Japanese stocks sank, while the yen and most Asian equities climbed higher, as investors look ahead to key central bank monetary policy decisions over the next few days. The US dollar sank while most European index futures opened higher.
- The S&P 500 Index lost 0.3% with energy shares down 2.0% as a group and industrial shares falling 0.6%.
- The Bloomberg Spot Dollar Index, which tracks the greenback against 10 key currencies, closed 0.1% higher last night before falling as much 0.4% earlier today.
- Benchmark 2-year bond yields jumped to a one-month high after a weak auction; 10-year Treasuries were steady at 1.57%.
- The Fed is widely expected to keep rates steady on Wednesday and more focus will be placed instead on their statement, as investors await more clues regarding the next rate hike.
- A month after Brexit, UK bonds are yielding the least in 16 years relative to their US counterparts, reflecting speculation that the BOE will loosen policy to mitigate the economic impact of the vote.
- Finance Minister Taro Aso announced earlier today the government has yet to decide on the size of a fiscal stimulus package, spurring speculation among traders that too much optimism has been built ahead of Friday’s BOJ policy decision.
- The yen earlier rallied 1.9% against the US dollar back to the 104 handle, the largest intraday rally since Brexit.
- Earnings reports due soon from Singapore’s largest banks may show their 2Q profits were hit by higher buffers for soured loans and a faltering rally in domestic interest rates, Bloomberg reported.
- Ravi Menon, managing director of MAS, said current monetary policy stance remains appropriate. He also added that it is not time yet to ease property cooling measures.
- Core CPI for June rose 1.1% from a year earlier and while headline inflation fell 0.7% over the same period, analysts’ estimates were 1.1% and -1.1% respectively.
- Industrial production fell 0.3% year-on-year, missing the 0.5% rise that was predicted.
- Spot gold remains steady as it continues to consolidate above the $1,310/Oz support area. A key downside risk would be a more hawkish-than-expected Fed statement this Wednesday.
- Holdings in gold-backed ETFs fell 4.5 metric tons yesterday, the biggest decline since July 12th.
- Silver for immediately delivery is currently undergoing a classic triangle-consolidation as well. A break above the $20/Oz handle would indicate a continuation of the uptrend since the start of the year; should the $19/Oz support fail to hold and the precious metal could quickly correct back to $18/Oz.
- WTI futures expiring in September dropped 2.4% to $43.13/bbl, its lowest point since April after US producers increased drilling for a fourth week.
- The $40/bbl handle could be tested soon should the $44/bbl support fail to hold.
- Spot 1.3586
- USDSGD fell 0.3% to 1.3566 earlier today, on the back of a weaker US dollar, despite reaching a one month-high of 1.3639 this morning.
- Spot 0.7523
- AUDUSD jumped 0.7% to 0.7529, the highest in a week, ahead of tomorrow’s key inflation data.
- The sudden jump in AUDUSD earlier today was an indirect result of Japan Finance Minister Aso’s comments, which caused a sell-off in the US dollar.
- Spot 1.3206
- USDCAD rallied 0.6% to 1.3242 last night, its highest level in almost 4 months, before today’s dollar-sell off caused the currency pair to pare back some of its gains.
- Upside risk continues to be elevated for the currency pair, as depressed oil prices should drive the loonie weaker while a hawkish Fed statement could potentially strengthen the greenback.
- Spot 6.6822
- The PBOC set its daily fix rate stronger earlier today, one week after signalling an intention to stop the currency from weakening further.
- USDCNH fell 0.1% to 6.6796 earlier.
- The World Bank is planning to sell bonds in China denominated in the IMF’s Special Drawing Rights, people familiar with the matter said, with issuance potentially coming as soon as next month.
- Spot 1.3091
- GBPUSD dropped 0.4% to 1.3081 earlier today, following the release of a report this morning that indicated BOE policy market Martin Wheale now favors immediate stimulus for the UK economy.
- 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.