March 30, 2017

Daily Observations:

Most Asian stocks declined amid profit-taking by investors as they approached the end of the best quarter for global equities since 2013. Oil neared $50/bbl while Treasuries and gold slipped.

US:

  • The Fed’s Boston President Eric Rosengren argued Wednesday that 4 hikes in 2017 may be needed to guard against economic overheating, and warned that the economy should not be allowed to grow so much faster than potential that the unemployment rate becomes unsustainable.
  • San Francisco Fed chief John Williams said that while the median Fed official expects 3 increases this year and his “own view is similar”, given his forecast and upside risks he “would not rule out more than 3 increases total for this year”.
  • House Republicans are considering making another run next week at passing the health-care bill they abruptly pulled from the floor last week. 2 Republicans lawmakers say leaders are discussing holding a vote, which may stray into the weekend if necessary, but it’s unclear what changes would be made to the GOPs health bill. They described the discussions on condition of anonymity, Bloomberg reported.
  • Pending home sales in February rose 5.5% from a month earlier, its highest level since April 2016, and better than the median estimate of 2.5%.
  • USD bulls regained ground today, with the Bloomberg Dollar Spot Index rising 0.2% in Asia earlier to erase its overnight decline.
  • The benchmark 10yr Treasury yield closed 2.38% in New York, down 4bps, but managed to pare some it earlier today after rising to 2.40%.
  • US equities ended mixed overnight with gains in the S&P 500 (+0.1%) and Nasdaq Composite (+0.4%) indices bringing some optimism despite losses in the Dow Jones Industrial Average (-0.2%). Energy producers were the best performers.

UK:

  • Prime Minister Theresa May adopted a conciliatory tone towards the EU as she coupled her demand for Brexit with a request for a sweeping free-trade deal encompassing financial services. However, the possibility of a hard Brexit landing cannot be ruled out amid speculation that the UK could be penalized by the EU in order to shut the anti-EU voices in other parts of the Eurozone.
  • May sought to smooth over tensions by calling on both sides to negotiate “constructively and respectfully””, saying that she wants the bloc to “succeed and prosper”.
  • May wants to conduct parallel discussions to preserve the UK’s bargaining power, while counterparts such as EU President Donald Tusk insisted that terms of a future partnership can’t be discussed until an “orderly withdrawal” is determined.
  • One flashpoint will be money as the EU pushes for the UK to pay around 60 billion euros to settle its accounts. May has however hinted that Britain would make its own claims as well as it leaves the bloc.

Japan:

  • BoJ Governor Iwata said that it’s appropriate to continue powerful monetary easing until the 2% inflation target is achieved, adding that here is no need to buy US Treasuries directly from the Fed as the BoJ is able to achieve sufficient monetary easing via JGB purchases.

China:

  • Earnings reports the past 2 days from China Construction Bank Corp. and Agricultural Bank of China Ltd., the nation’s second- and third-largest lenders by assets, beat analysts’ estimates, helped by a drop in expenses and cut their bad-loan rations.
  • According to a recent poll of traders and analysts, the consensus view is that the PBOC will keep a tight rein on money –market rates this year, raising the cost of short-term funds at least twice that will pressure bonds.

Australia:

  • According to a Bloomberg report, signals from Australia’s latest labour report point to stronger consumption and growth in 1Q. However, the data is not strong enough to close the door to further rate cuts by the RBA, as some soft patches in employment remain a challenge to growth. In addition, inflation is outpacing wages while household debt is the highest on record. The AUD has also held up well despite the Fed tightening – another constraint on Australia’s economy.

Precious Metals:

  • Spot gold continued its pullback after failing to break above its 200-day moving average for the second time in a month, after the precious metal declined 0.3% to $1,248.41/Oz earlier.
  • The metal is up almost 9% since the start of the year and is poised to snap 2 straight quarterly declines.
  • In a rare form of divergence, silver for immediate delivery gained, unlike gold, and closed above its 200-day moving average yesterday. It rose a further 0.7% to $18.2597/Oz earlier, its highest level 4 weeks, before paring gains and is currently trading at a key downtrend line from July last year.

Oil

  • Crude oil futures expiring in May rallied 2.4% to $49.51/bbl in New York, after US government data showed gasoline inventories dropped by 3.75 million barrels last week, more than the 2 million expected.
  • Additionally, refineries boosted the amount of crude they processed by the most in almost 3 years, helping to overshadow a gain in American output and stockpiles that have undermined production curbs this year by OPEC and its partners.

 

USDSGD:

  • Spot 1.3961
  • USDSGD continues to be supported above the 200-day moving average after gaining 0.2% to 1.3967 earlier.
  • As the pair undergoes consolidation between the 1.3900 and 1.4000 handles, for the next move to materialise, a break out of its current range will have to first take place.
  • The general view that the central bank will refrain from easing monetary policy next month has provided renewed demand for the Singapore dollar, and drove the USDSGD pair below the key 1.4000 level last week.

 

AUDUSD:

  • Spot 0.7655
  • AUDUSD erased an overnight gain today after having met strong supply on resurgent USD demand and weakness surrounding commodities’ prices.
  • Medium-term momentum remains to the upside, after the pair rebounded strongly off its 0.7600 support on Tuesday.

 

USDCAD:

  • Spot 1.3338
  • On the back of stronger crude oil prices, the Canadian dollar strengthened 0.3% to 1.3323 against the USD.
  • The currency pair continues to be bound by its 1.3300 and 1.3400 handles.

 

USDCNH:

  • Spot 6.8746
  • The PBOC strengthened its daily reference rate earlier today, to 6.8889 to the dollar, from 6.8915 yesterday.
  • USDCNH advanced 0.2% to 6.8831, but pared back some of its gains after former Treasury Secretary Jacob Lew said China’s currency interventions were aimed at bolstering the yuan, instead of weakening it to gain trade advantage.

 

USDJPY:

  • Spot 111.14
  • The recent rebound in USDJPY lost legs just below the support-turned-resistance level of 111.60; the pair pared gains of as much as 0.4% to 111.43 this morning.
  • The risk for USDJPY continues to remain to the downside, after the pair closed below the 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 1.2432
  • GBPUSD was little changed after the pair halted its decline around the 1.2400 handle, as investors adopted a wait-and-see attitude after the historic Article 50 got triggered yesterday, paving way for Brexit to take place.
© Jachin Capital Pte Ltd

UEN: 201419754M

The contents of this document are for information only and is taken or compiled from sources that we, Jachin Capital Pte Ltd, believe to be reliable. To the maximum extent permitted by law, we do not make any representation or warranty (express or implied) that this information is accurate, timely or complete and it should not be relied upon as such. Opinions expressed are our current opinions as at the date of this document only and are subject to change without notice. We endeavour to update on a reasonable basis the information discussed but regulatory, compliance or other reasons may prevent us from doing so. The publication and distribution of this document is not and does not imply any form of endorsement of any person, entity, service or product described or appearing here. This is not and does not constitute or form an offer to buy or sell nor the solicitation of an offer to buy or sell any security or financial instrument nor to participate in any particular trading or investment strategy. We are not soliciting any action based on this document. The information, services and products described or appearing here are intended only for Accredited Investors (as currently defined in the Securities and Futures Act) and are not intended for nor targeted at the public in any specific jurisdiction. This information does not take into account the particular investment objectives, financial situations or needs of individual investors. Investors should seek independent financial, tax or legal advice or make independent investigations as considered necessary or appropriate before making an investment decision. Investments involve risk. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment instrument.

Essential SSL