Spot values at a glance:
Haven assets such as the yen and gold held near multi-month highs, ahead of a barrage of key events on Thursday as Asian equities mostly reversed morning losses. The US dollar maintained near an 8-month low, while Treasuries steadied after climbing on news China is prepared to buy more of the notes.
- US President Donald Trump threw his weight behind the Saudi-led diplomatic isolation of Qatar, calling it just punishment for the country’s financial support for Islamic extremists and taking sides in a dispute among key US allies in the Persian Gulf.
- Fired FBI Director James Comey will publicly describe conversations with Donald Trump in a hearing set for Thursday, but stop short of saying if he thinks the president sought to obstruct a federal probe of Russia’s role in the 2016 election, according to a person familiar with Comey’s thinking, Bloomberg news reported.
- US stocks fell a second day, as caution prevailed before Comey’s testimony on Thursday, which is also the day of the ECB’s policy decision and the UK election. The S&P 500 Index fell 0.3%, by its most since mid-May, as consumer and industrial shares slumped.
- Thursday is shaping up to be a pivotal day for capital markets as Comey’s testimony may give clues on how politically effective the Trump administration will be in refocusing attention on its policy agenda. Investors had already taken a defensive stance this week following a diplomatic spat among energy producing nations in the Middle East and the weekend’s terror attack in London.
- The US dollar, as tracked by the Bloomberg Dollar Spot Index, is at its weakest since October, while 10yr Treasury yields are plumbing depths last seen after Trump’s November election. Since his victory, the correlation between the greenback and yields has risen to 0.68, where a reading of 1 indicates movements in lockstep. According to Bloomberg news, analysts see the recent slump in both coming down to fading optimism the Trump administration will pass measures to boost economic growth and inflation, and the follow-through effects on expectations for Fed policy.
- The Bloomberg Dollar Spot Index slid 0.4% to its lowest since October, while the benchmark 10yr Treasury yield fell 3bps to 2.15%, its lowest level since November.
- China is prepared to increase its holdings of US Treasuries under the right circumstances, as local officials judge the assets are becoming more attractive than other sovereign debt and as the yuan stabilizes, according to people familiar with the matter.
- The Australian economy in the first quarter this year expanded 0.3% quarter-on-quarter, matching expectations and at slower pace versus the 1.1% growth in the prior quarter.
- On a year-on-year basis, GDP rose 1.7%, slightly higher than the 1.6% forecasted.
- The RBA had signalled Tuesday it would look through slower Q1 growth when it left its benchmark rate on hold, saying the pace should still accelerate above 3% in the next couple of years. The biggest detractors from growth were exports and housing investment as weather factors including storms and floods materially impacted both industries.
- The economy was supported by mining firms restocking inventories, after taking advantage of strong commodity price gains to sell as much as possible in the latter part of 2016. Growth in household spending halved on the previous quarter, while a drop in the savings rate to its lowest in almost 9 years hints at some raiding of the coffers to cover bills and other essentials.
- Spot gold reached a 6-month high overnight of $1,296.15/Oz, testing it for the second time in almost a month, before paring some of its gains earlier in the Asian session today.
- Gold has surged 13% in 2017, eking out gains every month, and a Bloomberg survey this week signalled further gains. The latest leg up has been supported by an increase in haven demand as UK voters head to the polls on Thursday, with the outcome set to dictate how the country handles Brexit. On the same day, Comey is set to appear before a Congressional panel to testify about his investigation into President’s Trump campaign’s ties to Russia.
- A convincing break above the $1,300/Oz may propel the yellow metal to the next resistance region of $1,350/Oz.
- Silver for immediate delivery was little changed earlier today at around $17.880/Oz, paring gains from a 5-week high reached overnight.
- Crude oil futures expiring in July rose 1.7% to $48.19/bbl overnight, but pared some of it earlier today after the American Petroleum Institute was said to report stockpiles of the motor fuel increased by 4.08 million barrels last week.
- Government data Wednesday is forecast to show supplies fell for a fifth week. Crude inventories shrank by 4.62 million barrels, the API reported.
- Spot 1.3810
- USDSGD remains near its lowest level since October, with the pair holding near its 1.3800 handle for the third consecutive day.
- Improving activity data and pickup in core inflation remain supportive of Nomura’s view that the Monetary Authority of Singapore will maintain its stance at the next policy review, according to a note released on Tuesday.
- A break below 1.3800 and the next level of 1.3725 may be tested soon.
- Spot 0.7546
- The Australian dollar gained after first-quarter economic growth met expectations, soothing concerns of a deeper slowdown signalled by the RBA.
- AUDUSD rallied 0.7% to 0.7548, wrong-footing some investors who had taken short positions on the Aussie after the RBA on Tuesday said growth slowed in the March quarter.
- Spot 1.3452
- USDCAD pared earlier declines to remain little changed from its previous day’s close, as crude oil stabilizes following the recent Gulf crisis.
- The resistance at 1.3540 – a 2-week high, represents the next target level for the currency pair.
- Spot 6.7707
- The PBOC strengthened its fixing by 0.11% earlier today, to 6.7858 to the US dollar.
- USDCNH gained 0.1% to 6.7708 earlier, erasing some of its previous day’s fall.
- Spot 109.51
- USDJPY slumped 1.1% to 109.44 overnight, amid safe-haven buying as investors awaited a slew of risk events on Thursday.
- The currency pair broke below its 200-day moving average for the scone time in 2 months. A second consecutive lower daily close signals more downside for the pair.
- Spot 1.2906
- GBPUSD could plunge to as low as $1.20 on Friday should the UK snap election lead to a hung parliament, according to a Bloomberg of analysts. Such an outcome, though seen as unlikely, would be marginally more negative than even an electoral upset that sees the Labour Party defying odds to emerge the winner, suggesting investors don’t share Prime Minister May’s view that not having a Brexit deal is better than a bad one. A victory for May’s Conservative Party would be supportive of the pound, and this outcome is more or less already priced in, analysts say.
- GBPUSD was little changed earlier, maintain above the 1.2900 handle.