Daily Observations:

An overnight equities rally which saw US stocks reach record highs stretched into Asia earlier today, with most indices well into the green. The US dollar extended gains following hawkish comments from Fed Governor Brainard who has usually been dovish. Treasuries fell for a fourth straight day while gold retreated after reaching $1,250 earlier in the day.

US:

  • Federal Reserve Governor Lael Brainard painted a positive picture of economics at home and abroad that supported the case of an interest-rate hike “soon” by the central bank. Brainard, who is usually more dovish than her colleagues, said that “assuming continued progress, it will be likely be appropriate soon to remove additional accommodation, continuing on a gradual path” and that the US is “closing in on full employment, inflation is moving gradually towards target, foreign growth is on more solid footing and risks to the outlook are as close to balanced as they have been in some time”.
  • The personal consumption expenditure deflator or PCE deflator, the Fed’s preferred measure of inflation, in January rose 0.4% month-on-month and 1.9% year-on-year, slightly below their respective estimates of 0.5% and 2.0% respectively. Core PCE over the same period matched expectations, rising 0.3% from a month earlier and 1.7% from a year earlier. All figures in January accelerated from December.
  • Personal income gained 0.4% in January while personal spending edged 0.2% higher, economists had forecasted readings of 0.3% for both.
  • ISM manufacturing in February rose to 57.5 from 56.0 prior, beating the median estimate of 56.2. The Markit manufacturing PMI slid to 54.2 from 54.3 prior, missing the 54.5 reading expected.
  • Construction spending in January fell 1.0% month-on-month, contracting unexpectedly and missing the 0.6% rise predicted.
  • According to the Fed’s latest Beige Book economic report, based on information collected by regional Fed banks from early January through Feb. 17, the economy grew at a modest to moderate pace across the country, while employment grew moderately while some districts reported “widening labor shortages”. The latter is another sign the economy is at what economists consider full employment.
  • The US dollar rallied following hawkish comments from Brainard and a good ISM report; the Bloomberg Dollar Spot Index ended in New York 0.4% higher and added another 0.2% during Asian trade this morning.
  • The probability of a March rate hike implied by prices in federal funds futures contracts soared to about 80%, from 52% on Tuesday.
  • The benchmark 10yr Treasury yield jumped 6bps to 2.45% last night, as US Treasuries sold off.
  • The Dow Jones Industrial Average broke 21,000 as Trump’s speech the day before sent stocks soaring to record highs; the S&P 500 Index jumped 1.4%, led by financial stocks.

Canada:

  • The Bank of Canada kept is benchmark interest rate unchanged at 0.5% last night, in which policy makers continued to highlight economic slack and divergence with the US economy. In its statement, the central bank commented that “while there have been recent gains in employment, subdued growth in wages and hours worked continue to reflect persistent economic slack in Canada, in contrast to the US”.
  • For a third straight statement, the BoC pointed to divergence with the US economy. Governor Poloz has been keen to point out how much weaker his country’s economy is relative to the US, wary of investors getting too far ahead of themselves pricing in interest rate hikes.
  • On the positive side, the central bank highlighted an improving outlook for growth for the Canadian and global economies, while pointing out the development were expected and that exports continue to face “competitive challenges”.
  • The Markit manufacturing PMI for February rose to 54.7 from 53.5 in January.

UK:

  • The Markit manufacturing PMI last month fell to 54.6 from 55.7 in January.

Australia:

  • According to a Bloomberg report, the drivers behind the Aussie’s 2-month rally are being eroded as iron ore shows signs of topping out and Australia’s yield advantage over the US shrinks. Iron ore prices have fallen almost 4% since reaching a more than 2-year high last week.
  • Trade surplus in January fell to A$1.3 billion, from A$3.3 billion in December, and was significantly lower than the median estimate of A$3.8 billion. Imports fell 4% on the month, while exports declined 3%.

Precious Metals:

  • Spot gold declined 0.7% to a low last night of $1,237.01/Oz before erasing losses towards markets’ close.
  • Recent signs of a technical exhaustion may be a cause for worry for gold investors; a fall back below $1,220/Oz could signal that the rally gold experienced since end-December might be a correction instead, which could potentially lead to a decline back to the lows around $1,130/Oz.
  • Silver for immediate delivery was largely unchanged earlier today, and continues to fluctuate between $18.2500/Oz – $18.5000/Oz.

Oil

  • Crude oil futures expiring in April closed 0.3% lower in New York yesterday and declined a further 0.3% to a low of $53.68/bbl earlier today after government data showed US crude stockpiles rose by 1.5 million barrels to 520.2 million last week, the most in weekly data going back to 1982.
  • Saudi Arabia’s shipments of crude fell last month, indicating OPEC’s biggest producer is continuing to cut supplies by more than it pledged, vessel-tracking data compiled Bloomberg showed.

 

USDSGD:

  • Spot 1.4111
  • The Singapore dollar continued to be depressed as the greenback extended an overnight rally in Asia on growing expectations that the Fed will raise rates this month.
  • USDSGD climbed 0.3% to 1.4124 and could be in line to retest the 100-day moving average, last broken a week ago.

 

AUDUSD:

  • Spot 0.7653
  • AUDUSD declined earlier today, nearing an intraday low of 0.7642.
  • Despite its move from 0.7200 in end-December last year, the currency pair is beginning to show signs of exhaustion; a retracement back to the 0.7500 support is possible over the medium-term.

 

USDCAD:

  • Spot 1.3349
  • USDCAD advanced a further 0.2% to a fresh 1-month high of 1.3360 earlier today, extending upon its previous session’s 1.1% rally. The pair has surged about 2% over its past 4 sessions.
  • Having broken beyond the 1.3200 level, the next resistance target lies at 1.3400.

 

USDCNH:

  • Spot 6.8690
  • The PBOC earlier set its daily reference rate at 6.8809, little changed from the yesterday’s fixing of 6.8798 to the dollar.
  • USDCNH climbed 0.1% to 6.8778, rising above its 50-day moving average for the first time since Jan 11th.
  • The currency pair has been largely in consolidation phase for most part of the year so far, with movements constrained within the range of 6.8000 to 6.9000.

 

USDJPY:

  • Spot 113,96
  • USDJPY edged above the 114 handle for the first time in 2 weeks; the pair added 0.5% to 114.16 earlier, and looks set to gain for the fourth consecutive day.

 

GBPUSD:

  • Spot 1.2282
  • GBPUSD extended its previous session’s fall, declining 0.9% to 1.2262 earlier today.
  • Following a break below the February-low of 1.2350, the pair may continue to fall lower to around 1.2100 – 1.2200 levels.
© Jachin Capital Pte Ltd

UEN: 201419754M


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