Key overnight events:
- The S&P 500 Index fell 0.4%, wiping out its gains for the year and slipping for the third consecutive day as Fed officials continue to signal a willingness to tighten policy in June. Industrial and financial shares led the drop, although earnings from Walmart and Cisco surprised positively.
- The Fed’s Vice Chairman Stanley Fischer remained silent on a possible hike in June, but New York and Richmond Presidents Dudley and Lacker both confirmed that the case for a June hike is strong. The Bloomberg Dollar Spot Index extended gains by 0.1%; the US dollar is currently at its strongest levels since 28th Mar.
- US weekly jobless claims last week dropped from a 1-year high to 278,000, roughly in line with the expected figure of 275,000, suggesting a tighter labor market as non-farm payrolls are due for release in 2 weeks.
- WTI futures expiring in June slipped 0.1% to settle at $48.16/bbl, paring losses of as much as 3.0% from earlier in the session. Gains extended further into Asian trading hours with futures reaching a session high of $48.78/bbl, fuelled by data which showed US oil production slid for the tenth week to the lowest level since Sep 2014.
- Bank of Japan Governor Kuroda reaffirmed he will add stimulus if needed but avoided FX policy as he spoke at the G-7 meeting, which runs through Saturday.
- The White House’s deputy national security adviser for international economics, Wally Adeyemo, warned FX intervention won’t spur global growth, reinforcing pressure by Obama’s administration on Japan to avoid weakening the yen.
- ECB Executive Board member Coeure said that the bank has no plans to cut its deposit rate further, and instead urged G-7 nations to focus on structural growth policies.
- Spot 1.3801
- USDSGD has registered month-to-date gain of 2.7% culminating with yesterday’s close at the 1.3800 handle; it was largely unchanged this morning.
- CPI due on Monday is expected to show a 0.7% year-on-year fall.
- Spot 0.7228
- AUDUSD briefly fell below the 0.7200 handle last night before paring and reversing losses to gains of up to 0.7%.
- The currency pair closed below its 200-day moving average of 0.7256 for the first time since 2nd Mar; the moving average should act as a resistance point over the near term.
- Spot 1.3092
- USDCAD extended its climb by 0.4% to 1.3154, before reversing back below the 1.3100 handle today. 1.3300 remains the next level of resistance above.
- Retail sales in March due tonight is expected to show a month-on-month drop of 0.6%, while headline CPI in April is expected to have improved by 1.7% year-on-year.
- Spot 6.5610
- USDCNH pared previous day’s gains, declining back towards the 6.5600 level of support. Both onshore and offshore yuan gained after the PBOC strengthened its daily reference rate for the first time in three days.
- The yuan is headed for its third week of declines, the longest stretch of losses since December last year.
- Spot 8.3480
- After reaching a 7-week high of 8.3941 last night, USDNOK reversed gains and traded down by as much as 0.3%, fuelled by oil’s resurgence today
- The IMF said Norway‘s economic growth is likely to remain sluggish in 2016, and recovery should take root in 2017 alongside a gradual upturn in oil prices and a slowing of the pace of decline in oil investment. It also stated that current monetary stance is appropriately supportive and should remain given the slack in the economy and the stable inflation outlook.