July 25, 2016

Daily Observations:

The dollar advanced, weighing on precious metals and oil, as investors looked toward central bank meeting this week in the US and Japan. Most Asian stocks were slightly positive after valuations rose to the highest in almost a year.

US:

  • Flash manufacturing PMI for July came in at 52.9, the highest since October, improving from the prior month’s 51.3 and beating the consensus estimate of 51.5.
  • The S&P 500 Index closed 0.5% higher on Friday at a fresh record high; telecoms and utilities led gainers.
  • The Fed is set to meet later this week although it is widely expected that they will stand pat on interest rates.
  • The US dollar maintained its recent across-the-board strength as the Bloomberg Spot Dollar Index rose to near 4-month highs.

Canada:

  • Retail sales in May rose 0.2% from a month earlier; no growth was expected.
  • CPI for June rose 1.5% year-on-year and 0.2% month-on-month, beating estimates of 1.4% and 0.1% respectively.
  • Rising home and car expenses offset weaker gasoline and food prices.

Europe:

  • The first batch of key post-Brexit data was released last Friday and showed little initial impact in continental Europe as July flash PMIs in Germany and France surprised positively.

UK:

  • PMI for manufacturing in July came in at 49.1, better than the 48.7 expected. However, services PMI contracted for the first time in 43 months following Brexit, registering a reading of 47.4 instead of the anticipated 48.8.

Japan:

  • BOJ Governor Kuroda said G-20 didn’t discuss helicopter money at all during their meeting over the weekend. He also reiterated that the central bank is prepared to step up stimulus if needed.
  • The BOJ is set to conclude their two-day meeting this Thursday and 78% of economists surveyed by Bloomberg forecast that more monetary policy stimulus measures will be implemented.
  • Exports in June dropped for the ninth straight month, falling 7.4% from a year earlier albeit less than the expected 11.3% drop. Imports slid 18.8%, less than the predicted 20.0% fall.
  • Weak trade data figures show that economic recovery in japan remains tepid and fuel speculation that the BOJ will expand its monetary stimulus later this week.

China:

  • Agricultural Bank of China Ltd is planning China’s largest sale so far under a trial program for lenders to offload bad loans by packaging them up as asset-backed securities.

Precious Metals:

  • Spot gold gave up 0.7% earlier today, declining to $1,313.57 amid the recent rebound in equities and a strengthening US dollar.
  • The precious metal is likely to experience support around the $1,300/Oz to $1,310Oz region.
  • Silver for immediate delivery ended last week down 3.0%, capping its second week of declines. It continues to be supported around its 2-week lows of $19.2333/Oz; beyond that, $18.50/Oz comes in as the next level of support.

 

USDSGD:

  • Spot 1.3610
  • The Singapore dollar weakened to almost a one-month low against the greenback ahead of CPI data due for release later today which is expected to show core inflation in June rising by 1.1% from a year earlier, the fastest pace since Feb 2015.
  • USDSGD rose 0.3% to 1.3626 earlier this morning.
  • 2 consecutive daily closes above the 1.3600 handle could propel the currency pair back above the 1.3700 region.

 

AUDUSD:

  • Spot 0.7471
  • AUDUSD slumped 1.5% last week as traders boosted bets on easing by the RBA and tightening from the Fed. The currency pair was 0.3% higher at 0.7481 earlier today.
  • 2Q CPI data due on Wednesday is expected to show inflation growing 0.4% from the previous quarter and 1.1% year-on-year.

 

USDCAD:

  • Spot 1.3145
  • Firmer-than-expected CPI and retail sales numbers last Friday boosted the Canadian dollar, but only temporarily, as weaker oil prices and a strengthening US dollar soon drove USDCAD back higher to its 3-month highs.
  • The currency pair closed 1.2% higher at 1.3127.

 

USDCNH:

  • Spot 6.6858
  • The PBOC weakened its reference rate by 0.3%, following the meeting of G-20 finance ministers and central bank governors in Chengdu over the weekend. USDCNH rose 0.1% to 6.6913.

 

GBPUSD:

  • Spot 1.3116
  • GBPUSD ended Friday 0.6% lower at 1.3109, following poorer-than expected flash PMI numbers and reviving bets the BOE will loosen monetary policy as early as next month.
  • The 1.3100 support handle doesn’t seem likely to be able to hold up for much longer. A drop back to the post-Brexit low of 1.2798 looks imminent.
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