Key overnight events:
- US retail sales in May rose 0.5% from a month earlier, higher than the expected rise of 0.3%. Stripped off autos and gas, retail sales matched expectations, rising 0.3% over the same period. Prices for imported goods increased 1.4% month-on-month, exceeding estimates of 0.7% and growing at its fastest pace in over four years.
- The S&P 500 Index fell 0.2%, paring losses from as much as 0.7% after the positive retail sales numbers. Financials came under pressure to lead declines as the German 10-year bund yield turned negative for the first time ever.
- The US dollar has rallied for three out of the past four days as the Bloomberg Spot Dollar Index rose 0.5% overnight to its highest level in almost two weeks as investors dumped riskier currencies. The pound continued to weaken, dropping by as much 0.5% earlier in the session, as Brexit fears mount.
- WTI futures expiring in July sank 0.8% and a further 1.9% earlier this morning, reaching its lowest level in three weeks. The International Energy Agency said the surplus in global oil market is shrinking more quickly than expected and the market will be almost balanced next year as demand rises faster than production.
- MSCI has decided against adding China’s domestic equities to its benchmark indices for a third time, citing the need for additional improvements in the accessibility of the A-share market. It said will reconsider inclusion in its 2017 market classification review, while not ruling out an earlier announcement.
- Spot 1.3557
- USDSGD seems to be undergoing some consolidation ahead of tonight’s Fed’s policy decision.
- The currency pair continues to be capped at the 50-day moving average of 1.3610. Near-term support lies at 1.3352 – the low in almost a year.
- Spot 0.7370
- Consumer confidence in June fell to 1.0% to 102.2. May’s jobs report is due for release tomorrow and is expected to have added 15,000 new jobs last month.
- AUDUSD pared back previous day’s losses, rising 0.6% to as high as 0.7382 earlier today. The 100-day moving average at 0.7390 should provide some near-term resistance.
- Spot 1.2856
- USDCAD has risen the past four consecutive days, gaining 1.2% in the process.
- The currency pair is currently testing the 50-day moving average resistance at 1.2867, and should remain at present levels until the Fed’s policy decision tonight.
- According to Bank of America Merrill Lynch, Canadian companies have racked up a record of at least $69.6 billion of high-yield debt, including $61.3 billion of US-denominated bonds, a 133% increase form 5 years ago.
- Spot 6.6062
- Onshore-traded yuan weakened to $6.6045 – a five-year low, this morning, dragged down by MSCI’s decision to leave Chinese stocks out of its benchmark indices. The PBOC weakened its reference rate by 0.32% to 6.6001, the weakest since 12th Jan 2011.
- USDCNH rose 0.2% to 6.6157, the highest since early February this year.
- Spot 8.3606
- The Norwegian krone has weakened for four consecutive days, falling 3% against the US dollar in the process.
- USDNOK is likely to test the 100-day moving average resistance of 8.3798 in the short term, with a stronger level of resistance coming in at the 8.4000 handle.