Spot values at a glance:
Asian stocks fluctuated and US equity futures fell as investors weighed the damage from Hurricane Harvey on US oil refining centres. The greenback maintained losses after Federal Reserve Chair Janet Yellen failed to provide clues on monetary-policy tightening.
- North Korea fired 3 ballistic missiles over the weekend and Secretary of State Rex Tillerson said on Sunday that the US will continue to push for negotiations to deescalate nuclear tensions on the Korean peninsula despite the “provocative” acts.
- Hurricane Harvey smashed ashore near Rockport, Texas, on Friday as a Category 4 hurricane and the strongest storm to hit the US since 2004 then started dumping what could end up being about 4 feet of rain. 2 deaths are attributed to the storm, which also halted a quarter of oil and natural gas production in the Gulf of Mexico and 5% of US refining capacity. Energy, crops, livestock and drinking water are under threat; airlines cancelled almost 3000 flights and the White House said President Trump will travel to Texas on Tuesday.
- Trump was on the offensive again over the weekend about the North American Free Trade Agreement, calling it the “worst trade deal ever made” in a Twitter post on Sunday and saying the US might have to just “terminate” the pact because Mexico and Canada were being difficult in renegotiation talks. He reiterated his determination to build a wall along the US’s southern border and to make Mexico pay for it eventually.
- Fed Chair Janet Yellen’s speech in Jackson Hole over the weekend was all about how post-crisis financial reforms made the banking system safer and more resilient. She did not elaborate on rate-hike chances, disappointing any who thought she might try to prop up the sagging odds in futures that there will be another one this year. The US dollar, as a result, sank the most in a month.
- The Bloomberg Dollar Spot Index earlier today sank to its lowest since January 2015, due to the lack of guidance from Yellen during Jackson Hole. The Dollar Index gapped lower by as much as 0.5% to 92.318 this morning, before recovering back to the 92.500 handle.
- Federal Reserve Bank of Cleveland President Loretta Mester urged her colleagues to look past recent weak inflation data and to stick to their gradual pace of lifting interest rates, with one more increase projected before the end of this year. Mester also said she favors beginning the run-down of the central bank’s $4.5 trillion balance sheet “soon.” Economists expect the Fed to make an announcement on the timing of that process after their Sept. 19-20 meeting in Washington.
- The benchmark 10yr Treasury yield fell 2bps on Friday, but gained 1bp to 2.18% earlier this morning.
- According to a Bloomberg report, the Treasury bill yield curve says the probability that the US government won’t raise the debt ceiling in time to avert a technical default is about 15%.
- The S&P500 Index (+0.17%) and the Dow Jones Industrial Average (+0.14%) closed higher on Friday, after both Fed Chair Yellen and ECB President Draghi failed to reveal clues about future monetary policy moves. The Nasdaq Composite declined (-0.09%).
- ECB President Mario Draghi, speaking at Jackson Hole, said it was a particularly dangerous time to loosen regulation given that central banks are still supporting their economies with accommodative monetary policies. Draghi said nothing dovish on the policy front and gave no indication he was concerned about the euro’s surge this month to a 2 1/2-year high, prompting the euro to rise more than 1% against most majors.
- Brexit talks resume on Monday with Prime Minister Theresa May under pressure on two fronts: European negotiators are pushing her to reveal her hand, while the opposition Labour Party has made a bid to lure May’s critics to their side.
- Labour’s announcement on Sunday that it wants Britain to stay in the EU’s single market and customs union for up to 4 years after it leaves the bloc, a proposal that will delight business, means it’s now worthwhile for Conservative lawmakers who want to maintain ties with Europe to rebel and seek cross-party deals. May, who wants to leave the single market in 2019, lacks a parliamentary majority.
- BOJ Governor Haruhiko Kuroda pledged to forge on with very accommodative monetary policy as he warned that his inflation target remains distant and the current pace of growth in the world’s third-largest economy looks unsustainable. He also added that the he BOJ’s yield-curve control program has been working quite well and that he doesn’t see a need to adjust it at present.
- The earliest gauges of how China’s economy has fared this month show diverging sentiment among businesses, though the outlook is underpinned by expectations that the expansion will remain broadly steady, according to Bloomberg News. Manufacturing activity tracked by satellites strengthened and confidence at smaller companies improved, according to private indicators for August. The outlook wasn’t as strong in gauges of sales managers and steel mills, which show conditions moderated.
- Industrial profits for July rose 16.5% from a year ago, at a slower pace than the prior month’s gain of 19.1%.
- Industrial production in July jumped 21.0% year-on-year, accelerating upon June’s 12.7% rise and beating the median estimate of 12.9%.
- Spot gold added 0.3% to $1,294.94/Oz earlier today, after gaining 0.4% on Friday following a weaker US dollar over the weekend.
- The short-term support below at $1,270/Oz looks to hold for the time-being, while the key psychological resistance remains at $1,300/Oz.
- The precious metal broke above a key downward multiyear trendline 2 weeks ago, which was 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 gained as well, rising 0.6% to $17.1689/Oz earlier.
- Crude oil futures reversed an earlier gain, falling 0.5% to $47.61/bbl earlier. Oil has traded this month in the tightest range since February as investors weigh rising global supply against output cuts by OPEC and its allies.
- Gasoline futures jumped as the wider impact of Hurricane Harvey that shut more than 10% of US fuel-making capacity was becoming more evident.
- 2 more oil fields in Libya are being closed after an armed group took over pipelines to both deposits, further disrupting the OPEC nation’s plan to boost crude production.
- US drillers targeting crude reduced the working rig count by 4 to 759, according to Baker Hughes data reported Friday.
- Spot 1.3564
- USDSGD pared some of its 0.4% from Friday, gaining 0.1% to 1.3572 earlier.
- The pair fell below its 1.3600 support last week, and a retest of its 10-month low of 1.3543 is likely.
- Spot 0.7940
- AUDUSD extended upon Friday’s gain, adding another 0.2% to 0.7950 earlier today following USD weakness over the weekend.
- The pair has been recently bound between the support and resistance levels of 0.7800 and 0.8000 respectively.
- Spot 1.2481
- USDCAD remained largely unchanged on the day earlier following last Friday’s 0.4% decline to 1.2481, its lowest close since the start of August.
- The pair has failed to recover back above previous support of 1.2600, and a retest of the 1.2400 support is possible. The 1.2800 resistance target remains.
- Spot 6.6372
- The PBOC strengthened its reference rate by 0.34% to 6.6353 per US dollar earlier today, its strongest fixing in more than a year.
- USDCNH extended Friday’s drop, retreating a further 0.1% to 6.6365 earlier. The next support level lies at 6.6228.
- Spot 109.17
- USDJPY fell 0.3% to 109.09, as the focus turns to a slowing US economy after Fed Chair Yellen failed to discuss monetary policy at Jackson Hole. The yen gained as investors sought safer assets even as BOJ Governor Kuroda vowed to maintain an accommodative monetary policy.
- 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 1.2884
- GBPUSD erased an earlier gain of as much as 0.5% to end up largely unchanged on the day. Despite effects from a weaker USD over the weekend, the currency pair was weighed down by renewed Brexit concerns with talks set to resume today.
- The key support remains around the 1.2800 handle.