March 28, 2017

Daily Observations:

The selloff in riskier assets eased after US stocks staged a recovery, with most Asian equity markets resuming their upward trajectories as the dollar put the brakes on losses and gold retreated from a key resistance level.

US:

  • Chicago’s Fed President Charles Evans said 2 interest-rate increases may be the right amount of tightening for the US economy this year given uncertainty surrounding the outlook for inflation and government spending. However, he added that renewed confidence in the economy could bring the number up to 3.
  • Evan’s colleague, Dallas Fed chief Robert Kaplan, told reporters last night that he hadn’t factored fiscal policy into his forecasts, but that he was watching the Affordable Care Act debate because it might have had an effect on consumers. He reiterated his view of gradual easing of monetary policy, but stated it makes sense to lift rates before inflation hits the Fed’s 2% goal.
  • US stocks finished lower, but the S&P 500 Index all but erased a loss of almost 1% while the Dow Jones Industrial Average rebounded more than 100 points from its session low. The Dow still notched an eighth straight loss for its longest slide since 2011.
  • The S&P 500 Index ended 0.1% lower, as gainers in health care and materials stocks dampened effects of decliners in the telecommunications and real estate sectors.
  • The US dollar continues to remain weak following Trump’s failure to pass the health-care bill over the weekend and uncertainties regarding the rest of his policies. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, declined 0.4% in New York, paring losses of as much as 0.7% earlier in its session.
  • Yields dropped across the board as well, ending 3bps lower at 2.38%, after recovering from its day-low of 2.35%. The crucial support remains at 2.30%.

UK:

  • Theresa May’s government is increasingly concerned the EU will seek to punish the UK for leaving the bloc, amid claims the prime minister hasn’t done enough to charm her counterparts as she prepares to start Brexit.
  • 3 senior members of May’s administration said that the single biggest obstacle to winning favourable exit terms and a new free-trade deal is an “emotional” backlash from the EU against last June’s vote for Brexit. One said the premier had not worked enough to woo EU leaders, warning that her failure to quell European hostility could prove a weakness in the talks.
  • May will on Wednesday formally trigger the start of 2 years of Brexit negotiations with a letter announcing Britain’s planned withdrawal from the EU.

China:

  • Sales manager sentiment and confidence of small- and medium-sized enterprises jumped to the highest in almost 2 years, according to earliest private indicators for March. International markets experts see a significantly stronger outlook and a gauge of manufacturing activity based on satellite imagery remains robust.

Precious Metals:

  • Spot gold failed to break above its 200-day moving average of $1,261/Oz, bouncing off it to turn lower; the precious metal fell 0.3% earlier to $1,252.58/Oz.
  • The last time spot gold rebounded off its 200-day moving average, the precious metal retreated more than 4% back towards the $1,200/Oz support. A strong break higher though could pave the way for a move to the $1,300/Oz resistance.
  • Silver for immediate delivery looks poised to gain for its fifth straight session, adding 1.1% to briefly trade past its 200-day moving average of $18.0741/Oz earlier.

Oil

  • Crude oil futures expiring in May rebounded off the $47/bbl handle, gaining 0.6% to $48.00/bbl earlier today, before weekly US government data is forecast to show record crude stockpiles last week expanded probably by 1.37 million barrels, according to a Bloomberg survey.

 

USDSGD:

  • Spot 1.3942
  • USDSGD rebounded off its 200-day moving average of 1.3915, and was 0.1% higher at 1.3947 earlier today.
  • The general view that the central bank will refrain from easing monetary policy next month has provided renewed demand for the Singapore dollar, and driven the USDSGD pair below the key 1.4000 level over the past week.

 

AUDUSD:

  • Spot 0.7617
  • AUDUSD continues to be supported above the 0.7600 handle, despite erasing previous session’s gains to 0.3% lower at 0.7608.
  • A recent decline in iron ore prices has somewhat negated the effects of a weaker US dollar.

 

USDCAD:

  • Spot 1.3381
  • USDCAD retreated from a session-high of 1.3403, helped by crude oil prices moving off their lows earlier today.
  • The currency pair continues to be bound by its 1.3300 and 1.3400 handles. A break higher and a consolidation on top could open the doors to more gains for the pair.

 

USDCNH:

  • Spot 6.8637
  • The PBOC weakened its daily reference rate for the first time in 5 days, by 0.12% to 6.8782 to the dollar, from 6.8701 yesterday.
  • USDCNH advanced 0.1% to a session-high of 6.8638 after a rebound off the key 6.8500 handle.

 

USDJPY:

  • Spot 110.57
  • USDJPY rose 0.4% to 110.83, but pared some of its gains after the US dollar came under renewed pressure and stalled its corrective rally against majors in reaction to a cautious tone seen in a speech by Fed’s Kaplan.
  • The risk for USDJPY continues to remain to the downside, after the pair closed below the key 111.60 support last week. The currency pair had spent most of the past months within the 111.60 – 115.60 range, and following a breakout of its lower boundary, could fall further to its 200-day moving average of around 108 over the medium term.

 

GBPUSD:

  • Spot 1.2570
  • GBPUSD slid 0.3% to 1.2554 earlier, after briefly trading above the 1.2600 handle earlier, the first time the pair has breached that handle since early February.
  • With the 100-day moving average at 1.2400 broken last week, the momentum remains to the upside. The next resistance comes in at 200-day moving average of 1.2691.

 

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