Daily Observations:

Most Asian equities declined, while regional bonds joined a global debt selloff as investors weighed prospects for further monetary easing in Europe, after the ECB’s less-dovish than expected policy announcement yesterday. South Korean equities slid with the won after a possible nuclear weapons test in North Korea this morning.


  • The ECB’s Draghi failed to announce an extension of QE, and downplayed the need for more economic stimulus. No changes were made to its deposit rate which stayed at -0.4%, asset purchases which remained at 80 billion euros, or the scheduled end date which is set for March next year.
  • Draghi reiterated that monetary policy has its limitations and will not be as successful in isolation as it would be in conjunction with fiscal measures. He also reminded finance ministers that they must do their part to spur global growth, as they had pledged to at the G-20 summit earlier this week.
  • Europe’s benchmark sovereign notes extended losses after Draghi’s announcement, as German 30yr yields jumped 9bps to 0.51%.


  • The Fed’s Brainard is scheduled to make a speech on Monday, just before the Fed’s blackout period ahead of its much anticipated-September meeting. Barclays noted that if Yellen wants to raise market pricing for a hike, this could be one of the Fed’s last chances to do so. It is also worth noting that Brainard is one of the most dovish voting members on the committee and in her last speech, she said it was better to wait and see.
  • The US dollar firmed following Draghi’s press conference as the Bloomberg Dollar Spot Index ended 0.4% higher. The dollar was also boosted by increased odds of a September hike, which rose to 28% last night.
  • The benchmark 10yr Treasury yield rose 6bps to 1.60%
  • The S&P 500 Index declined 0.2% after closing little changed the day before; Apple Inc was the biggest drag, falling 2.6% following an underwhelming iPhone 7 launch.


  • The Bank of Canada’s Deputy Governor Tim Lane said industries most affected by commodities prices, which make up 13% of GDP, are down 6.5% year-on-year, versus a 2.1% increase for the rest of the economy. He noted as well, that the economy is still operating below potential.

North Korea:

  • North Korea conducted its fifth nuclear test earlier this morning, South Korean President Park Guen Hye said, with the atomic explosion coming on the anniversary of the nation’s founding and setting off an artificial 5.3-magnitude earthquake around 9:30am Seoul time.


  • CPI in August rose 1.3% from a year earlier, less than the 1.7% median consensus by economists and slower than the 1.8% rise in July.
  • PPI over the same period slid 0.8%, less than the 0.9% drop projected and July’s 1.7% fall.
  • Suspected intervention by the PBOC drove the HK borrowing rate, the cost of borrowing the currency offshore, to a 7-month high, thus making it more expensive to short the yuan – a signal the central bank will strive to prevent the yuan from weakening beyond the 6.7000 level.


  • Home-loan approvals slid 4.2% month-on-month in July, the biggest month decline since January and worse than economists’ 1.5% estimate, as potential buyers remained on the side-lines amid a prolonged election vote-count.


  • Managing director of MAS, Ravi Menon, said Singapore’s current policy stance remains appropriate.
  • According to Bloomberg data, 6-month SGD forwards signal the central bank will refrain from easing next month.

Precious Metals:

  • Spot gold has been capped by the $1,350/Oz resistance, and fell 0.9% last night to $1,335.50/Oz. Draghi’s failure to deliver more stimulus played a part in its overnight decline.
  • Silver for immediate delivery mimicked gold’s overnight moves, declining 1.8% to $19.5565/Oz.


  • Crude oil for October delivery soared 4.7% to settle at $47.62/bbl, its biggest one-day gain since April, after government data showed US crude inventories fell by 14.5 million barrels last week which was the biggest drop since Jan 1999; analysts were predicting a 905,000 increase.



  • Spot 1.3511
  • USDSGD rebounded from a 2-week low, rising 0.5% to an intraday high of 1.3522.



  • Spot 0.7644
  • AUDUSD looks likely to snap its 6-day winning streak, falling 1.1% to 0.7636 earlier today.
  • From a longer-term perspective, a break above the 0.7800 level coincides with a break above the long-term neckline in play since early 2015, and could signal more room for upside for the currency pair.



  • Spot 1.2921
  • USDCAD extended its previous day’s advance, rising further today by 0.5% to 1.2939, following the BOC’s rather dovish statement the previous day and a stronger US dollar overnight.



  • Spot 6.6855
  • The PBOC weakened its fixing by 0.1% to 6.6684 against the dollar, the weakest fixing since Monday.
  • USDCNH rose 0.2% to 6.6873, almost erasing all of Wednesday’s drop.



  • Spot 102.14
  • USDJPY rebounded from near 2-week lows, rising 1.0% to 102.60 last night before paring back some of its gains this morning.



  • Spot 1.3319
  • GBPUSD declined 0.7% to 1.3284 last night before recovering back above the 1.3300 handle earlier this morning.


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UEN: 201419754M

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