May 15, 2017

Daily Observations:

Crude oil jumped to its highest level in more than 2 weeks, following a production-cut deal between Saudi Arabia and Russia. Equities in Asia were mainly higher, buoyed by China President Xi’s plans for an international infrastructure program worth $78 billion.

Global:

• An unrivalled global cyber-attack is poised to continue claiming victims this week as people return to work and switch on their desktop computers. More than 200,000 computers in at least 150 countries have so far infected, according to Europol, the EU’s law enforcement agency. The UK’s National Cyber Security Centre said new cases of so-called ransomeware are possible “at a significant scale”.
• The malware used a technique purportedly stolen from the National Security Agency in the US. Affected organizations so far include the UK’s National Health Service, Russia’s Ministry of Interior, Germany’s Deutsche Bahn rail system, Nissan Motor Co., Renault SA, FedEx Corp. and other company and hospital computer systems in countries from Eastern Europe to the US and Asia.

US:

• Headline inflation in April rose 0.2% month-on-month and 2.2% year-on-year, with the former matching expectations and the latter missing the consensus estimate of 2.3%. Stripped of the volatile effects of food and energy prices, core CPI gained 0.1% from a month earlier and 1.9% from a year ago, both missing the expected gains of 0.2% and 2.0% respectively.
• Retail sales last month advanced 0.4% month-on-month, less than the expected growth of 0.6% but improving from the prior rise of 0.1%.
• The US dollar sold off last Friday following lower-than-expected retail sales numbers, and maintained weakness earlier today in Asia. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, declined 0.4% Friday to fall back below its 200-day moving average.
• Treasury yields sank across the curve last Friday after inflation data came in largely weaker than expected. The benchmark 10yr Treasury yield declined 6bps to 2.33%.
• US equity indices were mixed with gains in the tech-heavy Nasdaq Composite outweighed by declines in the Dow Jones Industrial Average and the S&P 500 Index. The latter fell 0.2%, with the industrials sector leading declines.

Germany:

• Chancellor Angela Merkel’s party decisively won an election in North rhine-Westphalia, Germany’s most populous state, handing her Social Democratic opponents a humiliating defeat and further boosting her momentum as she seeks a fourth term in September.

China:

• President Xi Jinping described over the weekend the Belt and Road Initiative as a “project of the century” and pledged 540 billion yuan, or $78 billion, in financing, including 100 billion yuan for China’s Silk Road Fund, 380 billion yuan in new lending for participating nations, and 60 billion yuan in coming years to developing countries and international organizations that join the program.
• Xi repeated his call for multilateral trade, describing his initiative as a force for peace in “a world fraught with challenges”. He told the almost 2 dozen world leaders gathered at the forum that countries should “uphold and grow an open world economy”.
• China April retail sales grew 10.7% year-on-year, versus 10.8% expected by economists and slowing from a 10.9% rise in March.
• April industrial production rose 6.5%, less than the predicted 7% gain.

Singapore:

• Retail sales in March slipped 0.2% month-on-month and gained 2.1% year-on-year, surpassing consensus estimates of -1.2% and 0.3% respectively.

Precious Metals:

• Spot gold maintained Friday’s gains, edging 0.2% higher to $1,230.76/Oz earlier today as Treasury yields maintained near lows. Investors of the yellow metal still remain cautious, however, as massive rate hike expectations continue to hinder extended buying.
• The key support is at $1,200/Oz, last tested 2 months ago.
• Silver for immediate delivery continued its rebound earlier today, adding 0.3% to $16.5195/Oz.

Oil

• Crude oil futures expiring in June rallied 3.4% to $49.45/bbl, after Saudi Arabia and Russia said they favour prolonging oil-output cuts by global producers through the end of the first quarter of 2018, setting a firmer extension of the curbs into next year.
• US drillers added 9 rigs targeting crude, bringing the total to 712, the most since April 2015, Baker Hughes Inc. reported last Friday.

USDSGD:

• Spot 1.4031
• USDSGD fell beyond Friday’s low, 0.1% lower to 1.4029 on the back of USD weakness last Friday.
• The 200-day moving average of 1.4000 looks set to provide strong support.

AUDUSD:

• Spot 0.7399
• AUDUSD advanced 0.2% to 0.7404 this morning, mainly driven by USD weakness.

USDCAD:

• Spot 1.3622
• USDCAD declined 0.7% to 1.3615 amid surging crude oil prices today.

USDCNH:

• Spot 6.8917
• USDCNH extended declines below the 6.9000 handle earlier, falling 0.1% to 6.8916.

USDJPY:

• Spot 113.48
• USDJPY was little changed from Friday’s close of 113.38, having found resistance at the 114 level last week.

GBPUSD:

• Spot 1.2930
• GBPUSD advanced 0.4% to 1.2941 earlier, as the pair continues to consolidate between the 1.2800 and 1.3000 levels.
• Following its bullish break above the 200 day moving average, the pair looks likely to extend gains higher should it manage to trade above the 1.3000 resistance. Over the longer-term, the key level to watch is 1.3500.