Daily Observations:

  • On the continuing Brexit fallout:
    • Moody’s downgraded the outlook for UK’s long-term debt rating to negative from stable but kept the ratings unchanged at Aa1.
    • Scotland’s bid to stay in the EU has sparked calls for a new independence vote.
    • An on-line petition in the UK for a second EU referendum, started over this past week-end, has now garnered more than 3 million signatures. However, given that EU leaders have accepted the Brexit decision and a pledge by leading UK political leadership to recognise the Brexit results it is unlikely that this petition will lead anywhere.
    • GBP continues to bear the full brunt of the fallout. Sterling touched a low of 1.3356 this morning before recovering to 1.3431 currently. Latest forecasts from several banks including Credit Suisse and Bank of Tokyo puts GBPUSD at between 1.2500 and 1.2000 by this year-end.
    • Yields on high grade government bonds dipped last Friday with US 10 Year Treasuries closing at 1.51%; UK Gilts at 1.086% while German 10 Year Bunds dipped into negative territory at -0.047%.
    • Euro Stoxx 50 closed down 8.62%; FTSE100 was negative 3.15% after posting a session low of -8.7% (recovery kicked in after BoE Governor Mark Carney assured support for the UK financial market). US S&P500 closed down 3.59%.
    • Crude oil tumbled with both WTI and Brent crude declining more than 6% last Friday before stability returned. WTI crude futures for August 2016 at US$47.72/bbl is a touch higher than last Friday’s close of US$47.64/bbl.
    • Industrial metals and agriculture also took hits last Friday with the Bloomberg Commodity Index recording its second biggest weekly loss for 2016. The only exception was copper which saw short covering that made it one of the best performing commodities this past week.
    • Finally, gold made a fresh 2-year high of US$1,358/oz on Friday before profit-taking pushed the precious metal lower to close at US$1,315.75/oz. This morning the metal has been trading between a high of US$1,335.55/oz and US$1,327.31/oz currently. Gold’s shine expected to continue given (1) risk aversion; (2) safe haven demand; (3) expectations of a rate hike by US Federal Reserve this year have all but evaporated; (4) global growth concerns now magnified by Brexit (and more importantly we believe the possibility of contagion across EU land); and (5) negative government bond yields that have given an immediacy to asset re-allocation/diversification considerations.
    • Gold levels to watch – US$1,300/oz on the downside and US$1,400/oz resistance.
  • Spain’s Mariano Rajoy’s People’s Party wins the elections with a 137 seat victory in the 350-seat Spanish government. This was an improvement over the 123-seat win in last December’s election. Podemos failed to make any headway and had to be satisfied with an unchanged 71 seats in the government. The Socialist party secured 85 seats from 90 in the previous election.


  • Spot 1.3543, testing resistance at 50-day moving average
  • MAS confirmed last Friday that SGD remains within the SGD NEER policy band. However, given Singapore’s exposure to global trade and ties to UK, possibility of adjustment to SGD NEER band in October cannot be ruled out.


  • Spot 0.7432; the currency was hit earlier today by a weaker Yuan fixing in China
  • Immediate resistance 0.7500, immediate support 0.7450


  • Spot 1.3016; main concern is possibility of recession in US before end of this year
  • Immediate resistance 1.2850; immediate support 1.3188


  • Spot 6.6577
  • On-shore yuan fixed 0.9% lower at 6.6375 this morning (vs 6.5776 last Friday)
  • UBS projection of 6.7 to 6.8 looks on target
  • PBoC added another 270billion Yuan in liquidity this morning via 7-day reverse repos



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UEN: 201419754M

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