Spot values at a glance:
Asian equities were mostly mixed, with solid gains in Australia, Malaysia and Indonesia offset by weakness in China, Singapore and Korea as investors await the Fed’s policy decision later today. The US dollar remained weak while Treasuries edged higher. Gold rebounded from $1,260/Oz while crude oil slipped overnight to $46/bbl.
- The Fed is expected to raise its benchmark interest rate for the second time this year on Wednesday. Since that’s widely anticipated, the more market-sensitive elements of the meeting will relate to signals on future policy – either the path for rates or plans to cut the $4.5 trillion balance sheet.
- US producer prices in May was unchanged from a month ago, in line with expectations and slowing from a 0.5% gain in the month prior. Excluding the effects of food and energy, PPI rose 0.3% over the same period, more than the 0.1% gain predicted but slowing from the 0.4% rise in April.
- The political drama in Washington continued, with US Attorney General Jeff Sessions testifying to lawmakers that he never spoke with Russian officials concerning “any type of interference” with the 2016 presidential campaign. He declined to comment on conversations he had with President Donald Trump, saying that to do so would potentially deny the president the right to claim executive privilege.
- Investors should be wary as low interest rates, aging population and global warming inhibit real economic growth and intensify headwinds facing financial markets, according to Bill Gross’ investment outlook released yesterday. He added that “all markets are increasingly at risk”.
- The US dollar held onto losses earlier today ahead of tonight’s FOMC decision, falling against most G-10 peers with the pound outperforming and the loonie surging; the Bloomberg Dollar Spot Index slipped 0.2% in New York.
- The benchmark 10yr Treasury yield declined 1bp to 2.20% after ending little changed last night.
- Tech stocks recovered from their selloff last Friday, with the Nasdaq Composite outperforming other indices to close 0.7% higher. The S&P 500 Index ended 0.5% higher to register an all-time highest close. Tesla rose 4.7% to close at an all-time high as well.
- Bank of Canada Stephen Poloz said that rate cuts have done their job shielding the economy from shocks, though it’s too soon to plan a recovery party. He added that “the economy is gathering momentum, and not just in certain spots but across a much wider array”.
- Poloz’s comments echoed that of his deputy Carolyn Wilkins from a day earlier, and sent the loonie surging higher.
- UK inflation in May accelerated more than expected to its fastest pace in 4 years. Headline inflation gained 2.9% year-on-year and 0.3% month-on-month, beating estimates of 2.7% and 0.2% respectively. Core inflation grew 2.6% from a year ago, faster than Aprils’ 2.4% gain and the median forecast of 2.4%.
- The price pickup means additional pressure on households, who aren’t seeing the wages keep pace. Bank of England Governor Mark Carney expects inflation to keep accelerating this year before falling back slightly from 2018.
- Faster inflation is already weighing on the economy. Growth slowed to 0.2% in the first quarter, partly because of weaker consumer spending, and the government bodies estimate it hasn’t picked up so far this quarter.
- Retail sales in May rose 10.7% year-on-year, matching the consensus estimate as well as April’s increase.
- Industrial production over the same period advanced 6.5%, maintaining its prior month’s pace and surpassing analysts’ forecasts of a 6.4% climb.
- Fixed-asset investment excluding rural areas rose 8.6% from a year ago, slowing from April’s 8.9% gain and less than the median estimate of 8.8%.
- The Westpac consumer confidence index slipped to 96.2 in June, from 98.0 last month.
- The Bank of Japan’s unprecedented quantitative easing is a major trigger for fiscal deterioration and it’s time for the central bank to rethink it and start discussing an exit, according to a former adviser to the country’s finance minister.
- Spot gold rebounded off the $1,260/Oz handle, gaining 0.6% to $1,270.10/Oz earlier today, even before the Fed is widely predicted to raise its benchmark interest rate for the second time this year.
- Sensing the Fed may be losing its exuberance for rapid-fire rate hikes, gold bulls are increasing bets the metal’s longest losing streak in 3 months is about to end. Investors poured $675 million into SPDR Gold Shares last week, taking total bullion holdings to a 6 – month high.
- A convincing break above the $1,300/Oz may propel the yellow metal to the next resistance region of $1,350/Oz. To the downside, the $1,260/Oz handle is likely to provide some short-term support.
- Silver for immediate delivery looks set to snap a 3-day losing streak, climbing 0.8% to $16.9416/Oz earlier. The real test is whether the metal will be able to recover back above its key $17/Oz handle.
- Crude oil futures expiring in July recovered back above the $46/bbl handle, after earlier falling by as much as 1.3% to $45.83/bbl.
- US inventories climbed by 2.75 million barrels last week, the American Petroleum Institute was said to report. The government’s Energy Information Administration is expected to report a supply slide of 2.45 million barrels later today.
- OPEC output rose in May as Libya and Nigeria revived production halted by attacks and political crisis, a report from the group showed Tuesday.
- The low last month of $44.13/bbl remains as the next level of support.
- Spot 1.3816
- USDSGD was little change, rebounding off its overnight low near the 1.3800 support level. More sideways action is expected before the Fed’s interest-rate decision later tonight.
- A break below 1.3800 and the next level of 1.3725 may be tested soon.
- Spot 0.7533
- AUDUSD seems to have steadied above its 200-day moving average of 0.7528, holding above it for the fifth straight day.
- To the upside, the 0.7600 resistance remains.
- Spot 1.3227
- USDCAD fell 0.4% to 1.3212, its lowest level since February following hawkish comments over the past 2 days from key Bank of Canada officials.
- The pair may likely find some support around the 1.3200 handle. Alternatively, a break below it may generate sufficient momentum to drive the pair to current 8-month lows near the 1.3000 level.
- Spot 6.7883
- The PBOC earlier kept its fixing rate little changed at 6.7939, from 6.7973 yesterday, per dollar.
- USDCNH was steady, after retreating yesterday from a 2-week high. The resistance remains at the psychological 6.8000 level.
- Spot 110.03
- USDJPY remains little changed from yesterday’s close of 110.11, and looks likely to trade sideways in a range bound direction ahead of key central bank interest-rate decisions in both the US and Japan this week.
- Spot 1.2746
- GBPUSD extended its rebound from a 7-week low, rising 0.2% to 1.2757 overnight following better-than-expected UK inflation data yesterday.