Key overnight events:
- The FOMC minutes from its April meeting indicated most policy makers felt that a June hike would be appropriate should the US economy continue to improve, boosting market expectations that they will act next month following recent stronger-than-expected data on consumer inflation, housing starts and industrial production.
- According to Bloomberg’s Fed funds futures pricing, the probability of a June hike has risen to 32%, from 4% a week ago and 12% prior to the release of April’s minutes.
- The S&P 500 Index added less than 0.1%, after swinging more than 0.6% in both directions. Bank shares led gainers, offsetting broader declines paced by consumer shares. High dividend-yielding stocks got punished as Treasury yields spiked as much as 11 basis points.
- The US dollar jumped broadly following the release of the Fed’s hawkish minutes, with the Bloomberg Dollar Spot Index closing 0.8% higher – the most one-day gain since 6th Nov last year.
- The pound jumped to a 3-month high against the euro and reversed its drop against the dollar after a poll showed the campaign to keep Britain inside the EU had extended its lead.
- Front-month crude oil futures slipped 0.3%, and a further 1.6% to $47.41/bbl in Asia trading hours this morning, as US crude stockpiles unexpectedly increased by 1.3 million barrels last week.
- Moody’s lowered its growth forecast for the US to 2% from 2.3% in 2016, to reflect weakness in 1Q, followed by 2.3% growth in 2017.
- Investors will look out for speeches by the Fed’s Fischer and Dudley tonight to confirm if a June hike is seriously on the calendar.
- Spot 1.3812
- USDSGD extended its gains today, climbing 0.5% higher to 1.3829 – the highest in two months.
- A run up to 1.3941, the next level of resistance, looks probable. The 50-week moving average lies in close proximity at 1.3906 lies.
- Spot 0.7215
- Australia’s economy added 10,800 jobs in April, less than the 12,000 forecasted and the 25,600 jobs added the in prior period. The unemployment rate remained at 5.7%, lower than the 5.8% estimated. Gains in employment were fuelled by part-time roles as full-timers fell.
- AUDUSD sank as much as 1.0% to 0.7209, taking out its 200-day moving average in the process. The next support comes in at the 0.7000 psychological handle.
- Spot 1.3055
- USDCAD extended gains to a 6-week high, rallying 0.7% to 1.3057 earlier today, following oil’s decline and a US dollar rally overnight.
- After struggling to break above the 50-day moving average and 1.3000 handle for weeks, the currency pair could potentially trade higher up to the 1.3300 region, following its breakout.
- Spot 6.5658
- The PBOC set its reference rate at the 6.5531, the weakest in over 3 months, following a strong US dollar rally overnight.
- USDCNH jumped 0.9% to 6.6145 overnight before paring losses back to the 6.5600 handle this morning.
- A resurgent US dollar is shaking up a strategy that the PBOC has pursued over the past 3 months – a steady rate against the dollar, combined with depreciation against other major currencies. Further weakness in the yuan could risk a repeat of the turmoil of Jan 2016 and Aug 2015, when a tumbling exchange rate roiled global markets.
- Spot 8.3272
- USDNOK jumped 1.3% to a session high of 8.3315 earlier today, reaching its highest level in a month, helped on by weaker oil prices and a stronger US dollar.
- The resistance around 8.4450 is likely to be tested over the near-term.