Daily Observations:

Financial markets are judging the first of three US presidential debates as a win for Hillary Clinton so far, with US stock index futures reversing losses and Mexico’s peso rebounding from a record low. Safe haven assets which include the yen and gold fell. Most Asian indices remained in the red.

US:

  • Dallas Fed President Robert Kaplan said he wasn’t too concerned about the US economy overheating but instead, is more worried that low interest rates could create “distortions” in the US economy.
  • New home sales in August dropped 7.6% from a month earlier, less than the projected 8.3% drop while July’s rise was revised higher to 13.8%.
  • Overnight, investors piled into safer assets as Deutsche Bank’s 7.5% plunge to a record low during European hours spurred a rout in global financial companies on concern the lender is struggling with tougher capital standards, negative interest rates and soaring legal bills.
  • Financials led decliners as the S&P 500 Index fell 0.9%. European stocks logged their worst decline since early July with the Stoxx Europe 600 Index falling 1.6%, its biggest slide since early July.
  • The benchmark 10yr yield slipped 4bps to 1.59% and has retraced more than 10bps from its pre-FOMC high of above 1.70%.
  • The US dollar was weaker earlier today as the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was lower by 0.1%.
  • Fed Governor Daniel Tarullo said that the Fed is considering changes that would raise the minimum capital bigger banks need for a passing grade in revamped stress tests.

China:

  • Industrial profits in August rose 19.5%, a faster pace than the 11.0% increase in July; this was the highest jump in 3 years.

Precious Metals:

  • Gold continues to struggle to make new highs, with the precious metal trading 0.2% lower at $1,334.37/Oz earlier today.
  • According to Citigroup, gold may be in for a bumpy ride in the final quarter this year with US Republican candidate Donald Trump given a 40% chance of winning the presidential election and investors preparing for the possibility of higher interest rates.
  • Silver fared worse, with its spot price making lower lows for the third day running; spot silver slid 0.50% earlier today to $19.3601/Oz.

Oil:

  • Crude oil for November delivery rebounded 3.3% to settle at $45.93/bbl after Saudi Arabia offered to pump less crude if Iran caps output despite the two countries failing to reach an agreement after two days of preliminary talks ahead of Wednesday’s OPEC meeting.

 

USDSGD:

  • Spot 1.3611
  • USDSGD was slightly higher by 0.1% to 1.3622 earlier today.
  • Following recent softer-than-expected inflation and industrial production data, MAS could be more inclined to maintain its accommodative stance a while longer when the central bank reviews its policy settings next month.

 

AUDUSD:

  • Spot 0.7647
  • AUDUSD rose 0.4% to 0.7651 after the currency pair found support at the 0.7600 handle.
  • The Aussie dollar was also buoyed by stronger Chinese industrial profits data as China is Australia’s top export destination.

 

USDCAD:

  • Spot 1.3185
  • USDCAD briefly rose to a six month-high of 1.3276, and the 200 day moving average is in danger of being breached for the first time since March.
  • Currency traders are beginning to price in a higher chance of a rate cut by the Bank of Canada this year, with the odds rising to 22% from 13% last week.

 

USDCNH:

  • Spot 6.6801
  • The PBOC strengthened its reference rate by 0.15% to 6.6646 against the dollar.
  • USDCNH remained largely unchanged around the 6.6800 handle.

 

USDJPY:

  • Spot 100.80
  • USDJPY rose 0.5% to 100.87, bouncing off the 100 support level for the second time in 4 sessions and paring earlier losses as a Bloomberg poll showed Trump and Clinton deadlocked prior to their debate earlier today.
  • 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 1.2984
  • GBPUSD recovered from yesterday’s losses but remain below the psychological 1.3000 level. The currency pair was 0.5% higher this morning at 1.2993.

 

© Jachin Capital Pte Ltd

UEN: 201419754M


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