September 23, 2016

Daily Observations:

A rebound in global equities since Fed’s decision on Wednesday to scale back plans for rate-hikes in 2017 and beyond lost steam in Asian trading earlier today, as the dollar strengthened and oil retreated from a two-week high. Bonds extended gains, buoyed by central banks’ commitments to keep monetary policies loose.

US:

  • Initial jobless claims unexpectedly fell by 8,000 to 252,000 last week; economists were projecting an increase of 1,000.
  • Existing home sales in August surprisingly slid 0.9% from a month earlier, while the prior month’s decline was revised lower; analysts were predicting a 1.1% rise.
  • August’s leading economic index dropped 0.2%, poorer than the 0.0% forecasted.
  • In a nutshell, US economic data released overnight were mostly a miss, reaffirming the Fed’s decision a day earlier to leave rates unchanged and rein in its outlook for future rate-hikes.
  • Investors will now turn their attention to the first of three US presidential debates on Monday and earnings season due to get underway in about 3 weeks.
  • The S&P 500 Index added 0.7% to its recent rebound, rising above its 50-day moving average for the first time in almost 2 weeks. The NASDAQ rose to an all-time high. Computer and soft-ware stocks vaulted to record-highs, at a rate not seen since the dot-com bubble.
  • The benchmark 10ur Treasury yield fell 3bps to 1.62%, declining for a third consecutive day.
  • The US dollar recouped previous day’s losses, with the Bloomberg Dollar Spot Index rising 0.1% earlier today. Morgan Stanley said the dollar will suffer more losses, predicting further declines of about 4% to 5%.
  • Janus Capital Group’s Bill Gross said a bear market in government debt has been delayed, while former Fed Chairman Alan Greenspan called the rally in US Treasuries unsustainable.

Canada:

  • Prime Minister Justin Trudeau said Canada and China will hold “exploratory talks” to gauge the possibility of starting free-trade negotiations. He added that the 2 countries have agreed to a goal of doubling bilateral trade by 2015.

UK:

  • Prime Minister Theresa May’s spokesman said the government won’t speculate on whether Britain’s exit from the EU could be completed in 2 years, as Foreign Secretary Boris Johnson had suggested. May had ordered ministers not to comment on Brexit negotiating strategy or timing.

Australia:

  • In his first testimony yesterday, RBA Governor Lowe emphasized the risk of igniting a new round of borrowing among already debt-laden households should the RBA employ looser monetary policy in its bid to hit its inflation target faster.
  • Lowe’s comments allayed concerns on excessive easing, and markets are likely to scale back prospects of further rate-cuts.

China:

  • The PBOC has approved trading of credit-default swaps by financial institutions in the nation’s interbank market, as it seeks to help investors tackle rising non-payment risks among the country’s borrowers, Bloomberg reported.

Precious Metals:

  • Spot gold gained 0.8% to an overnight-high of $1,343.72/Oz before giving up gains earlier this morning. The next key resistance lies at the one-month high of $1,352/Oz.
  • Spot silver tested its one-month high of $20.1381/Oz, but failed to stay above the $20/Oz psychological barrier.

Oil:

  • Crude oil for October delivery settled 2.2% higher at $46.32/bbl in New York, but pared gains during Asian trade this morning, falling 1.2% and back below the $46/bbl handle.
  • Officials from OPEC members Saudi Arabia and Iran, whose rivalry derailed an oil supply accord earlier this year, met in Vienna for a second day before the wider group members gather in Algiers next week.

 

USDSGD:

  • Spot 1.3585
  • USDSGD rose 0.3% to 1.3589, rebounding from a two-week low yesterday.
  • The previous support around the 1.3600 handle could now be an area of resistance. Given the weaker outlook for the US dollar, more downside is expected for the currency pair with 1.3400 the next key area of support.

 

AUDUSD:

  • Spot 0.7634
  • AUDUSD fell 0.4% to 0.7627 and is likely to snap a 6-day winning streak. The decline looks to be reactionary though, as the momentum strongly remains to the upside.

 

USDCAD:

  • Spot 1.3069
  • USDCAD bounced off the 1.3000 level, advancing 0.3% to 1.3075 earlier today. The currency pair has declined more than 1% since Tuesday following renewed USD weakness.

 

USDCNH:

  • Spot 6.6774
  • The PBOC weakened its reference rate by 0.24% to 6.6670 against the dollar.
  • USDCNH was largely unchanged around the 6.6800 handle this morning.

 

USDJPY:

  • Spot 101.17
  • USDJPY rebounded off the key 100.00 support level yesterday and was 0.5% higher at 101.24 this morning.
  • A break below the all-important 100.00 level would confirm further downward momentum for the currency pair, with 95.00 a realistically possible target.

 

GBPUSD:

  • Spot 1.3036
  • GBPUSD continues to hover above the 1.3000 handle. The currency pair was 0.1% lower at 1.3035 earlier today, reversing overnight gains.

 

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