Spot values at a glance:
The US dollar gained as most Asian equities and Treasury yields rose after investors judged the recent selloff on US political turmoil as excessive given the backdrop of economic resilience and a potential rate increase in June. Crude oil extended gains towards $51/bbl, while gold declined.
- US President Donald Trump has dialled back on his critique on Islam, saying that the war on terrorism isn’t a battle between different faiths and toning down rhetoric that had earlier fuelled concerns America was at war with Islam. On his second day of his inaugural trip to the Middle East, Trump told Muslim allies over the weekend not to wait for help from the US to crush terror groups, and that countries must ensure terrorist find “no sanctuary”.
- According to the Washington Post on Friday, the law enforcement investigation into possible coordination between Russia and the Trump campaign has identified a current White House official as a significant person of interest, showing that the probe is reaching into the highest levels of government. The S&P 500 Index cut its gain by almost half following the release of the news.
- The S&P 500 Index extended its rebound Friday, ending 0.7% higher but remained negative for the week. All sectors advanced, with industrials and energy stocks leading the way.
- The US dollar extended its weakness Friday, with the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, closing down 0.6% to reach its lowest since November last year. The dollar pared some of its losses today, with the gauge rebounding 0.2% earlier.
- The benchmark 10yr Treasury yield rose 2bps today to 2.25%, as odds of a June rate hike have begun to creep up again.
- The Fed’s St. Louis President James Bullard said last Friday recent economic data has been weak and the committee’s projected path for raising interest rates may be too steep, citing declines in longer-term yields, inflation expectations and market expectations of rate paths since March. He further postulated the FOMC’s “contemplated policy rate path is overly aggressive relative to actual incoming data”.
- Canada Trade Minister Francois-Phillipe Champagne said Canada is prepared for the start of talks to renegotiate the North American Free Trade Agreement and is confident it will get a successful outcome. New US Trade Representative Robert Lighthizer has kicked off the process of the three-way agreement, which includes Mexico as well, issuing a 90-day notice to Congress.
- CPI in April rose 1.6% year-on-year, unchanged from the previous month but slightly lower than the consensus estimate of a 1.7% gain. Prices rose 0.4% on a monthly basis, lagging the 0.5% median economist forecast.
- Retail sales in March rose 0.7% from a month earlier, surpassing the median forecast of 0.3%.
- Central bank policy markets have been citing weakening core inflation figures, along with slow wage growth, as evidence that slack remains in the nation’s economy. Lack of inflation pressures is one for the main reasons why the Bank of Canada, which has a mandate to target a 2% inflation rate, isn’t expected to match interest rate increases this year by the Federal Reserve.
- Brazil President Michel Temer suffered a setback in trying to fend off allegations of corruption and cover-up after the country’s influential bar association voted in favour of his impeachement.
- EU ministers meet in Brussels on Monday to discuss their Brexit negotiating position after the UK threatened to quit talks on its departure unless the bloc drops its demand for a divorce payment as high as 100 billion euros. The size of Britain’s exit bill, and which types of negotiations can begin before it has been determined, has been a source of debate in recent weeks.
- Exports in April rose 7.5% from a year earlier, slower than the 12.0% gain in March, and less than the median economist forecast of 8.0%. Imports over the same period advanced 15.1%, higher than the expected rise of 14.8%.
- North Korea fired off another medium-range ballistic missile on Sunday, the country’s eighth test of this year and second since Moon Jae-in won South Korea’s presidential election on May 9. US President Donald Trump has vowed to stop North Korea’s push for a missile that could deliver a nuclear warhead to North America, by force if necessary.
- Spot gold declined 0.3% earlier today, falling to $1,252.15/Oz. The precious metal continues to be supported above its 200-day moving average of $1,246/Oz, as investors continue to weigh political turmoil surrounding US President Trump.
- Gold continues to remain capped by a multi-year downtrend line, in play since 2011; a convincing rally above it could lead to a significant move back up to 2016-highs.
- Silver for immediate delivery remains little changed, after erasing earlier gains which saw the metal gain beyond the $17/Oz handle.
- Crude oil futures expiring in June extended upon Friday’s rally, gaining 1.1% to $50.89/bbl after Saudi Arabia Energy Minister Khalid Al-Falih said an extensions into next year will help producers reach their goal of trimming global stockpiles to a 5-year average.
- In the US, drillers targeting crude oil added rigs for an 18th straight week.
- Spot 1.3869
- After 7 consecutive sessions of declines and falling to a 6-month low on Friday, USDSGD looks poised to buck the trend with the pair rising 0.1% to 1.3878 earlier today.
- With momentum firmly on the downside, the current pullback may be short-lived, with the previous support-turned-resistance level now at 1.3900.
- Spot 0.7449
- AUDUSD fell 0.3% to 0.7435 at its open earlier today following geopolitical concerns regarding North Korea’s weekend missile test, but has since pared back some of its declines as risk sentiment starts to turn positive again in Asia.
- Resistance can be found at 0.7470; despite last week’s rebound off 0.7400, momentum remains to the downside.
- Spot 1.3528
- The Canadian dollar strengthened to its highest against the US dollar in 3 weeks last Friday, following crude oil’s rally.
- USDCAD pared Friday’s 1.0% decline earlier today, rising 0.2% to 1.3541 following USD strength during Asia trade today.
- Spot 6.8788
- The PBOC earlier strengthened its daily reference rate by 0.16% to 6.8673 per US dollar.
- USDCNH edged 0.1% higher to 6.8812 earlier today.
- Spot 111.47
- USDJPY gained 0.3% to 111.61, following gains in the US dollar today after investors judged the recent selloff on US political turmoil as excessive given the backdrop of economic resilience and a potential rate increase.
- The 200-day moving average of 109.82 is likely to provide support against further downside.
- Spot 1.3003
- GBPUSD gapped lower by as much as 0.5% to 1.2974, before erasing declines back to the 1.3000 handle, after the UK threatened to quit talks with the EU on its departure unless the bloc drops its hefty settlement demand.
- 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.