Key overnight events:
- The S&P 500 Index fell 1.1%, snapping a 5-day gain, on the lowest volume so far this month; energy sector led the selloff.
- After reaching a 2-month high of $38.39/bbl, WTI futures expiring in April slid as much as 4.7%, back towards the $36/bbl handle, before finally settling 3.7% lower at $36.50/bbl. Government data on Wednesday is expected to show supplies increased, keeping stockpiles at the highest level in 80 years.
- The Bank of England’s Governor Mike Carney commented that “Brexit” would be a risk to UK financial stability, sparking a fall in the pound for the first time in 7 days versus the dollar.
- ECB’s rate decision is due tomorrow and analysts predict that Draghi is preparing to cut the Eurozone’s already negative deposit rate and expand the quantitative-easing program he first flagged a year ago. Economists surveyed by Bloomberg are expecting a further 10bp rate cut to -0.40%.
- Spot 1.3869
- USDSGD inched higher towards the 1.3900 handle after rebounding off the 7-month low on Monday.
- The currency pair is expected to find some resistance around the 1.3950 – 1.4000 region where the 200-day moving average and a previous key resistance level reside.
- Spot 0.7421
- AUDUSD continues to consolidate above the 0.7400 level as it takes a breather following its recent rally.
- Australia’s January home loans for January declined 3.9% month-on-month, worse than the 3.0% fall expected and the previous figure of a 2.7% increase.
- Spot 1.3435
- Bouncing strongly of the 200-day moving average yesterday, USDCAD pared losses, reaching a high of 1.3442 this morning.
- Bloomberg strategist Vincent Cignarella wrote that 8 weeks of Canadian dollar gains and a more-than-40% recovery in WTI since February lows could dictate the tone of BoC’s forward guidance as it is expected to refrain from a rate cut tomorrow. He added that he expects Poloz to lean more towards the dovish side and buy some time until Trudeau puts forth a stimulus package within the coming weeks.
- Spot 6.5168
- USDCNH rose to a high this morning of 6.5186 after the PBOC set its reference rate lower for the first time in a week.
- PBOC Deputy Governor Yi stated that China will continue implementing prudent monetary policy with a balance between tightening and easing, Xinhua reported.
- China CPI is due for release tomorrow and is expected to remain at 1.8% year-on-year. The National People’s Congress set its CPI target this year at 3.0%.
- Finance Ministry spokesman Ou said that China will speed up fiscal and tax reforms in 2016.
- Spot 8.5861
- USDNOK rose to as high as 8.5995 last night, as Norges Bank reported its regional survey output over the next 6 months at 0.11, beating estimates of 0.00.
- The report added that there has been a “considerable fall in output” in the oil service sector, although it is still “broadly in line with previous surveys”.