September 8, 2016

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

The contents of this document are for information only and is taken or compiled from sources that we, Jachin Capital Pte Ltd, believe to be reliable. To the maximum extent permitted by law, we do not make any representation or warranty (express or implied) that this information is accurate, timely or complete and it should not be relied upon as such. Opinions expressed are our current opinions as at the date of this document only and are subject to change without notice. We endeavour to update on a reasonable basis the information discussed but regulatory, compliance or other reasons may prevent us from doing so. The publication and distribution of this document is not and does not imply any form of endorsement of any person, entity, service or product described or appearing here. This is not and does not constitute or form an offer to buy or sell nor the solicitation of an offer to buy or sell any security or financial instrument nor to participate in any particular trading or investment strategy. We are not soliciting any action based on this document. The information, services and products described or appearing here are intended only for Accredited Investors (as currently defined in the Securities and Futures Act) and are not intended for nor targeted at the public in any specific jurisdiction. This information does not take into account the particular investment objectives, financial situations or needs of individual investors. Investors should seek independent financial, tax or legal advice or make independent investigations as considered necessary or appropriate before making an investment decision. Investments involve risk. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment instrument.

Essential SSL