Daily Observations:

Asian stocks maintained near one-month lows while US equity futures fell, as investors reassessed the outlook for the Federal Reserve’s monetary policy, following dovish comments from a Fed official last night. China’s industrial production and retail sales beat expectations, adding evidence to recent data that the world’s second-largest economy is begin to stabilize.


  • The Federal Reserve’s Lael Brainard remained dovish in her approach to tighter monetary policy. In her speech last night, she preached prudence in raising rates, saying that “policy today must rely less on the old normal as a guidepost and instead be sensitive to the contours that shape today’s new normal”.
  • Brainard is the last Fed official to speak before next week’s FOMC meeting. Last Friday, Boston Fed President Rosengren had signalled a greater willingness to raise interest rates.
  • The S&P 500 Index rallied 1.5% overnight on high volume, with telecom, staples, utilities and tech shares leading gainers. The gauge staged its steepest reversal since January following Monday’s 2.5% slump, jumping the most in two months.
  • The US dollar weakened as Brainard’s comments triggered USD selling against most currencies; the Bloomberg Dollar Spot Index fell 0.3% and looks set to snap a three-day winning streak.
  • The benchmark 10yr yield fell 1bp to 1.67% amid weaker-than-expected demand in 3yr and 10yr auctions last night. Janus Capital fund manager Bill Gross asked why bonds did not rally with stocks last night and warned investors to watch Japan and German government debt today.
  • According to Bloomberg pricing data, market-implied probability of a September hike fell last night to 22% from 20%; a December move is still likely with a 57% chance priced in.


  • Industrial production last month rose 6.3% year-on-year, more than the 6.2% expected and faster than July’s gain of 6.0%.
  • Retail sales in August accelerated, growing by 10.6% from a year earlier and beating the median estimate and previous month’s growth of 10.2%.
  • Fixed asset investments increased 8.1% in the first 8 months of the year, matching July’s gain and beating forecasts of 7.9%.


  • In a speech earlier today, RBA Assistant Governor Kent said the central bank’s inflation target remains flexible, and added that the Australian dollar hasn’t dropped as much as expected in recent years.

Precious Metals:

  • After declining for three consecutive days, spot gold looks on course to snap its losing streak after rising 0.5% to $1,332.15/Oz earlier today. The $1,300/Oz key support remains the level to watch.
  • Silver for immediate delivery was about 2.7% higher earlier today at $19.2907/Oz, paring around half of its declines over the prior three sessions.


  • Crude oil for October delivery rebounded from losses of more than 1.5% to close 0.9% higher at $46.29/bbl. The $45/bbl support is likely to be tested again.



  • Spot 1.3577
  • USDSGD was lower by as much as 0.5% at 1.3552 earlier today, following overnight dollar weakness.
  • The currency pair had previously gained above the 1.3600 handle on Friday.



  • Spot 0.7548
  • AUDUSD rose 0.9% to 0.7568 earlier, following its 2.9% slump over the prior two days.
  • From a longer-term perspective, key levels are 0.7400 towards the downside, and 0.7750 for the upside.



  • Spot 1.3054
  • USDCAD rebounded off the 1.3100 handle, declining 0.6% back towards the 1.3000 level as overnight dollar weakness and a bounce in crude oil provided renewed support for the Canadian dollar.



  • Spot 6.6880
  • The PBOC strengthened its fixing by 0.3% to 6.6726 against the dollar.
  • USDCNH declined 0.1% to 6.6830, after testing the 6.7000 level on Friday.



  • Spot 101.75
  • The yen maintained near its strongest levels in more than 2 weeks, following overnight dovish comments from Fed official Brainard. USDPY was 0.6% lower at 101.44 earlier today.



  • Spot 1.3334
  • Sterling was 0.6% stronger against the dollar earlier today at 1.3347. Sterling looks likely to test the 1.3400 level again for the second time in a week.
  • The bias for GBPUSD is now to the upside, after the currency pair completed a key reversal chart pattern last Friday. The neckline of the previous head-and-shoulders chart formation has now became a base support which GBPUSD rebounded from at the end of last week.


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UEN: 201419754M

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