Daily Observations:

Asian equities were mixed; indices in Hong Kong, Shanghai and Singapore gained, while those in Tokyo, Sydney and Kuala Lumpur fell. Trading volumes slumped throughout much of the region. The dollar was slightly weaker, ahead of a key jobs report due for release later this week. Gold declined for an eighth consecutive day.

Global:

  • According to OECD, the global economy may not be strong enough to withstand risks from increased trade barriers, overblown stock markets or potential currency volatility.
  • While forecasting a pickup in growth this year and next, it said the pace is still too slow and warned there’s much that could detail it. OECD expects global expansion to reach 3.3% this year, up from 3% in 2016.
  • Though not named in its report, some of the concerns are related to the policies of US President Trump’s administration, including his threats to impose tariffs on nations he deems to have an unfair advantage. In addition, there is also a “disconnect” between equity valuations and the outlook for the real economy, with the market performance partly linked to anticipation of a Trump stimulus package.

US:

  • The US trade deficit in January matched analysts’ expectations and increased to $48.5 billion, from $44.3 billion in the month prior. This was the largest trade deficit in nearly 5 years.
  • US equities slipped to register a third day of declines over the past 4 days, with the S&P 500 Index retreating 0.3%. Energy and telecommunication stocks were the biggest decliners.
  • The US dollar fluctuated; the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, remained little changed ahead of Friday’s jobs data report which is expected to add around 190,000 workers to payrolls, in line with the average over the past 6 months and a sign of steady job growth.
  • US yields continue to climb, as the benchmark 10yr Treasury yield closed 2bps higher at 2.52% – its highest close in 2017.
  • According to fed funds futures pricing data on Bloomberg, the implied odds of a March rate-hike is at 96%.

Canada:

  • Trade surplus in January rose more-than-expected to C$810 million, from a downwardly-revised C$450 million in the month prior; analysts were expected a surplus of C$750 million. Exports rose by 0.5% while volumes expanded by 1.0%.

UK:

  • Prime Minister Theresa May suffered a fresh blow to her plan to trigger the start of Brexit talks after upper-house lawmakers demanded the power to reject the final deal she reaches with the EU. The House of Lords in London voted in favour of changing May’s draft Brexit law to give Parliament the ability to send her back to the negotiating table if legislators decide the terms of the UK’s exit agreement aren’t good enough.

Japan:

  • GDP during 4Q 2016 grew 0.3% quarter-on-quarter and 1.2% on an annualized basis from the previous quarter in the 3 months through December, both less than the median estimates of 0.4% and 1.5% respectively.
  • Japan’s economy has expanded for 4 consecutive quarters, the longest run in more than 3 years, although growth has been modest and mainly driven by exports while private consumption at home remains soft.

China:

  • Imports in February, in yuan terms, jumped 44.7% year-on-year, accelerating from a 25.5% rise in January and surpassing the consensus estimate of 23.1%.
  • Exports over the same period grew at a slower pace, gaining 4.2% from a year earlier and missing the 14.6% rise predicted by analysts; imports rose 15.9% in the previous month.
  • It is worth noting that the results were skewed because the week-long Lunar New Year holidays that shutter factories and ports across the nation occurred in February 2016 versus late January in 2017, distorting base year comparisons.

Australia:

  • The RBA yesterday kept its target rate unchanged at 1.50%, as expected, following strong growth and trade performances in the final 3 months of last year.
  • It still forecasts headline inflation to rise above 2% over the course of 2017, with the pickup in underlying inflation to be more gradual.
  • Sydney housing demand remains strong as buyers appear to conclude city property is a one-way bet and keep ratcheting up record debt, despite higher house prices partly stoked by high population growth and a lack of residential construction. The RBA has left policy unchanged to avoid further inflaming the market while resurgent commodity prices and higher exports are providing a boost to national income.

Precious Metals:

  • Spot gold rebounded off its 100-day moving average of $1,212.73/Oz to pare some of its overnight declines. The precious metal is poised to register its eighth consecutive day of losses.
  • A daily close below the current support of $1,220/Oz may indicate the rally gold experienced since end-December could be a correction of a larger downtrend instead, which could potentially lead to a decline back to the lows around $1,130/Oz.
  • Silver for immediate delivery mirrored gold’s drop, falling by as much as 1.4% to $17.4694/Oz.

Oil

  • Crude oil futures expiring in April fell 0.7% to $52.75/bbl earlier today, after the American Petroleum Institute was said to report crude stockpiles increased by 11.6 million barrels last week. Government data later today is forecast to show supplies rose for a ninth week.
  • Saudi Arabia Energy Minister Khalid al-Falih acknowledged that oil inventories aren’t draining as quickly as expected, opening the door for an extension of OPEC’s production cuts into the second half of the year.

 

USDSGD:

  • Spot 1.4100
  • USDSGD was almost unchanged, as the pair continued to consolidate around its 1.4100 handle.
  • A recent rebound off the 1.4000 has somewhat stalled over the past 2 sessions; renewed upside momentum could come into play should the pair manages to break above its 1-week high of 1.4169.
  • The 100-day moving average lies above as well at 1.4200.
  • In a note to clients, Credit Suisse expects USDSGD to reach 1.4500 in 3 months, and 1.4800 in 12 months, citing the Fed’s likelihood to raise rates 3 times this year as the main driving factor of the currency pair. The bank also doesn’t expect MAS to ease at its next meeting in April as concerns over deflation and a hard landing in China have ebbed.

 

AUDUSD:

  • Spot 0.7611
  • The Aussie gained after the RBA yesterday said the global economy has improved while local consumption growth was stronger, but pared gains thereafter as traders took note of RBA’s warning over the negative effects of a strong currency.
  • AUDUSD gained 0.2% to a high today of 0.7611.
  • Near-term key support lies at 0.7500.

 

USDCAD:

  • Spot 1.3405
  • USDCAD briefly reached its 2-month high last night, before falling back towards the 1.3400 handle.
  • The 1.3600 resistance level is next in line to be tested.

 

USDCNH:

  • Spot 6.8978
  • The PBOC earlier weakened its daily reference rate by 0.11% to 6.9032, from 6.8957 to the dollar the day before.
  • USDCNH was little changed earlier today, with the pair trading just below the 6.9000 handle.

 

USDJPY:

  • Spot 113.63
  • USDJPY erased its previous day’s gain, falling 0.3% to a session-low of 113.61 earlier today.
  • Based on Tokyo Financial Exchange data, Japanese retail investors increased their overall net yen short positions by the most since June last year, amid increasing indications that the Fed will raise rates later this month.

 

GBPUSD:

  • Spot 1.2209
  • GBPUSD declined by as much as 0.3% to 1.2170, a fresh 7-week low, last night amid renewed political uncertainty over the UK’s plan to exit the EU.
  • The pair has since erased declines, and is now trading back above its 1.2200 handle.
© Jachin Capital Pte Ltd

UEN: 201419754M


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