June 24, 2016

Daily Observations:

  • UK leaves the European Union with a 51.9% vote. Initial market reactions:
    • GBP nose-dived this morning by 11% to reach GBPUSD1.3305, the lowest level since 1985.
    • USDJPY broke through the Yen100 level and reached a low of Yen 99.02 before recovering to Yen 102.92 now.
    • Asian stock markets skidded with ASX200 closing down 3.34%, Nikkei 225 closed 7.92% lower followed by TOPIX at minus 7.26%. Singapore’s STI currently down by 2.27%.
    • Euro Stoxx 50 is now lower by 8.3%.
    • US stock futures (DJIA and S&P500) were down by more than 5% earlier and this triggered a limit down trading curb by the US exchanges.
    • Crude oil futures for August 2016 delivery fell 6.8% to US$46.70/bbl before recovering to US$48.18 currently.
    • XAU (gold) rallied to a high of US$1,358.54/oz before retracing to US$1,315/oz now.
  • UK Prime Minister David Cameron has announced his resignation. He will stay on till October 2016 before handing over to his successor.
  • In other news, US jobless claims fell to a 43 year low for the week ended 18 June 2016. Initial claims were 259,000, the largest drop since February of this year. The previous recorded low was 253,000 claims, a 43 year record low reached in March 2016.
  • Staying in the US, Markit’s flash US manufacturing PMI increased to 51.4 in June from 50.7 the previous month.
  • These encouraging signs supported Fed Chair’s Janet Yellen’s statement on Tuesday that the recent slowdown in non-farm payroll gains were “transitory” and that “several other timely indicators of labor market conditions still look favourable”.

Currency Views:

USDSGD:

  • Spot 1.3539 after reaching a high of 1.3722 this morning.
  • Singapore’s May 2016 industrial production came in at -0.4% m/m vs estimates of -0.9%
  • Resistance remains at 1.3600 level

AUDUSD:

  • Spot 0.7396 after making a low of 0.7306 earlier.
  • Odds of a July rate cut by RBA went up 51% post Brexit.
  • Elections are scheduled for 2 July 2016 as Malcolm Turnbull seeks a second term for his Liberal-National coalition.
  • Resistance at 0.7642 with support coming in at 0.7284. A firm break below this mark may see AUD moving to 0.7144.

USDCAD:

  • Spot 1.3005 after reaching a high of 1.3099 today.
  • Still range bound between 1.2654 and 1.3187. A move beyond 1.3187 brings CAD towards 1.3311.

USDCNH:

  • Spot 6.6380 with a high of 6.6520 today.
  • China’s CNY fixing today was 6.5776 vs yesterday’s lower fixing of 6.5658.
  • EU was China’s second largest trading partner in 2015 with 2-way trade flow of US$564.9billion. Brexit expected to be negative for China.
  • UBS expects USDCNY to quickly move lower to 6.7-6.8 mark. China’s PBOC likely to cut RRR.
  • China’s central bank injected CNY340 billion (US$51 billion) liquidity this week, biggest pump priming since April 2016.

USDNOK:

  • Spot 8.4530, high was 8.7291 earlier.
  • The earlier move lower in NOK tracked a more than 5% fall in Brent crude.
  • Norway’s sovereign wealth fund to remain long-term investor in UK despite Brexit.

 

 

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