Daily Observations:

Asian stocks advanced, rebounding from their worst day since Brexit. Crude oil held its overnight rebound while higher-yielding currencies climbed. Safe haven assets declined as gold and Australian and Japanese government debt declined. The Bank of England is widely expected to cut rates later today.


  • ADP US private payrolls for July rose 179,000, pacing last month’s gains of 176,000 and better than the forecasted 170,000. Gains were largely driven by the service sector.
  • Markit US services PMI in July rose to 51.4 from 50.9 in June, beating the 51.0 expected. ISM non-manufacturing, however, cooled to 55.5 from 56.5 in June and was off the median estimate of 55.9.
  • The Fed’s Chicago President Charles Evans, who doesn’t vote on the committee this year, said one hike may be warranted this year, though he would prefer none given the weakness in inflation.
  • The S&P 500 Index added 0.3% to finish at its sessions high, after slipping 0.8% over the past 2 days. Energy and financial stocks led gainers while utilities and staples struggled.
  • The US dollar was well supported overnight before paring some of its gains at the start of Asian trade this morning; the Bloomberg Spot Dollar Index, which tracks the dollar against 10 major peers, retreated 0.1% today after its 0.3% gain last night.
  • The average yield on bonds in Bank of America’s G-7 Government Index climbed to 0.58%, the highest in five weeks, suggesting the record-setting global bond market rally appears to be nearing exhaustion. A record low of 0.45% was reached in July.
  • US Treasury 10-year yields slipped 1bp to 1.54%.
  • Bill Gross said in a world of inflated stock and bond prices, he recommends buying the assets that central bankers aren’t – real estate and gold.


  • Markit services PMI data for July plunged to 47.4 from 52.3, its most severe decline in 7 years, and adding weight to arguments for the BOE to loosen policy further later today.


  • The recent reversal of fortunes of crude oil prices could be a potential complication for Canada’s economy. With aggregate demand falling the most since 2009, continued oil weakness could force the BoC to reduce rates further in an attempt to bolster its economy.
  • Continued deterioration of oil prices should result in increased speculation of a BoC rate cut during either of its next meetings in September and October. According to Bloomberg data, overnight indexed swap rates indicate a 1.4% chance of a cut in September and a 31.9% chance in October.


  • The PBOC reiterated that monetary policy will remain prudent in the second half of this year, seemingly rebutting a call yesterday from NDRC, China’s top economic planner, for more easing.
  • According to Bloomberg, the NDRC is more concerned about growth and wants more accommodative monetary policy while the PBOC is worried about excess leverage while seeking to limit it, the PBOC also hopes fiscal policy can do more of the heavy-lifting.


  • India approved the creation of a national sales tax, as expected, a decade after it was first mooted. The tax may be positive for the rupee in the near term, and is expected to boost GDP by as much as 2 percentage points.


  • Retail sales in June rose 0.1% month-on-month, slower than May’s increase of 0.2% and the general consensus’ gain of 0.3%.
  • Stripped of inflation, retail sales were 0.4% higher quarter-on-quarter, lower than the 0.5% predicted.

Precious Metals:

  • Spot gold halted its longest rally in 6 weeks following the positive ADP numbers. The precious metal fell 0.7% to $1,354.29/Oz.
  • Silver for immediate delivery extended previous day’s losses, falling 1.9% today to $20.2295/Oz.
  • A more positive-than-expect nonfarm payrolls number tomorrow could further dampen demand on precious metals. Immediate support and resistance for spot gold lies at $1,335/Oz and $1,375/Oz respectively.


  • WTI oil futures expiring in September rebounded strongly yesterday to settle 3.3% higher at $40.83/bbl and extended gains by more than 1% in early Asian trade today.
  • EIA data showed gasoline stockpiles fell unexpectedly by the most since April or 3.3 million barrels.



  • Spot 1.3414
  • USDSGD was mostly steady as it continues to consolidate and be supported above the 1.3400 level.



  • Spot 0.7615
  • Despite its recent rate cut and this morning’s worse retail sales numbers, the Aussie dollar has continued to strengthen, rising as much as 0.5% earlier today to 0.7626.
  • The key resistance of 0.7676 remains to be tested next.



  • Spot 1.3063
  • USDCAD reverted back below the 1.3100 handle, driven by an overnight rebound in crude oil prices. The currency pair slid 0.7% to 1.3039 earlier today.



  • Spot 6.6408
  • The PBOC sets its fixing rate 0.38% weaker to 6.6444 against the dollar, its biggest decline in almost a month.
  • USDCNH was 0.2% higher at 6.6455 earlier today.



  • Spot 1.3339
  • GBPUSD remains largely unchanged ahead of the BOE’s widely expected 25bp rate cut announcement later today.
  • Considering that swaps prices are reflecting an almost-100% chance of a cut, the risk for GBPUSD remains to the upside, with the 1.3500 handle coming in as the next level of resistance.
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UEN: 201419754M

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