The dollar strengthened versus the bulk of its peers amid growing confidence the Fed will hike interest rates later this year following better-than-expected US PMI data overnight. Most Asian shares declined following a mixed batch of earnings reports, while oil steadied near a three-week low. Gold and sovereign bonds retreated.
- The US Markit PMI for services in October rose to 54.8 from 52.3, beating the median projection of 52.5. Composite PMI was higher as well, up to 54.9 from 52.3 prior.
- Other positive economic data include September wholesale inventories which gained 0.2% from October and beating estimates of a 0.1% rise, and new home sales as well, which rose 3.1% month-on-month to reverse a prior drop of 8.6% and exceed expectations of -1.5%.
- The key data for the week will be US 3Q DP due for release Friday night, which analysts expect to have expanded and annualized 2.5% quarter-on-quarter.
- The S&P 500 Index retreated 0.2% after swinging between gains and losses. Apple sank 2.3% after predicting holiday sales that barely topped estimates amid its first annual revenue drop since 2001, while Boeing rallied 4.7% after reporting a jump in profit. Tesla Motors surprised investors with its first profit in 8 quarters.
- Treasuries declined after positive US economic data further boosted chances of a December hike; the benchmark 10yr yield rose 4bps to 1.79%.
- The US dollar reversed previous day’s losses and looks set to resume its rise following better-than-expected economic data. The Bloomberg Dollar Spot Index ended 0.2% higher and extended gains by another 0.1% earlier today.
- According to a Reuters report, unidentified ECB officials say the central bank is almost certain to keep buying bonds beyond Match and relax it constraints on the purchases to make sure it finds enough paper to buy.
- UK Trade Minister Mark Garnier said global financial services companies headquartered in London could lose their passporting rights to access the European single market.
- The overwhelming majority of economists surveyed by Bloomberg expect the BOJ to keep stimulus unchanged when the central bank meets on Oct 31 – Nov 1; the survey also indicated that most do not expect a reduction in JGB purchases anytime soon.
- The PBOC confirmed that it’s studying whether to place off-balance sheet wealth-management products under macro-prudential oversight, reported China Business News, in a bid to better guide bank management of off-balance sheet business.
- A PBOC publication reported that the yuan is unlikely to drop much further against the dollar, and recent losses were mainly due to rising expectations of a Fed hike.
- September industrial profits rose 7.7% year-on-year, lower than the 19.5% rise prior.
- Industrial production last month surged 6.7% from a year earlier, outpacing the prior rise of 0.5% and exceeding the consensus estimate of 1.0%.
- According to a note to clients, DBS wrote that stellar industrial production numbers will certainly bring about an upward revision to 3Q GDP figures.
- 3Q unemployment rate came in at 2.1%, lower than the 2.2% expected.
- Spot gold gave up most of its gains from the past 2 days, and was 0.5% lower at $1,264.79/Oz earlier today after overnight US dollar strength dampened demand for the precious metal.
- Spot silver declined as well, falling 0.7% to $17.5667/Oz earlier. Silver continues to be buoyed by its 200-day moving average.
- Crude oil for December delivery fell 1.6% in New York to settle at $49.18/bbl, its third straight day of declines, after a weekly report on US crude supplies offered a mixed picture.
- Spot 1.3921
- USDSGD rose 0.2% to 1.3928, underpinned by a stronger US dollar overnight. 1.4000 remains the next resistance target for the currency pair.
- Spot 0.7630
- AUDUSD reversed previous day’s gains, as a USD strength drove the currency pair 0.7% lower to 0.7628.
- Spot 1.3392
- USDCAD is testing the 1.3400 handle again for the second time in a week, with the currency pair gaining 0.3% to a day-high of 1.3395.
- Goldman Sachs predicts the currency pair to strengthen beyond 1.3500 by year-end and to 1.4000 in 12 months.
- Spot 6.7877
- Onshore and offshore yuan both weakened, tracking steeper declines by Asian EM currencies as the dollar posted broad gains.
- The PBOC weakened its fixing by 0.05% to 6.7736.
- USDCNH rose 0.2% to 6.7924 earlier today.
- Spot 104.43
- The yen continued some form of consolidation between the 104 and 105 handles, as the USDJPY pared prior day’s declines to gain 0.5% to 104.70 earlier in the session.
- In the near-term, the consolidation is set to continue until at least tomorrow night as traders and investors await 3Q US GDP data.
- The next key resistance above comes in at 107.50, while 104.00 should act as a new-found support.
- Spot 1.2214
- GBPUSD was little changed after the currency pair pared previous session’s declines following comments from BOE Governor Carney.
- Investors and traders await key GDP data from the UK (later today) and the US (tomorrow night), and surprises in either data could potentially lead to big moves in the currency pair amid the current backdrop of Brexit concerns.
- The 1.2100 handle remains a key support; should it fail to hold and slide back down to the 1.1800 region is likely.