Spot values at a glance:
Asian equities are mostly in the green, adding to recent gains that pushed regional indices to the highest since the financial crisis and following a surge yesterday in global bonds as investors weigh the potential for tepid economic growth. The US dollar pared declines, showing signs of stabilization. Gold retreated from its highest level in July while crude oil held above $46/bbl.
- US import prices in June declined 0.2% month-on-month, matching expectations and compared to a 0.1% fall in May. Export prices of the same period fell 0.2%, slower than the 0.5% drop in the month prior.
- The votes aren’t there for a straight repeal of the Affordable Care Act in the US Senate, which was Senate Majority Leader Mitch McConnell’s next step less than 24 hours after support for the replacement plan was also found wanting. President Donald Trump now says the Republicans will “let Obamacare fail” in a bid to avoid owning the healthcare issue.
- Wall Street strategists are warning that the impasse may jeopardize the administration’s fiscal wishes, which include tax reductions and a boost in infrastructure spending. The primary fallout in financial markets Tuesday was greenback weakness.
- The US dollar faced heavy selling pressure overnight, with the Bloomberg Dollar Spot Index declining 0.5% to a fresh 10-month low in New York; the gauge however has somewhat stabilized during Asian trade this morning.
- Traders in the Treasury futures market are growing more convinced that US yields will be lower for longer, no matter what the Federal Reserve says. The benchmark 10yr Treasury yield tumbled 5bps to 2.26% in New York, a 2-week low.
- The market-implied probability of a hike by year-end has declined in the past 2 weeks with Treasury yields. The odds are now 40%, down from 60% on July 7, based on the Bloomberg pricing data.
- The Nasdaq Composite rose 0.5% to close at a new record with its “FANG” heavyweights — Netflix, Facebook, Amazon, and Google — leading the way higher. The S&P 500 Index also managed to inch higher, by 0.1%, to an all-time high despite softness in the financials.
- Goldman Sachs Group Inc. and Bank of America Corp. both posted better-than-expected second quarter earnings Tuesday morning, but that wasn’t enough to keep them from retreating as investors focused on soft spots in their businesses. For Goldman, the results revealed its worst first-half performance for trading revenue during Lloyd Blankfein’s tenure, while Bank of America posted a surprise drop in net interest income. This weakness in these traditionally standout segments contributed to the down days for each bank.
- CPI in June rose by 2.6% year—on-year in June, slipping from 2.9% the previous month and registering its first drop in pace since October; economists had predicted CPI would hold at a 4-year high of 2.9% reached in May.
- The data undermines arguments for the immediate interest-rate hike that a minority of policy makers supported at the last BOE decision as inflation looked set to veer further above the 2% target. There are also signs economic growth is cooling as consumers, the engine of growth for the past year, start to rein in spending
- Shares of Australia’s big 4 banks rallied as new capital requirements aimed at ensuring the lenders are “unquestionably strong” turned out to be less onerous than expected. The banks will need to have Tier-1 capital ratios of at least 10.5% by Jan. 1, 2020, the Australian Prudential Regulatory Authority said.
- Singapore home sales fell 21% in June from the previous month as fewer new projects were launched in the city-state. Developers sold 820 units last month, compared with a revised 1,039 in May, according to Urban Redevelopment Authority data released on Monday. A total of 159 units were offered, down from 370 in May, the data showed. Developer sales have fallen below 1,000 units for the first time in 4 months, following an increase after the government in March tweaked some of its property curbs.
- Spot gold looks set to rise for the seventh straight day, gaining by as much as 0.6% to $1,244.66/Oz earlier today on the back of overnight decline in Treasury yields.
- The next resistance stop lies around the $1,250/Oz handle, coinciding with the precious metal’s 100-day moving average.
- Silver for immediate delivery added 1.1% to $16.3385/Oz, rising in tandem with gold. Downside risk continues to remain high with the resistance looming near at $16.50/Oz; the next support below comes in around $15/Oz.
- Crude oil futures expiring in August rose 0.8% in New York last night to $46.44/bbl, but slipped earlier today by as much as 0.6% after the American Petroleum Institute reported that US inventories increased by 1.6 million barrels last week.
- An earlier drop in crude oil futures was pared in view of a contrasting Bloomberg survey before another government report to be released later today which forecasts a 3.5 million-barrel decline; that would be the 13th drop in 15 weeks.
- Today’s recover was also fuelled by a report saying Saudi Arabia could deepen its export cuts.
- Spot 1.3665
- USDSGD maintained below the 1.3700 handle, but showed signs of stabilizing after the pair pared an earlier decline of 0.1%.
- USDSGD has declined for 6 sessions straight, and a pull back to 1.3700 is a distinct possibility.
- The next important support handle below comes in around 1.3500.
- Spot 0.7931
- AUDUSD was largely unchanged, following its 1.4% jump in the previous session to a 2-year high of 0.7931, following the release of minutes from the RBA’s July meeting, in which it struck a more hawkish tone than the statement released 2 weeks ago.
- Following the breach above the key level at 0.7835, the next resistance lies at the psychological 0.8000 handle.
- Spot 1.2636
- USDCAD rebounded off the 1.2600 handle, rising 0.6% to 1.2674 overnight.
- The Canadian dollar has been the best performing currency in the world over the past 2 months. The next bastion of support lies at 1.2460 – the pair’s 2-year low.
- Spot 6.7541
- The PBOC strengthened its fixing by 0.24% to 6.7451 per US dollar earlier.
- USDCNH pared a previous session loss, rising 0.1% from a 6-week low to 6.7541 earlier. The pair looks poised to snap a 6-day losing streak.
- The 9-month low of 6.7234, established in early June, acts as a key support.
- Spot 112.08
- USDJPY erased an earlier session drop below the 112 handle, and is currently almost unchanged on the day.
- The 50-, 100- and 200-day moving averages all reside in close proximity below, around the 111.80 region.
- Spot 1.3029
- GBPUSD fell from a 10-month high yesterday following slower-than-expected inflation gains in June, reducing the chances of an imminent interest-rate increase by the Bank of England. The pair was largely unchanged on the day earlier this morning.
- A decline back below the 1.3000 handle may lead to further weakness for the pound with a probable target of 1.2800 over the near term.