Spot values at a glance:
Asian equities returned to its highest in almost 10 years after strong US hiring data bolstered optimism about economic growth in the world’s largest economy. The US dollar held onto gains following a strong rebound last Friday. Gold and crude oil were both lower earlier today.
- The United Nations Security Council imposed the “most stringent” sanctions on North Korea that would ban exports of coal, iron, lead and seafood in response to Pyongyang’s testing of 2 intercontinental ballistic missiles last month that could target the US.
- Chinese President Xi Jinping’s co-operation with the US on this likely helps cool tensions on trade between the world’s two largest economies, at least for now. China expressed confidence that the UN’s measures, which aim to crimp North Korea’s exports by roughly one-third, will bring the Kim regime to the negotiating table. However, US National Security Adviser H.R. McMaster also said the administration wasn’t ruling out the possibility of a “preventative war”.
- Nonfarm payrolls in July gained 209,000, surpassing the median estimate of 180,000, while June’s gain was revised higher to 231,000 from 222,000.
- The unemployment rate last month hit a 16-year low of 4.3%, matching expectations.
- Average hourly earnings in July rose 0.3% month-on-month and 2.5% year-on-year, versus their respective estimates of 0.3% and 2.4%, and maintaining upon June’s gains of 0.2% and 2.5%.
- Job gains were broad-based during July, led by the largest jump in leisure and hospitality employment since September 2015, a move driven by gains at restaurants. Hiring also hit five-month highs in manufacturing and education and health services. The drop in the jobless rate reflected a 345,000 rise in employed people in the household survey, while the number of unemployed was little changed.
- White House economic adviser Gary Cohn suggested that the US must cut its corporate tax rate by at least a third to compete with other developed countries. In an interview with Bloomberg TV, Cohn called for a 15% corporate tax rate, which would represent a far larger cut, as a starting point for negotiations as the administration and congressional tax writers begin drafting legislation. The current corporate tax rate is 35%.
- The US dollar saw its biggest advance since Jan. 26 following Friday’s better-than-expected jobs report, spurring the greenback to its first weekly gain since early July. The Bloomberg Dollar Spot Index, which tracks the USD against 10 major peers, rose 0.6% in New York Friday, while the narrower Dollar Index gained 0.8% to 93.542.
- US yields were higher across the curve; the benchmark 10yr Treasury yield rebounded from a 5-week low to gain 4bps to 2.26% on Friday.
- US equities closed higher, as the Dow Jones Industrial Average (+0.30%) rose for a ninth straight day to close at a record. The S&P 500 Index (0.19%) and the Nasdaq Composite (+0.18%) both eked out gains as well.
- Canada’s labor market continued its stellar performance in July, with the jobless rate falling to the lowest since before the financial crisis.
- The unemployment rate fell to 6.3%, the lowest since October 2008, as the labor market added another 10,900 jobs during the month, Statistics Canada reported from Ottawa; economists were predicting a 12,500 gain. The total increase over the past year of 387,600 is the biggest 12-month gain since 2007.
- While the job gain in July was lower than the average over the previous few months, the numbers show a healthy labor market as the bulk of the gains over the past year have been full-time. In July, the economy created 35,100 full-time jobs while dropping 24,300 part-time jobs
- UK consumers cut back on spending for a third month in July, putting them in their worst slump in more than 4 years and dealing another blow to the economy at the start of the quarter. The 0.8% year-on-year drop in spending was broad-ranging, with clothing, household goods, food and transport among the worst hit, IHS Markit and Visa said in a report published on Monday.
- Spot gold retreated 0.3% to $1,258.88/Oz Friday, following a more-positive-than expected July jobs report on Friday which bolstered the case for further rate hikes this year.
- The precious metal has failed to close above the key $1,270/Oz handle for 6 consecutive sessions, and further correction to the downside is expected. The key support remains around the $1,200/Oz region.
- According to a Bloomberg news report, even in its best month since February, bullion gained only 2.2% in July, and concern is mounting that rising interest rates may crimp further gains. That’s helping drive investors who want to continue owning the metal toward lower-cost funds. Bullion held by SPDR Gold Shares, the largest ETF backed by the metal, have shrunk to the smallest in more than a year, while holdings in the cheaper iShares Gold Trust are near an 8-month high.
- Global gold demand dropped to a 2-year low in the second quarter as reduced investment in ETFs products outweighed higher jewellery and bar purchases. Total demand slipped 10% from a year earlier to 953 metric tons, the lowest since the 2Q 2015, the World Gold Council said in a report last week. The decline was almost entirely due to ETF investors who cut buying by 76% from last year’s high level.
- Silver for immediate delivery delcined for the fourth straight day on Friday; the metal fell 1.4% to $16.2700/Oz.
- Crude oil futures expiring in September gained 1.1% to $49.58/bbl on Friday, ahead of a meeting in Abu Dhabi this week where major oil producers are expected to discuss why some nations are falling behind in pledges to reduce production.
- Saudi Arabia and Russia are expected to pressure other members of the agreement to hold up their end of the bargain. Data compiled by Bloomberg indicate that compliance by the group fell to its lowest level since January last month, though some parties are expected to argue that the sources used overestimate their production.
- The number of US drill rigs targeting crude oil fell by 1 last week, according to data from Baker Hughes Inc.
- The shale surge that’s tied down global oil prices shows no signs of abating, as 4 of the biggest US drillers said last week that they’re not backing away from lofty production targets for 2017. In second-quarter earnings reports, EOG Resources, Devon Energy, Newfield Exploration and Diamondback Energy all outlined goals that would help push US output toward a record 10 million barrels a day next year. The US drillers said they’re getting more efficient, allowing them to raise production goals without boosting spending.
- Spot 1.3601
- USDSGD reversed a decline from earlier in its session to close 0.1% higher at 1.3611 last Friday, its highest close in in more than a week. The currency pair pared its gain earlier this morning, retreating back to the 1.3600 handle.
- The support below lies at 1.3500, where the base of a double-top formation on the pair’s multiyear technical chart lies. However, a recovery back up to the resistance level of 1.3700 is more likely.
- Spot 0.7943
- AUDUSD gained 0.3% to 0.7949, following last week’s solid US nonfarm payrolls report.
- The next resistance target resides at the 2-year high of 0.8164, while to the downside, 0.7875 is expected to provide support.
- Spot 1.2632
- USDCAD rose to a 2-week high on Friday, adding 0.4% to 1.2645 after US payrolls beat expectations while jobs gains in Canada fell short of forecasts. The pair pared gains by around 0.1% earlier today.
- Having broken above 1.2600, the pair could extend its rebound higher towards the 1.2800 key resistance level.
- Spot 6.7284
- The PBOC weakened its reference rate by 0.14% to 6.7228 per US dollar earlier today.
- USDCNH erased most of Friday’s gain, declining 0.1% to 6.7281. The 9-month low of 6.7163 remains the next support to be tested.
- Spot 110.67
- USDJPY was little changed on the day, after the pair had retreated from its high around the 111 handle reached on Friday.
- The 110 support continues to hold. Further downside could be potentially capped by the base of a rising wedge pattern, established since April, at around 109.50.
- Spot 1.3056
- GBPUSD slipped 1.5% to 1.3040 on Friday, reversing all of last week’s gains and ending lower for the week. The pair rose 0.1% earlier today.
- Last Thursday, it was the BOE’s rather-dovish statement which sent the pair lower. The decline was later extended, following a better-than-expected jobs report on Friday.
- Over a longer-term, the key support remains at 1.2800 while the important resistance target is at 1.3450.