Spot values at a glance:
Asian equities followed US indices into the red, after turmoil surrounding Donald Trump’s administration sparked a selloff in risk assets. Safe haven assets such as US Treasuries, gold and the yen rallied overnight.
- US equities and the dollar extended losses despite House Speaker Paul Ryan reassuring reporters that lawmakers will simultaneously investigate potential Russian meddling in the US election and possible ties to President Trump’s campaign, while continuing to advance the administration’s pro-growth legislative agenda.
- Several US congressional panels are pushing for testimony from fired FBI Director James Comey to get to the truth about whether Donald Trump asked him to drop an investigation even as Republicans largely stood by the president. However, some Republicans have joined Democratic calls for an independent Russian probe.
- Many investors expect the US to be a major growth engine this year for the global economy, but the latest political developments come at the same time as markets get hit with reports showing weakness in retail sales, housing and inflation.
- The US dollar extended its selloff, with the Bloomberg Spot Dollar Index falling for the sixth straight session, closing 0.5% lower in New York. The dollar has since pared back some of its decline, with the gauge higher by 0.2% in Asia this morning.
- The odds that the Fed raises its benchmark rate next month are down to 60%, from 80% a week ago, based on the current fed funds rate and the forward overnight index swap rate, with a full hike priced in only by November.
- US Treasuries surged on safe haven buying; the benchmark 10yr Treasury yield sank 11bps to 2.22% in New York, its steepest decline since July last year.
- The Dow Jones Industrial Average plunged more than 370 points, while the S&P 500 fell 1.8% to register its worst performance since 9 Sep. Banks shares led the retreat with a 3% slide, the most since June last year.
- 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.
- Japan’s economy advanced for a fifth straight quarter, the longest expansion in a decade. 1Q GDP expanded 0.5% quarter-on-quarter (expected 0.5%) and 2.2% on an annualized basis (expected 1.7%), accelerating from 0.3% and 1.4% respectively.
- Australia’s jobless rate fell in April, adding to the previous month’s strong employment gains and reinforcing expectations that the RBA won’t cut rates further.
- Unemployment rate fell to 5.7% from 5.9% in March, less than the 5.9% expected.
- 37,500 jobs were added in April, less than the 60,000 added in March but more than the median consensus of a 5,000 gain. Full-time jobs fell 11,600 while part-time positions gained by 49,000.
- Spot gold extended gains, rallying by as much as 1.4% to $1,263.20/Oz earlier as the disarray engulfing Trump’s administration boosted safe haven-buying and as investors scaled back the odds of a Fed hike next month.
- The precious metal has climbed back above its 200-day and 200-week moving averages, but still remains capped by the multi-year downtrend line – a convincing rally above it could lead to a significant move back up to 2016-highs.
- Silver for immediate delivery was little changed, retreating back below the $17/Oz handle after briefly trading above it last night.
- Crude oil futures expiring in June gained 0.8% to $49.07/bbl last night to close at the highest since 28 Apr. US stockpiles dropped last week for a sixth straight weekly decline, and crude production fell for the first time in 13 weeks, ending the longest stretch of gains since 2012, according to government data.
- Crude’s recent rebound has stopped short just under the $50/bbl handle, and all eyes will be on upcoming events such as Iran’s presidential election tomorrow and OPEC’s meeting next week.
- Spot 1.3912
- USDSGD briefly declined below the 1.3900 support, falling 0.4% to 1.3891 before a technical bounce saw the pair pare some of its decline.
- Currently at a key support level, a strong close below 1.3900 for the pair and we could witness a move down to the next support region of 1.3725.
- Spot 0.7465
- AUDUSD climbed to its highest in almost 2 weeks, gaining 0.8% to 0.7467 following a better-than-expected jobs April jobs report and USD weakness earlier today.
- Spot 1.3606
- USDCAD continues to fluctuate around the 1.3600 handle. The pair retreated 0.3% to 1.3572 overnight on the back of USD weakness but has since erased most of its declines as the US is poised to kick off a 3-month countdown to NAFTA’s renegotiation.
- 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.
- Spot 6.8784
- The PBOC earlier strengthened its daily reference rate to 6.8612 per US dollar, raising it for the sixth straight day.
- USDCNH was little changed earlier today, after erasing a 0.1% overnight decline.
- Spot 111.01
- USDJPY slumped 1.7% to 110.54 overnight, before paring its decline back to the 111 handle earlier today following upbeat jobs report from Australia and GDP figures from Japan.
- The 200-day moving average of 109.72 is likely to provide some support against further downside.
- Spot 1.2966
- GBPUSD failed in yet another attempt to surpass stiff resistance at the 1.3000 handle, and continues to remain little changed from its previous session’s close of 1.2972 as investors await UK retail sales data due for release later today.
- Following its bullish break above the 200 day moving average last month, 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.