, Finance Minister Bill Morneau said.
- RBI Governor’s Rajan will be replaced by Urjit Patel, the current deputy governor. However, markets were initially expecting someone more dovish.
- BOJ Governor Kuroda said there is “sufficient chance” of expanded easing at its meeting next month. He added that there is “technically” room for deeper negative rates but ruled out the use of helicopter money.
- A senior PBOC official said China should increase its current fiscal deficit of 3.5%, adding that he prefers a reduction in tax rate instead of an interest rate cut. He also predicted the yuan won’t see a big devaluation for a long time.
- Spot gold extended Friday’s 0.6% drop by another 0.6% earlier today to $1,333.14/Oz, as recent hawkish comments from Fed officials dampened demand for the precious metal.
- Silver for immediate delivery slumped 3.0% earlier today to $18.7320/Oz, its lowest level in more than 7 weeks. The previous support level of $19.20/Oz has been broken; the next level of $18.50/Oz looks likely to be tested soon.
- Crude oil futures expiring in September was lower by around 1.1% at $48.01/bbl this morning, and looks set for its first losing day in eight consecutive sessions.
- Spot 1.3521
- USDSGD advanced by as much as 0.6% to 1.3549, its highest level in almost 3 weeks, driven by a stronger US dollar over the weekend.
- Spot 0.7591
- The Aussie dollar weakened to its lowest level since Aug 4th, 0.6% lower at 0.7585.
- Analysts have been divided over the future direction of the currency pair, with Goldman Sachs predicting further Aussie strength to 0.8000 and Westpac Banking targeting the currency pair to fall to 0.7400.
- Spot 1.2917
- USDCAD rose 0.4% back above the 1.2900 handle following hawkish comments from US central bankers and poor retail and inflation data last Friday.
- Spot 6.6728
- The PBOC set its fixing rate 0.67% weaker at 6.6652 against the dollar, the deepest daily fixing cut by the central bank in almost 2 months.
- Offshore yuan was 0.3% weaker against the greenback at 6.6739, near its highest levels in 3 weeks.
- Spot 100.79
- The yen weakened by 0.7% to 100.91 against the dollar, following Kuroda’s dovish comments of more easing in September.
- Spot 1.3046
- GBPUSD extended Friday’s drop by a further 0.3% to 1.3037 earlier today.
- The UK will report 2Q GDP later this week and a weaker-than-expected number is likely to push the currency pair back below the 1.3000 handle.