Spot values at a glance:
The yen rose with gold, and US equity-index futures fell as investors took a cautious approach amid latest reports on the Trump administration and a suspected terrorist attack in the UK killed at least 19 people. Asian equities were mixed, while crude oil pared overnight gains.
- According to the Washington Post, US President Donald Trump has asked intelligence chiefs, Director of National Intelligence Daniel Coats and NSA Director Michael Rogers, to publicly deny any collusion between his campaign and Russia.
- Trump will dramatically reduce the US government’s role in society with $3.6 trillion in spending cuts over the next 10 years in a budget plan that shrinks the safety net for the poor, recent college graduates and farmers. Trump’s proposal, to be released later today, claims to balance the budget within a decade, but relies on a tax plan for which the administration has provided little detail, the elimination of programs backed by many Republican lawmakers, and heavy use of accounting gimmicks, according to a Bloomberg news report.
- Selling pressure on the US dollar continued following Merkel’s comment that the euro is “too weak”, with the Bloomberg Dollar Spot Index falling 0.1% in New York.
- Federal Reserve Bank of Dallas President Robert Kaplan said he still sees 3 rate hikes in 2017, including the Fed’s March increase, as “an appropriate baseline case for the near-term path of the federal funds rate”.
- US yields rose following Kaplan’s comments, with the benchmark 10yr Treasury yield gaining 2bps to 2.25% overnight.
- US stocks closed higher for a third session of gains, recovering most of last week’s loss, as Donald Trump’s trip to Saudi Arabia netted deals that lifted industrial shares. The S&P 500 Index rose 0.5%, closing 0.25% shy of the 2,400 mark.
- German Chancellor Angela Merkel blamed a “too weak” euro and low oil prices for part of Germany’s trade surplus, which she said can be addressed with additional investment in the nation.
- UK police said at least 19 people were killed in a suspected terrorist attack at a concert in Manchester, in the worst such incident on British soil since the London bombings in 2005. No one has claimed responsibility yet.
- The EU has finalized its tough Brexit negotiating position, reiterating its hard line on the UK’s departure bill and refusing to discuss a future trading arrangement until there is agreement on other key topics.
- The size of Britain’s exit bill, which some estimates pout as high as 100 billion euros and is based on the UK’s past financial commitments to the EU, has been a source of debate for weeks and will prove an early test of the ability to find common ground when negotiations start.
- Manufacturing PMI in May slipped to 52.0, from 52.7; no estimates were provided.
- Spot gold rebounded 0.6% to $1,263.88/Oz earlier today, with tailwinds provided by a weaker US dollar, as well as safe-haven demand following a suspected terror attack in the UK.
- The precious metal continues to be supported above its 200-day moving average of $1,246/Oz.
- 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 advanced 1.5% to $17.2188/Oz, its highest level in 3 weeks.
- Crude oil futures expiring in June added 0.9% to $51.13/bbl overnight, its highest close since Apr. 19. US inventories probably slid by 2 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.
- Iraq backed a proposal to extend production curbs into 2018, adding to growing support for longer reductions to clear a global glut.
- Spot 1.3864
- USDSGD seems to have stabilized around the 1.3850 region, following its 1.7% decline since 10 May.
- With the support around the 1.3819 level, the currency pair could undergo further consolidation before deciding on its future direction.
- Spot 0.7495
- AUDUSD advanced 0.6% to 0.7503, amid USD weakness today. Resistance is expected around the 0.7500 handle and around the 200-day moving average of 0.7537.
- Spot 1.3485
- The Canadian dollar strengthened to its highest against the US dollar in 4 weeks earlier today, following crude oil’s continued surge, as well as weakness in the greenback today.
- USDCAD declined 0.2% to 1.3483, falling below the 1.3500 for the first time since Apr. 24.
- Spot 6.8792
- The PBOC earlier kept its daily reference rate little changed, at 6.8661 per US dollar.
- USDCNH was steady, fluctuating just below the 6.8800 handle.
- Officials have used the daily fixing to guide the currency higher against the dollar for 7 of the past 8 days, surprising market watchers with its strength. However, the yuan has closed lower than the fix rate on all but one of those days.
- According to a Bloomberg news report, the tug-of-war illustrates the tension at the heart of China’s currency market. As a campaign to cut risk in the financial sector weighs on the nation’s bonds and stocks, the authorities are keen to maintain stability in the yuan and limit outflows. Yet, with the deleveraging campaign showing little signs of ending and an economic rebound looking shaky, traders see a weaker outlook for a currency that’s still slumping against peers aside from the greenback.
- Spot 111.16
- USDJPY slipped 0.5% to 110.86, reversing a previous day’s gain, following weakness in the US dollar today after it was reported that Trump had urged officials to deny a possible collusion between his campaign and the Russian government.
- The 200-day moving average of 109.87 is likely to provide support against further downside.
- Spot 1.2991
- The pound was the only G-10 currency to decline against the dollar, following a suspected terror attack at a concert in Manchester killed at least 19 people.
- GBPUSD fell by as much as 0.2% to 1.2974, declining back below the key 1.3000 handle.
- 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.