Key overnight events:
- The ECB left stimulus and rates unchanged as predicted, however largely defied expectations for higher inflation forecasts and sparking concern that the enlarged stimulus program has yet to have an impact. Forecasts for core inflation were lowered to 1.0% in 2016, 1.2% in 2015 and 1.5% in 2018.
- A report from the ADP Research Institute showed 173,000 workers were taken on in the US in May, as expected, while filings for unemployment benefits declined for a third consecutive week, according to separate data.
- As expected, OPEC failed to agree on a new output cap in a meeting in Vienna yesterday. WTI futures expiring in July fell initially but then recovered to end 0.3% higher at $49.17/bbl after data showed US crude stockpiles shrank.
- During OPEC’s meeting, Saudi Arabia was discussing ideas with fellow OPEC members including restoring an output target scrapped in December; Iran however, resisted overtures from the Saudis to restore a production objective.
- The S&P 500 Index rose 0.3% after two days of closing little changed, to close above the key level of 2,100. Lack of surprises by the ECB and OPEC meant that the dollar was little changed overnight as the Bloomberg Dollar Spot Index advanced 0.1%; investors will turn their attention to tonight’s nonfarm payrolls.
- Spot 1.3761
- May PMI remained steady at 49.8, higher than the expected 49.7, while the Nikkei Singapore PMI rose to 50.1 from 49.4 in April.
- USDSGD remained largely unchanged from yesterday’s close of 1.3759.
- Spot 0.7235
- AUDUSD rose by as much as 0.4% to 0.7239, yet still remained below its 200-day moving average of 0.7254 and its 50-week average of 0.7280.
- Spot 1.3093
- The loonie remained little changed against the US dollar, mostly fluctuating around the 1.3100 handle.
- Bank of Canada Deputy Governor Schembri said Canada’s economy will gradually improve, citing a weaker Canadian dollar against the US dollar. He added that non-commodity exports will become the main contributor to export growth by 4Q 2017.
- Spot 6.5896
- The PBOC weakened its reference fix by 0.16% to 6.5793 after the US dollar gained slightly overnight. USDCNH was steady around the 6.5900 handle.
- Goldman Sachs has taken “an outright negative view” on the yuan, citing a risk of renewed outflows and potential bets on another devaluation.
- Spot 8.3340
- USDNOK pared gains back to flat after gaining as much as 0.5% to 8.3753 last night.
- The currency pair continues to be capped at 8.4000, with the last time it closed above the handle coming more than two months ago in March.