January 24, 2017

Daily Observations:

Asian equities were mixed following President Trump signing an order to withdraw the US from the TPP. The US dollar was broadly weaker overnight after Treasury Secretary nominee Mnuchin commented it was excessively strong. Demand for safe haven assets remained high as investors continued piling into gold and the Japanese yen.

US:

  • US Treasury Secretary nominee Steven Mnuchin said an “excessively strong dollar” could have a negative short-term effect on the economy. The comments were included in answers from Mnuchin to questions from US senators following his confirmation hearing last week. Mnuchin’s comments echoed President Trump’s remarks to the Wall Street Journal earlier this month that the currency was “too strong”.
  • Mnuchin also reiterated his intention to review “the issue of Chinese currency manipulation”, which he sees as a “serious infraction of free trade principles and needs to be effectively addressed”, according to his written response to the Senate Finance Committee.
  • Newly-elected President Trump signed a memorandum last night directing the US Trade Representative to withdraw the US as a signatory to the TPP accord with 11 other nations. He left NAFTA untouched for now, but an aide said action on that accord is still in the works, Bloomberg News reported.
  • The US dollar weakened following Mnuchin’s comments, with the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, falling 0.3% this morning to its lowest since 8th
  • Treasuries were higher on increased demand in haven assets, with the benchmark 10yr Treasury yield falling 7bps to 2.40% in New York.
  • US equities ended mostly lower over uncertainty over President Trump’s future policies and as batch of corporate quarterly results came out mixed. The S&P 500 Index fell 0.3%, led by industrial and energy shares.

Canada:

  • Canada probably won’t face major economic damage in trade talks sought by US President Donald Trump’s administration, according to Canadian Prime Minister Justin Trudeau’s adviser Stephen Schwarzman.

UK:

  • UK Prime Minister is set to meet Donald Trump on Friday, where they will begin talks regarding a trade deal between the US and the UK that would take effect after Britain leaves the EU.

Australia:

  • Prime Minister Malcolm Turnbull said he discussed the issue of the Pacific trade accord with Japan’s Shinzo Abe last night and has also held talks with his counterparts in New Zealand and Singapore. Speaking to reporters, Turnbull said “we are all working to see how we can ensure we maintain this momentum toward open markets and free trade”, further adding that “protectionism is not a ladder to get you out of the low growth trap, instead it’s a shovel to dig it deeper”.

Singapore:

  • Headline CPI in December rose 0.2% year-on-year and 0.2% month-on-month, with both readings beating their respective consensus estimates of 0.1% each.
  • Core inflation, which strips out the volatile effect of oil and food prices, rose 1.2% in December from a year earlier, matching expectations.
  • Food prices, which make up about 22% of the consumer price basket, rose 2% in December from a year earlier. The biggest rise on an annual basis was for education, which increased 3.2%.
  • The MAS sees core inflation averaging 1% to 2% this year, compared with 0.9% in 2016.

Precious Metals:

  • Spot gold edged higher this morning, gaining 0.6% to $1,220.26/Oz on increased safe-haven demand. Gold has been threatening to break beyond $1,220/Oz since last week; a clean break above and the next level the precious metal may test would be $1,250/Oz.
  • According to a Bloomberg report, European investors are piling into gold, amid worry that Trump’s “America First” rhetoric will impede global growth, adding to the growing concern of rising populist sentiment throughout the region. The four ETF’s backed by the metal that have attracted the most money this year are all based in Western Europe.
  • Silver for immediate delivery edged 0.5% higher to $17.2457/Oz earlier today.

Oil:

  • Crude oil futures expiring in March declined 0.9% in New York, but pared some of it earlier today, rising 0.6% to the $53/bbl handle after Iran said it’s close to implementing its share of pledged output curbs with OPEC in order to stabilize the global oil market. Oil minister Jabbar Al-Luaibi said Iran, who is OPEC’s second-biggest producer, has reduced supply by 180,000 bpd, and will cut a further 30,000 by the end of the month.

 

USDSGD:

  • Spot 1.4171
  • USDSGD fell 0.4% to 1.4157, following overnight USD weakness.
  • The key support remains at 1.4150. A clean break below it would generate sufficient momentum for the currency pair to reach the psychological 1.4000 level.

 

AUDUSD:

  • Spot 0.7609
  • AUDUSD’s recent rise shows no signs of abating, as the currency pair rose 0.7% to a fresh 2-month high of 0.7609.
  • The pair should encounter some resistance around the 0.7650 and 0.7750 levels, while 0.7500 will probably serve as a strong support.

 

USDCAD:

  • Spot 1.3222
  • USDCAD declined 0.5% to 1.3213 following crude oil’s gain earlier today coupled with overnight weakness in the US dollar.
  • Over the short-term, the currency pair may find some support at 1.3200.

 

USDCNH:

  • Spot 6.8151
  • The PBOC strengthened its yuan fixing today, by 0.35% to 6.8331 to the US dollar – its strongest level since Nov. 14.
  • USDCNH declined 0.4% to 6.8040 earlier today ahead of the Chinese New Year holiday later this week.
  • The 6.8000 remains the key support level to watch.

 

USDJPY:

  • Spot 112.82
  • USDJPY slid 0.9% to a session-low of 112.53, as the yen strengthened to its strongest level since Nov. 30.
  • A lower low would signify a break of the current 112.50 support, providing impetus for the currency pair to move lower to 110 – the 50% retracement level since Nov. 9.

 

GBPUSD:

  • Spot 1.2529
  • GBPUSD bulls gained control, as the currency pair moved above the key resistance level of 1.2400, advancing 0.7% to a 1-month high of 1.2545.
  • After gaining for 6 consecutive sessions, the pair could be capped over the short- to medium-term at 1.2550.
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