Daily Observations:

The dollar rallied broadly, together with Japanese equities, while emerging market assets slumped following hawkish comments from Fed officials over the weekend which reinforced the divergence in monetary policies between the US and other parts of the world. Government bonds, precious metals and crude oil all retreated.


  • The US economy expanded 1.1% in the second quarter, matching expectations but slower than 1.2% growth during the previous quarter.
  • Wholesale inventories stagnated in July from a month ago, missing estimates of 0.1%.
  • The University of Michigan consumer sentiment unexpectedly dropped to its lowest level since April, falling to 89.8 from 90.4.
  • Fed Chair Janet Yellen offered ambiguous remarks at her much-anticipated Jackson Hole speech last Friday.
    • Yellen cited solid performance in the labor market and improved outlook in economic activity and inflation as factors to a strengthening case for a September hike.
    • However, she also said economic growth has not been rapid, even though it was enough to generate labor market improvements.
    • The Fed are expecting moderate growth in real GDP, continued strengthening in the labor market and inflation rising to 2% over the next few years.
  • Following Yellen’s speech, Vice Chairman Stanley Fischer, in an interview with CNBC, said Yellen’s remarks were consistent with the possibility of two hikes this year, triggering a rally in the US dollar.
  • The Bloomberg Spot Dollar Index, which tracks the greenback against 10 major peers, rose 0.8% on Friday. The benchmark 10yr yield rose 5bps to 1.62%.
  • The probability of a rate hike in September rose to 42% from 26% last week, while the odds of 2 rate hikes this year are now 17%, according to Bloomberg pricing data.
  • The S$P 500 Index slipped 0.3% Friday, and was down 0.7% for the week.
  • All eyes are now focused on Friday’s non-farm payroll numbers and it is widely expected that a strong result will increase the odds of a September hike even more. Allianz’s chief economic adviser Mohamed El-Erian said a non-farm payrolls result of more than 200,000, coupled with higher wage growth, would provide the Fed with a very strong case to hike in September and “definitely by December”.



  • 2Q GDP matched expectations, growing by 0.6% month-on-month and 2.2% year-on-year, showing little impact from the lead-up to Brexit vote.


  • ECB executive board member Benoit Coeure said monetary policy may have to be used more frequently to help revive growth in the euro area.


  • Japan’s pension fund, the GPIF, has room to offload $56 billion in domestic bonds after falling yields last quarter boosted their portfolio weight above target, according to Bloomberg. An offloading of $56billion in bonds would mean that amount of money would be subsequently poured into stocks.
  • The BOJ’s Kuroda reiterated on Saturday that he is willing to ease further if needed.


  • Industrial production in July unexpectedly fell 3.6% from a year earlier, after registering a 0.6% growth the previous month; analysts were expecting a rise of 0.8%.

Precious Metals:

  • Spot gold was volatile on Friday, seesawing during the Jackson Hole symposium before closing 0.2% lower. The precious metal extended declines earlier today, falling a further 0.5% to $1,315/Oz.
  • The next key support region lies in the range of $1,300/Oz – $1,310/Oz, and could be tested soon as precious metals continue to be pressured by a strengthening US dollar.,
  • Silver for immediate delivery was 1.4% lower at $18.3990/Oz.


  • Crude oil futures expiring in September climbed 0.7% on Friday to $47.64/bbl, before paring gains today to fall 1.3% back to the $46/bbl handle.
  • Saudi Arabia Energy Minister Khalid Al-Falih said an output freeze will signify that producers are content with the market situation.



  • Spot 1.3601
  • USDSGD was 0.3% higher at 1.3627, its highest level in almost a month following the dollar’s rally over the weekend.
  • The next resistance for the currency pair comes in at 1.3722.



  • Spot 0.7549
  • AUDUSD broke back below the 0.7600 support handle, falling 0.5% to 0.7525, as hawkish Fed tones over the weekend and weakening iron ore prices weighed on the currency pair.
  • The apparent willingness of the Fed to hike rates means incoming RBA Governor Philip Lowe may have the ability to hold onto the policy ammunition that his predecessor bequeaths him.



  • Spot 1.3005
  • USDCAD rallied 0.6% on Friday back above the 1.3000 resistance handle and continued to fluctuate around it earlier today.



  • Spot 6.6888
  • Onshore yuan dropped to its weakest level in a month, tracking a decline in most currencies around the region after hawkish comments by Fed officials over the weekend.
  • Declines in CNY and CNH were limited by a fixing that was better than what some analysts had expected, with the PBOC setting the fix rate at 6.6856, spurring speculation that the central bank is set on defending the 6.7000 level.
  • USDCNH briefly traded above the 6.7000 level this morning before falling back below it, following the stronger-than-expected fixing.



  • Spot 102.11
  • USDJPY jumped 1.4% on Friday, and extended gains by 0.4% to 102.22 earlier today, as a strong dollar and Kuroda’s stimulus pledge over the weekend provided tailwinds for the currency pair.



  • Spot 1.3125
  • GBPUSD slipped back below the 1.3200 handle last Friday, falling 0.2% further this morning to 1.3108.
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UEN: 201419754M

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