Daily Observations:

Banks led broad gains in global stocks after Fed Chair Janet Yellen’s hawkish comments last night. The US dollar maintained gains following an overnight rally while most government bonds retreated. Gold edged lower.

US:

  • In her congressional testimony last night, Fed Chair Janet Yellen commented that waiting too long to remove accommodation would be unwise and could potentially require the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and push the economy into recession.
  • Yellen also said her monetary policy panel does not need to wait for President Trump’s administration’s plans on fiscal stimulus to be revealed in further detail before hiking rates.
  • Yellen further added that the committee “in the coming months” will provide further guidance on how it plans to shrink tis $4.5 trillion balance sheet.
  • US Treasuries sold off on her testimony; the benchmark 10yr Treasury yield gained as much as 6bps to 2.50% before closing at 2.47% in New York.
  • Yellen’s hawkish comments lifted the odds for a March rate hike to 34%, from 30% the previous day, as indicated by fed funds futures pricing data on Bloomberg.
  • The US dollar rallied overnight, with the Bloomberg Dollar Spot Index closing 0.1% higher in New York and adding a further 0.1% earlier today.
  • All 3 major US indices rallied to new record highs; the S&P 500 Index advanced 0.4%, with financial stocks leading gainers.
  • US PPI in January rose 0.6% month-on-month and 1.6% year-on-year, the biggest increase since Sep 2012 and beating the median estimates of 0.3% and 1.5% respectively.
  • Stripped off the volatile price effects of food and energy, core PPI gained 0.4% from a month earlier and 1.2% from a year ago, surpassing the 0.2% and 1.1% expected.
  • The Fed’s Dallas President Robert Kaplan said the US is making good progress toward full employment and inflation near its 2% goal, and shouldn’t wait to see evidence of overheating before hiking.
  • Atlanta Fed President Dennis Lockhart said there is no “great sense of urgency” for a March rate-hike, mainly because he feels it is still premature to calculate the effect of the Trump administration’s fiscal stimulus plans.

UK:

  • Headline CPI in January declined 0.5% month-on-month and rose 1.8% year-on-year, compared to the consensus estimates of -0.5% and 1.9% respectively. Core CPI underwhelmed as well, rising 1.6% from a year earlier, missing the 1.7% gain forecasted.
  • Despite price growth falling short of expectations, economists surveyed by Bloomberg were quick to restate their view that energy costs and a weaker pound signal inflation is still primed to accelerate going forward. A consensus survey sees inflation hitting 2.8% by the last quarter this year.

China:

  • CPI in January rose 2.5% from a year earlier, surpassing the 2.4% expected and the prior month’s gain of 2.3%.
  • PPI over the same period gained 6.9% – the most since 2011, beating the consensus estimate of 6.5% and last December’s gain of 5.5%.
  • PPI for mining products surged 31% year-on-year while those for raw materials climbed 12.9%, the National Bureau of Statistics said.

Precious Metals:

  • Spot gold rebounded off the $1,220/Oz support for the third time in 4 days, earlier declining 0.5% to an intraday low of $1,221.98/Oz before paring back some of its losses.
  • Gold looks set to log its fourth consecutive daily loss following Fed Chair Janet Yellen’s hawkish comments overnight that stated the Fed doesn’t need to wait for Trump’s fiscal plan’s details before hiking rates.
  • A break below the $1,220/Oz support level could lead to a lower move to the previous key support of $1,180/Oz.
  • Silver for immediate delivery briefly traded above the $18/Oz resistance before sinking back below it following Yellen’s testimony, with the metal currently 0.2% higher at $17.9301/Oz.

Oil:

  • Crude oil futures expiring in March closed 0.5% higher at $53.20/bbl in New York overnight, before erasing gains earlier this morning in Asia trade, following a report by the American Petroleum Institute that said crude stockpiles rose by 9.94 million barrels last week. Further government data later today is expected to show supplies increased for a sixth straight week.
  • 2 consecutive daily closes above the $54/bbl resistance level may signal more upside, with a move to $56/bbl a possibility.

 

USDSGD:

  • Spot 1.4207
  • USDSGD rose 0.3% to a high of 1.4233 this morning following last night’s hawkish comments by Fed Chair Janet Yellen.
  • The downtrend since the turn of the year remains intact, but a breakout above the 1.4325 resistance could signal a potential reversal.
  • To the downside, the 1.4000 remains the support level to watch.

 

AUDUSD:

  • Spot 0.7671
  • AUDUSD declined by as much as 0.8% last night to 0.7617, before erasing almost of its losses earlier today, as the currency pair continues to consolidate between the 0.7600 and 0.7700 handles.
  • Beyond 0.7700, the key resistance comes in at 0.7835 – the currency pair’s high last year. To the downside, the 0.7500 support will be key.

 

USDCAD:

  • Spot 1.3073
  • USDCAD gained as much as 0.5% to 1.3107 overnight, helped on by broad US dollar buying.
  • The 1.3000 continues to be key, and 2 consecutive daily closes below it may indicate further downside momentum, with the next support below coming in at 1.2800. To the upside, a breach of the 1.3200 resistance could signal a move higher to the next level of 1.3400.

 

USDCNH:

  • Spot 6.8543
  • The PBOC strengthened its daily reference rate by 0.25% to 6.8632 to the dollar, the most since in 3 weeks.
  • USDCNH was relatively unchanged following a 0.3% decline the previous day.
  • The 6.8000 remains as a significant support level.

 

USDJPY:

  • Spot 114.32
  • USDJPY cleared the 114 handle, rising 1.0% to 114.51 following Yellen’s hawkish speech last night.
  • A breakout of the 115.50 resistance region may result in a move higher to 118.66 – the 1-year high for USDJPY.

 

GBPUSD:

  • Spot 1.2469
  • A stronger USD overnight meant that GBPUSD continued to trade near its previous session’s low of 1.2444. Little change is expected until at least December’s jobs report is released later this evening.
  • The long-term post-Brexit downtrend remains intact. The key resistance at 1.2800 needs to be broken convincingly to signal a possible reversal in trend. To the downside, the 1.2400 support remains crucial.
© Jachin Capital Pte Ltd

UEN: 201419754M


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