July 26, 2016

Daily Observations:

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.

US:

  • 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.

UK:

  • 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.

Japan:

  • 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.

Singapore:

  • 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.

Precious Metals:

  • 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.

Oil:

  • 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.

 

USDSGD:

  • 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.

 

AUDUSD:

  • 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.

 

USDCAD:

  • 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.

 

USDCNH:

  • 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.

 

GBPUSD:

  • 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.
© Jachin Capital Pte Ltd

UEN: 201419754M

The contents of this document are for information only and is taken or compiled from sources that we, Jachin Capital Pte Ltd, believe to be reliable. To the maximum extent permitted by law, we do not make any representation or warranty (express or implied) that this information is accurate, timely or complete and it should not be relied upon as such. Opinions expressed are our current opinions as at the date of this document only and are subject to change without notice. We endeavour to update on a reasonable basis the information discussed but regulatory, compliance or other reasons may prevent us from doing so. The publication and distribution of this document is not and does not imply any form of endorsement of any person, entity, service or product described or appearing here. This is not and does not constitute or form an offer to buy or sell nor the solicitation of an offer to buy or sell any security or financial instrument nor to participate in any particular trading or investment strategy. We are not soliciting any action based on this document. The information, services and products described or appearing here are intended only for Accredited Investors (as currently defined in the Securities and Futures Act) and are not intended for nor targeted at the public in any specific jurisdiction. This information does not take into account the particular investment objectives, financial situations or needs of individual investors. Investors should seek independent financial, tax or legal advice or make independent investigations as considered necessary or appropriate before making an investment decision. Investments involve risk. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment instrument.

Essential SSL