September 16, 2016

Daily Observations:

Asian shares rose, paring weekly losses as weaker-than-expected economic data in the US pared bets of a Fed hike next week, spurring overnight risk-on sentiment. The dollar weakened versus most higher-yielding currencies and oil fell.

US:

  • Retail sales in August slipped 0.3% from a month earlier, down from a 0.1% gain in July and missing analysts’ estimates of -0.1%.
  • Industrial production last month declined 0.4% month-on-month, worse than the 0.2% drop expected and down from a 0.6% gain in July.
  • Jobless claims last week rose by 1,000 to 260,000, lower than the projected figure of 265,000.
  • Poorer-than-expected economic data out of the US sent odds for a rate increase by the Fed next week below 20%.
  • The S&P 500 Index rose for the first time in three days, bouncing off the key support of 2,120 to close 1.0% higher.
  • The dollar weakened modestly, with the Bloomberg Dollar Spot Index closing 0.1% lower in New York.
  • Yields on US Treasuries due in a decade fell 1bp to 1.69%, extending the previous day’s 3bps decline. 30yr Treasury yields rose 1bp to 2.46%; the spread between the 2 has reached the widest in more than six weeks.
  • Former US Treasury Secretary Lawrence Summers said the Fed has “no compelling case of any kind for a rate increase in September”.

UK:

  • The BOE kept rates at 0.25% and maintained its asset-purchases target, as expected. The 9-member committee said that while recent near-term data had been stronger than anticipated since the Brexit vote, it couldn’t draw inferences for its longer-term forecasts, and that its view of the “contours of the economic outlook” has not changed.
  • Investors and traders interpreted the MPC’s statement as a rather dovish one, as the pound initially weakened against all 16 of its major peers.
  • Retail sales in August fared better than expected, rising 6.2% year-on-year and falling 0.2% month-on-month; the consensus estimates were 5.4% and -0.4% respectively.

Japan:

  • According to the Wall Street Journal, the BOJ board is split over the monetary easing program, with 3 members still in current favour of bond purchases with negative rates and others no longer confident in bond purchases.
  • Japan became the epicentre of a global bond sell-off this month amid speculation the BOJ will pull back from buying long-term bonds after Kuroda ordered a comprehensive review of its easing program.

Singapore:

  • Retail sales in July gained 2.8% from a year earlier, outpacing expectations of 1.4% and the 1.3% rise in June.
  • Electronic exports last month slid 6.0% year-on-year; the fall was less severe than the prior month’s decline of 12.9%.
  • Non-oil domestic exports in August registered a flat growth on a year-on-year basis, and fared better than the 10.6% contraction in July and economists’ expectations of a 3.3% decline. This was due to a boost from shipments of non-electronic products which outweighed the fall in electronic shipments.

Precious Metals:

  • Spot gold remained its lows, declining 0.9% to $1,309.40/Oz last night. The key psychological support of $1,300/Oz is close, a break below it could signal more downside, possibly to $1,250/Oz.
  • Silver for immediate delivery was largely unchanged, despite fluctuating around the $19/Oz handle.

Oil:

  • Crude oil for October delivery gained 0.8% to $43.91/bbl, but pared gains during Asian trade earlier today.
  • All 14 OPEC countries will attend an informal meeting with Russia on 27th Sep in Algiers, according to a person familiar with the matter.

 

USDSGD:

  • Spot 1.3623
  • USDSGD declined 0.4% to 1.3609 amid overnight US dollar weakness.
  • The 1.3600 handle could provide some support over the next few days.

 

AUDUSD:

  • Spot 0.7458
  • Following the Australian dollar’s 3.2% decline in almost a week, the AUD gained 0.7% against the greenback rising back above the 0.7500 level in the process.

 

USDCAD:

  • Spot 1.3143
  • On the back of crude oil’s rebound overnight, USDCAD retreated 0.5% to 1.3131, and looks on course to post only its second day of declines out of the past seven sessions.
  • 3253 is the key resistance level; persistent oil weakness or weak retail and inflation numbers next week could drive the currency pair beyond it.

 

USDCNH:

  • Spot 6.6505
  • No fixing today due to a holiday in China.
  • USDCNH fell 0.2% to a three-week low of 6.6466 this morning and is poised for its biggest weekly drop since July. There have been rumours of a suspected intervention by China’s central bank choking supplies of the currency and driving borrowing costs to an 8-month high.

 

USDJPY:

  • Spot 102.05
  • USDJPY continued to be supported above the 102 level, despite declining 0.7% to an intraday low of 101.74 earlier this morning.
  • Expect more volatility to creep into the yen over the coming week as there has been little clarity and mixed expectations on what the BOJ will announce next week at its meeting.

 

GBPUSD:

  • Spot 1.3231
  • GBPUSD was relatively steady above the 1.3200 level, after paring back initial losses following yesterday’s comments from the Monetary Policy Committee.
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