Daily Observations:

Most indices in Asia ex-Japan advanced, following weaker-than-expected ISM services data form the US last night quelled speculation the Fed will raise interest rates this month. Japan equities retreated from a three month-high. Precious metals and government bonds gained.


  • US ISM non-manufacturing index fell in August to 51.4 from 55.5 in July, missing out on the consensus forecast of 54.9; this was the lowest reading since Feb 2010. The poorer-than-expected ISM data echoed last week’s worse-than-expected drop in its manufacturing index.
  • According to Bloomberg pricing data, Feds funds futures show that the odds of a September rate hike slid to 24% from 32% prior to last night.
  • The US dollar suffered heavy selling across the board; the Bloomberg Dollar Spot Index sank 1.0% to register its biggest decline in five weeks.
  • Bond yields fell across all maturities; the benchmark 10yr yield slid 7bps to 1.54%, while 2yr yields dropped 6bps to 0.73%.
  • The S&P advanced 0.3%, maintaining within its narrow range over past month. The Nasdaq Composite registered a fresh all-time high.
  • In a speech earlier this morning, the Fed’s San Francisco President John Williams painted an upbeat picture of the US economy, despite poorer-than-expected services data released last night. Williams, a non-voter this year in the committee, reiterated it makes sense to get back to a pace of gradual rate increases, preferably sooner than later, citing a low unemployment rate of 4.9%, as well as inflation which is on track to reach its 2% target.


  • Eurozone GDP for the second quarter this year rose 0.3% quarter-on-quarter and 1.6% year-on-year, matching prior figures as well as estimates.
  • The ECB is due to make its monetary policy decision tomorrow; most economists predict Draghi to lengthen quantitative easing for a second time and leave interest rates unchanged.


  • The BOC will announce its rate decision to night; no change to the current 0.50% is expected.
  • Canadian and US bond yields are diverging by the most in almost 6 months as investors bet the Bank of Canada could be years away from following the Fed’s path to rate hikes. The growing divergence reflects a Canadian economy just starting to revive from an oil shock and the collapse in exports that produced a record trade gap.


  • According to a statement released by the State Council, China is planning stronger fiscal policy and more infrastructure investment to cement the stabilization of its economy and to cushion it from slowing global growth.
  • The statement added that restrictions on infrastructure spending will be eased and equal access granted to private investors in sectors such as education and medical care. In addition, banks will be encouraged to increase credit support to investment projects and SOEs are asked to step up investment in rural grid and telecommunications projects.


  • 2Q GDP rose 0.5% quarter-on-quarter and 3.3% year-on-year, barely meeting economists’ projected gains of 0.6% and 3.3% respectively. Previous quarter’s GDP was revised lower, from 1.1% to 1.0% and 3.1% to 3.0%.
  • This was the fastest pace Australia economy has expanded in 4 years, which was driven by a surge in public investment to build roads, railways, as well as continued strength in resource exports.
  • Government spending registered a 1.9% rise while public investment generated a 15.5% increase.

Precious Metals:

  • Spot gold looks set to extend its current daily winning streak to 4, after rising by as much as 1.5% to $1,352.66/Oz last night.
  • Silver for immediate delivery rallied 3.0% to $20.1381/Oz.


  • Crude oil for October delivery settled 0.9% higher at $44.83/bbl, paring earlier gains of as much as 4.7% as skepticism regarding an output freeze crept in after a pledge by Russia and Saudi Arabia failed to include any specifics.



  • Spot 1.3471
  • USDSGD sank 0.8% this morning to a low of 1.3447, following broad-based US dollar weakness last night.
  • The long-time support level of 1.3400 could be tested soon.



  • Spot 0.7672
  • AUDUSD pared some of its earlier gains of 0.7% to an intraday high of 0.7689 following Australia’s 2Q GDP release.



  • Spot 1.2850
  • USDCAD seems poised to decline for the fourth consecutive day after falling 0.5% to two week-low of 1.2827.
  • A breach of the next key support level at 1.2764 could signal more downside for the currency pair.



  • Spot 6.6782
  • The PBOC strengthened its fixing by 0.2% to 6.6555 against the dollar.
  • USDCNH declined 0.3% following dollar weakness due to disappointing ISM data.
  • Most analysts expect further yuan strength should much-anticipated exports data due tomorrow beat estimates.



  • Spot 101.40
  • USDJPY slumped 2.0% to 101.21, following overnight selling pressure of the dollar.
  • The key 100 level seems likely to be tested soon.



  • Spot 1.3423
  • GBPUSD rose to its highest since 15th Jul, advancing 0.9% to 1.3445 overnight.
  • The 1.3500 key resistance level remains within striking distance.


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UEN: 201419754M

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