May 16, 2017

Daily Observations:

Asian equities were mixed with indices in Singapore, Shanghai, and Hong Kong declining and equities in Tokyo, Sydney and Seoul gaining. Crude oil extended gains after Saudi Arabia and Russia supported an extension of output cuts, while gold pared gains from a 1-week high. The US dollar continues to remain weak.

US:

• US Empire Manufacturing unexpectedly fell from 5.2 to -1.0 in May, faring much worse than the 7.5 reading expected by analysts.
• US President Donald Trump, already fending off questions about his firing of FBI Director James Comey amid an investigation of possible collusion by Trump associates in Russian interference with the US election, faced a new controversy after the Washington Post reported that the president revealed to Russia’s foreign minister and ambassador closely held intelligence from a US intelligence partner about an Islamic State plot.
• The US dollar continues to remain strongly offered; the Bloomberg Dollar Spot Index retreated fifth straight today, falling 0.1% earlier.
• US yields edged higher after Treasuries got sold off following rallies in crude oil and equities. The benchmark 10yr Treasury yield rose 1bp to 2.34% in New York.
• The S&P 500 Index closed at a record high to finish 0.5% higher and above the key 2,400 handle. Energy and financial shares paced gains.
• Ford Motor Co. is planning to cut about 10% of its global workforce in its bid to improve profits and boost its lagging stock price, the Wall Street Journal reported.

China:

• China increased its holding of US Treasuries by the most in 2 years, from $27.9 billion to $1.09 trillion in March, according to a monthly Treasury Department report released yesterday, and continues to remain the second-largest foreign holder of American debt. Adding the $3.7 billion surge in Belgium’s ownership, which is often seen as a home to China’s custodial accounts, the total increase was the biggest since 2014.
  

Australia:

• The RBA said March CPI data had “generally increased confidence” in its forecast that core inflation will pick up to around 2% by 2018, in minutes of this month’s policy meeting released earlier today. Data in April suggested that the economy had expanded at a moderate pace in the first quarter, the minutes said.
• Governor Lowe and his board are largely expected to keep rates on hold at 1.5% for the rest of the year with the labor market still showing plenty of slack and amid surging home prices in Sydney and Melbourne.

Singapore:

• UBS Group AG’s largest shareholder, Singapore’s sovereign fund GIC Pte, is slashing its ownership in the Swiss bank by offering a 2.4% stake worth about $1.6 billion.
• Singapore home sales more than doubled in April from a year earlier as homebuyer sentiment rallied after the government rolled back some property curbs following a 3-year slide in prices.

Precious Metals:

• Spot gold gained 0.5% to $1,237.40/Oz, and looks poised to gain for a third straight day as the US dollar continues to weaken. However higher interest rates expectations continue to weigh on the precious metals’ market sentiment, and further selling could creep in around the $1,250/Oz handle, where gold’s 200-day moving average resides.
• The key support is at $1,200/Oz, last tested 2 months ago.
• Silver for immediate delivery continued its rebound, adding as much as 1.2% to $16.8240/Oz last night.

Oil

• Crude oil futures expiring in June closed at its highest in more than 2 weeks last night, 2.1% higher at $48.85/bbl, and added a further 0.6% earlier this morning.
• Saudi Arabia and Russia said in Beijing on Monday they favour prolonging this year’s oil curbs to the first quarter of 2018. If they convince fellow producers to adopt the strategy when OPEC and its partners meet next week, it will pare near-record inventories in developed nations by 8% and erase glut weighing on the market, according to a report from Bloomberg.

USDSGD:

• Spot 1.3978
• USDSGD maintained near its lows, after the pair retreated back below its 200-day moving average of 1.4003 yesterday.
• The 200-day moving average of 1.4000 looks set to provide strong support.

AUDUSD:

• Spot 0.7413
• AUDUSD was 0.5% lower at 0.7405 earlier today, despite a fairly upbeat release of RBA’s minutes from its last meeting.

USDCAD:

• Spot 1.3624
• USDCAD maintained near its previous day’s lows after Saudi Arabia and Russia backed an extension of the oil production cut agreement.
• The pair continues to remain supported at the key 1.3600 level, having broken above it at the end of last month. The price momentum continues to remain to the upside over the longer term, with an ascent up to 1.3800, then 1.4000, a possibility.

USDCNH:

• Spot 6.8875
• The PBOC earlier strengthened its daily reference rate by 0.09% to 6.8790 per US dollar, stronger than expected according to forecasts from Mizuho and ANZ.
• On the back of a weaker USD, USDCNH declined for a fifth straight session, by 0.1% to 6.8848 earlier today.

USDJPY:

• Spot 113.50
• USDJPY was little changed from its previous session’s close of 113.46, as the 100-day moving average of 113 continues to provide support.

GBPUSD:

• Spot 1.2912
• GBPUSD pared declines, rising back above the 1.2900 handle on the back of dollar weakness. 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.