October 11, 2016

Daily Observations:

Most Asian stocks rose, led by energy companies, as the prospect of a deal to limit crude output continues to keep oil above $51/bbl. The dollar climbed versus major peers, extending a six-year high against the yuan, as Treasury yields rose earlier today. Gold and government debt fell.

US:

  • A CNN poll awarded yesterday’s second debate between US presidential nominees Hillary Clinton and Donald Trump to the former, with the latter’s campaign hit by a 2005 video in which he made vulgar and degrading comments about women, prompting some top Republicans to withdraw their support for him.
  • The Mexican peso, recently used as a barometer of investor anxiety over the US election – weakening when Trump advances in the polls, jumped as much as 2.6% last night to a one-month high against the greenback.
  • The US dollar strengthened, with the Bloomberg Dollar Spot Index reversing overnight losses to a gain of 0.1% and extending its climb by 0.2% this morning as increasing speculation of a December hike continues to buoy the dollar.
  • In a speech earlier today, Chicago Fed President Charles Evans says FOMC’s refrain from rate increases “may well be changing soon”, and renewed his call for the central bank to signal a willingness to tolerate higher inflation.
  • Vladimir Putin’s comments that Russia would back an OPEC accord fueled energy stocks, and helped the S&P 500 Index to a 0.5% gain.
  • Alcoa Inc. is set to kick off 3Q earnings season tonight. According to Bloomberg, analysts are expecting a 1.6% contraction in 3Q profits for S&P 500 companies, however historically, US firms have exceeded projections by an average margin of 3.6% in the past 5 years.
  • Trading in US Treasuries was halted last night for the Columbus Day holiday.
  • PIMCO, which manages the world’s biggest actively run bond fund, said the Fed may raise interest rates 2 or 3 times by the end of 2017, as higher economic growth and inflation may drive the central bank to tighten.

China:

  • Goldman Sachs warned that China’s currency outflows may be bigger than they look. Official data show that $27.7 billion in yuan payments left China in August, compared with a monthly average of $4.4 billion in the 5 years through 2014; such large cross-border moves can’t be explained by market driven factors and need to be taken into account when measuring currency outflows, according to an economist at the bank.

Precious Metals:

  • Spot gold pared prior day’s gains, and was 0.5% lower at $1,255.70/Oz earlier today. The precious metal continues to be supported at the key level of $1,250/Oz, although it has been trading below its 200-day moving average of $1,261.92 for most of its past three sessions.
  • On the other hand, silver has managed to remain above its 200-day moving average of $17.1828/Oz, despite falling 0.8% to $17.6005/Oz this morning.

Oil:

  • Crude oil for November delivery jumped 3.1% to $51.35/bbl, settling at its highest point since July after Russia’s Putin said he is willing to join OPEC on limiting output.
  • Saudi Arabia’s Energy Minister said oil prices could recover to $60/bbl by the end of 2016, and is optimistic that OPEC can reach a deal by November.

 

USDSGD:

  • Spot 1.3785
  • USDSGD extended recent gains, rising 0.3% to 1.3786 earlier today, as steadying oil prices suggests a pickup in inflation and hence no change in MAS policy later week, according to the consensus by analysts.
  • The May 2016 high of 1.3842 is the next resistance to be tested.

 

AUDUSD:

  • Spot 0.7571
  • AUDUSD pared previous day’s gains, falling 0.3% to 0.7566 on the back of overnight USD strength.
  • The currency pair has struggled to get back above the 0.7600 handle, and has a higher chance of falling lower to 0.7500.

 

USDCAD:

  • Spot 1.3191
  • The Canadian dollar strengthened on the back of oil’s overnight surge, gaining as much as 0.9% against the greenback to 1.3140.

 

USDCNH:

  • Spot 6.7209
  • The PBOC weakened its fixing again this morning, which was 0.13% weaker at 6.7098.
  • Onshore yuan extended its decline beyond the 6.7000 handle while offshore yuan is poised to post its longest losing streak since Mar 2014.
  • USDCNH was 0.2% higher at 6.7256.
  • Onshore yuan tumbled the most in 4 months as China’s markets reopened after a week-long break; offshore weakened 0.1% to 6.7135 against the USD following its 0.5% weekly decline last week.
  • The PBOC weakened its reference rate by 0.3% to 6.7008 earlier today.

 

USDJPY:

  • Spot 103.94
  • USDJPY rose 0.6% towards the 104 handle, gaining above its 100-day moving average in the process and the currency pair continues its recent upward trend.
  • The 104 handle will be key, and a break above it could see USDJPY rise to the 108 level.

 

GBPUSD:

  • Spot 1.2301
  • GBPUSD continues to remain well-offered, and was as much as 1.0% lower at 1.2301 earlier today after a report in The Times said the UK could lose up to 66 billion pounds a year under a “hard Brexit”.

 

 

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