September 19, 2016

Daily Observations:

European and Asian stocks rose with US equity index futures as a rebound in oil bolstered risk appetite ahead of heavily-anticipated central bank policy meetings in the US and Japan this week. The dollar retreated against all of its major peers.

US:

  • Headline CPI in August rose 0.2% month-on-month and 1.1% year-on-year, more than the expected gains of 0.1% and 1.0% respectively. Core CPI, which strips out food and oil prices, rose 0.3% from a month earlier, and 2.3% from a year earlier, higher than the forecasts of 0.2% and 2.2% respectively.
  • The University of Michigan sentiment in September remained at 89.8, the lowest since April, and less than the 90.6 projected.
  • A powerful explosion that rocked Manhattan’s Chelsea neighbourhood on Saturday night, injuring 29 people, doesn’t appear to be linked to international terrorism, Governor Andrew Cuomo said.
  • The S&P 500 Index fell 0.4% on Friday, trimming its weekly advance to 0.5%.
  • S&P Dow Jones Indices implemented its quarterly index rebalancing after the close, including the first reboot of S&P 500 group weights in almost 20 years which separates REITs from the financial industry, creating 11 top-level groups.
  • The US dollar slid earlier today, with the Bloomberg Dollar Spot Index falling 0.4% following Friday’s gain of 0.7% to reach the highest level since end July.
  • The 10yr Treasury note yield was little changed at 1.69% earlier today, after ending last week up by 3bps.

Canada:

  • Manufacturing sales in July rose 0.1%, slower than the 0.8% gain in June and the 1.0% rise expected by economists.

China:

  • China’s credit-to-gross domestic product “gap” reached a record 30.1%, the highest since 1995, the Bank for International Settlements warned. It is significantly higher than the scores during East Asia’s speculative boom in 1997 and during the US’ subprime bubble before the Lehman crisis.
  • China’s total credit reached 255% of GDP at the end of last year, solidifying a 107% increase over the last 8 years. Outstanding loans totalled $28 trillion, while corporate debt was 171% of GDP, reported the Telegraph.

Australia:

  • Today marks RBA Governor Philip Lowe’s first day on the job. According to RBA’s statement, the central bank reaffirmed its commitment to targeting inflation between 2% to 3% when setting future interest rates.

Precious Metals:

  • Spot gold rebounded 0.5% to $1,317.17/Oz earlier this today, following its 1.3% slide last week, reaching a low of $1,306.27/Oz in the process.
  • Speculators cut their bets on a bullion rally by the most in more than 3 months during the week ended 13th Sep and holdings in global ETFs backed by gold are heading for the biggest monthly decline this year.
  • Silver for immediate delivery rose 2.1% to $19.1801/Oz, rebounding from a two-week low.

Oil:

  • Crude oil for October delivery rebounded 2.1% to $43.91/bbl earlier this morning following its 6.2% decline for the week ended last Friday.
  • Clashes at Libya’s Ras Lanuf port have buoyed prices, after they halted what would have been its first overseas crude shipment from that site since 2014.
  • The head of OPEC said the group may call an extraordinary meeting if major producers reach consensus on an accord to stabilize prices at informal talks next week in Algiers.

 

USDSGD:

  • Spot 1.3642
  • USDSGD retreated from an almost 3-month high, declining 0.4% to a low today of 1.3632 amid a weakening greenback with the Fed odds on to stand pat later this week.

 

AUDUSD:

  • Spot 0.7458
  • AUDUSD advanced 0.7% to 0.7546; Bloomberg reported the currency was bought up by traders in view of buying by offshore banks on the announcement of the A$9.7 billion sale of the Port of Melbourne.

 

USDCAD:

  • Spot 1.3154
  • USDCAD reversed course and dropped sharply from five-week highs, by 0.5% to 1.3143.
  • The currency pair failed to hold above the 1.3200 handle, on the back of rebounding crude oil prices and fresh selling of the US dollar against most major peers.
  • 3253 is the key resistance level; a renewed weakness in oil prices or weak retail and inflation numbers later this week could drive the currency pair above it.

 

USDCNH:

  • Spot 6.6692
  • The PBOC set its daily fix 0.16% stronger at 6.6786 against the dollar.
  • USDCNH rose 0.3% to 6.6716 earlier today.
  • The cost of borrowing yuan in HK surged to 24% earlier today after the long holiday weekend, reflecting suspicions of intervention by China’s policy makers to make it harder to short the currency.

 

USDJPY:

  • Spot 102.07
  • USDJPY retreated 0.3% to the 102 handle as the pair continues to struggle for a firm direction ahead of the key BOJ meeting later this week.
  • Expect more volatility to creep into the yen closer to decision time on Wednesday as there have been little clarity and mixed expectations on the BOJ’s next policy move.

 

GBPUSD:

  • Spot 1.3057
  • GBPUSD rebounded 0.5% to 1.3061, following its 1.7% slide last Friday to the 1.3000 handle.
  • Renewed weakness in the pound has resurfaced as investors become increasingly focused on the timing of triggering Article 50 after Boris Jonson tells his Italian counterpart formal negotiations will likely begin in early 2017.
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