Daily Observations:

Asian equities were mixed earlier today as indices in Japan, Australia, Singapore and Korea declined, while investors in China, Hong Kong and Taiwan benefitted from stronger-than-expected trade data from China. Oil gained back above the $46/bbl handle, but precious metals pared some of its gains from yesterday’s rally. The dollar remained near two-week lows.

US:

  • The Fed’s Beige Book indicated modest growth in July and August amid “slight” inflation, as a strong labour market failed to put much upward pressure on wages and prices.
  • Chief economic adviser of Allianz SE, Mohamed El-Erian, said the current market pricing for a Fed hike later this month of 20% is “way too low” and US economic data aren’t that weak.
  • Bloomberg’s Fed funds futures pricing indicated odds for a September hike slid to 22% last night, from 24% the previous day.
  • The US dollar pared losses from yesterday afternoon and seems to have steadied; the Bloomberg Dollar Spot Index rose 0.1% in New York, but sold off again earlier today during Asian trade.
  • Treasury yields were little changed, with the benchmark 10yr yield rising 1bp to 1.54%.
  • The S&P 500 Index was almost unchanged, paring earlier losses to close 0.01% lower. The US benchmark index has traded within a band of 1.5% for 29 days, the narrowest range ever for that length of time.

Canada:

  • The BOC announced its rate decision last night; no change was made to the current rate of 0.50%, as expected.
  • The central bank released a statement that was more dovish than expected, signalling that the risk to inflation had tilted to the downside since July and that financial vulnerabilities associated with household imbalances remain elevated.
  • The chances for monetary easing this year more than doubled to 20% last night, according to interest rate futures on Bloomberg.

Europe:

  • The ECB is due to announce its monetary policy decision later today; economist speculate the central bank may extend its QE program but is unlikely to ease given Brexit’s muted impact.

Germany:

  • Industrial production in July unexpectedly slid 1.5% month-on-month and 1.2% year-on-year; economists predicted 0.1% and 0.2% increments respectively.

UK:

  • Industrial production in July rose 0.1% month-on-month and 2.1% year-on-year, beating expectations of -0.2% and 1.9% respectively.
  • Manufacturing production however missed projections, falling 0.9% instead of 0.3% from the previous month, and rising 0.8% instead of 1.7% from a year earlier.
  • BOE Governor Carney said that the central bank could cut rates further, as well as expand its term funding scheme, if needed.

Japan:

  • 2Q GDP expanded 0.7% from the previous quarter on an annualized basis, more than the 0.2% forecasted. An upward revision in capital spending, private inventories and public investment aided the better-than-expected expansion.

China:

  • China’s August exports beat economists’ estimates, rising 5.9% in yuan terms and falling 2.8% in dollar terms from a year earlier; a rise of 2.9% and fall of 4.0% were expected.
  • Imports were a beat as well – advancing 10.8% in yuan terms and 1.5% in dollar terms year-on-year; a rise of 0.7% and a drop of 5.4% respectively were the consensus estimates.

Australia:

  • Trade deficit in July narrowed to A$2.4 billion from $3.25 billion previously, less than the A$2.7 billion deficit estimated. Exports rose 3% from a month earlier while imports were little changed.

Precious Metals:

  • Spot gold declined 0.4% to $1,342.30/Oz earlier this morning, as it struggles to break above the $1,350/Oz level.
  • Silver for immediate delivery fell 1.0% back below the $20/Oz handle.

Oil:

  • Crude oil for October delivery settled 1.5% higher in New York, and extended gains further by 2.0% beyond the $46/bbl handle during Asian trade after industry data showed US stockpiles dropped, trimming inventories that are at the highest seasonal level in more than 30 years.
  • Iran President Rouhani said the nation will support efforts to bring about fair prices while it restores output lost in the past from sanctions.

 

USDSGD:

  • Spot 1.3476
  • USDSGD rebounded, rising 0.2% to 1.3479 earlier today.
  • The 1.3500 level, which coincides with the currency pair’s 50-day moving average, acts as a near-term resistance level.

 

AUDUSD:

  • Spot 0.7672
  • AUDUSD looks likely to snap its 5-day winning streak, falling 0.2% to 0.7665 earlier today and failing to break above the 0.7700 level.

 

USDCAD:

  • Spot 1.2872
  • The Canadian dollar weakened from a 3-week high against the dollar after the Bank of Canada signalled that risks of weak inflation and slower economic growth have increased.
  • USDCAD rose 0.6% above the 1.2900 handle following the news, before gradually paring back some gains.

 

USDCNH:

  • Spot 6.6751
  • The PBOC weakened its fixing by 0.1% to 6.6620 against the dollar.
  • USDCNH rose 0.1% to 6.6770 following yesterday’s 0.3% drop.

 

USDJPY:

  • Spot 101.69
  • USDJPY was mostly unchanged, paring back most of its gains following this morning’s better-than-expected GDP number, which may have eased some of the pressure on the BOJ to increase monetary easing later this month.

 

GBPUSD:

  • Spot 1.3350
  • GBPUSD declined 0.5% to 1.3319 and is likely to close lower after rising for 6 consecutive days.

 

© Jachin Capital Pte Ltd

UEN: 201419754M


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