As of Fri, May 17, Singapore Time zone UTC+8

Dollar Index +0.28%, 97.84
USDJPY, +0.39%, $109.89
EURUSD, -0.31%, $1.1173
GBPUSD, -0.39%, $1.2796
USDCAD, +0.16%, $1.3464
AUDUSD, -0.51%, $0.6892
NZDUSD, -0.43%, $0.6534

Better than expected US economic prints helped with risk appetite as housing starts and building permits recovered from last month’s declines. Manufacturing activity in the Philadelphia region also accelerated more than expected while jobless claims fell. Housing starts increased 5.7% m/m in April to a seasonally adjusted annual rate of 1.24 million (consensus 1.21 mln). The Philadelphia Fed Manufacturing Index for May jumped to 16.6 (consensus 10). Firms were more optimistic about hiring plans over the next six months, which suggests they expect end demand to remain solid.

In trade, the White House and US Department of Commerce took steps that would ban Huawei from selling technology into the American market, and could also prevent it from buying semiconductors from suppliers including Qualcomm in the US that are crucial for its production. US chipmaker Qualcomm, which earns around 5 per cent of its revenues from Huawei, saw its share price drop 4% to close at $82.81 on Thursday despite a broadly positive market. Shares in Broadcom, another supplier, fell 2.3% to $297.29. The US Department of Commerce said it would put Huawei on its so-called Entity List, meaning that the American companies will have to obtain a licence from the US government to sell technology to Huawei. At the same time, Trump signed an executive order declaring the US telecoms sector faced a “national emergency” — giving the commerce department the power to “prohibit transactions posing an unacceptable risk” to national security.

U.S. Treasuries retreated on Thursday. The 2-yr yield increased four basis points to 2.20%, and the 10-yr yield increased three basis points to 2.41%. The U.S. Dollar Index increased 0.28% to 97.84. WTI crude rose 1.5% to $62.99/bbl.

Aussie dropped to 4 month lows on the back of disappointing labor data. Although 28.4K jobs were created last month, which was more than the consensus forecast of 15.2K, investors were not happy that all of those jobs were part time. Full time jobs fell -6.3K, pushing the unemployment rate up to 5.2% (Consensus 5.0%).

As of Thu, May 16, Singapore Time zone UTC+8

Dollar Index +0.01%, 97.54        
USDJPY, -0.20%, $109.46    
EURUSD, +0.02%, $1.1208    
GBPUSD, -0.47%, $1.2846
USDCAD, -0.14%, $1.3442
AUDUSD, -0.16%, $0.6927
NZDUSD, -0.14%, $0.6562

There were renewed growth concerns early in the day as U.S. and China released weaker-than-expected economic prints. U.S. Retail Sales declined 0.2% (consensus +0.2%). Consumers curtailed discretionary spending on goods in April, this might affect the outlook for Q2 GDP growth. U.S. Industrial production declined 0.5% in April (consensus 0.0%). This marks the fourth straight month in which there was no growth in manufacturing output. Chinese Growth in Industrial Production slowed to 5.4%, lower than the 6.5% increase that had been forecast and level with November’s figure, which was the weakest rate since the global financial crisis a decade ago.

The 2-yr yield and the 10-yr yield declined four basis points each to 2.16% and 2.38%, respectively. The U.S. Dollar Index increased 0.01% to 97.54. WTI crude increased 0.4% to $62.06/bbl.

Markets got bid after reports indicated that Trump is expected to delay a decision on auto tariffs by up to six months. Treasury Secretary Steven Mnuchin also said that the U.S. is close to resolving a dispute with Canada and Mexico pertaining to tariffs on aluminium and steel. The official announcement hasn’t been made yet, (he has until Saturday) but investors expectations that he won’t be taking on China and Europe at the same time provided some respite. 

As of Wed, May 15, Singapore Time zone UTC+8

Dollar Index +0.22%, 97.52
USDJPY, +0.43%, $109.68
EURUSD, -0.19%, $1.1206
GBPUSD, -0.40%, $1.2908
USDCAD, -0.11%, $1.3462
AUDUSD, -0.14%, $0.6938
NZDUSD, -0.03%, $0.6571

The U.S. Treasury market was more subdued on Tuesday, registering modest declines amid the rebound in equities. The 2-yr yield increased two basis points to 2.20%, and the 10-yr yield increased one basis point to 2.42%. The U.S. Dollar Index increased 0.22% to 97.52. WTI crude rose 1.2% to $61.84/bbl, bolstered by increased concerns about supply disruption in the Middle East.

Markets liked Trump’s comments on trade yesterday, although they weren’t particularly new or substantive. Trump touted his relationship with President Xi as “extraordinary” and described the current trade dispute as a “little squabble.” According to Trump, he will meet with President Xi at G-20 next month. Both sides expressed intentions to continue to work on a trade deal, which helped foster a belief that the recent dip in risk-assets was a good buying opportunity. “When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense. We have to be allowed to make up some of the tremendous ground we have lost to China on Trade since the ridiculous one sided formation of the WTO. It will all happen, and much faster than people think!”, Trump tweeted.

CURRENCY MARKET WRAP 

As of Tue, May 14, Singapore Time zone UTC+8

Dollar Index +0.02%, 97.35
USDJPY, -0.66%, $109.21
EURUSD, -0.07%, $1.1228
GBPUSD, -0.31 %, $1.2960
USDCAD, +0.48%, $1.3478
AUDUSD, -0.74%, $0.6948
NZDUSD, -0.39%, $0.6573

Markets were in risk-aversion mode on Monday, the 2-yr yield dropped six basis points to 2.18%, and the 10-yr yield dropped five basis points to 2.41%. Dollar Index remained firm at 97.35.

Markets were offered after China increased the tariff rate on $60 billion of U.S. imports to a floating range of 5-25%, from 5-10%, starting June 1. Prior to the news, China said it would “not surrender” to external pressure. There was also speculation that Beijing could reduce its consumption of other U.S. goods and services, including orders from Boeing (BA 337.37, -17.30, -4.9%). Although the amount of goods China imports from the U.S. is substantially less than the goods the U.S. imports from China, the retaliatory actions fuelled concerns about a protracted trade war.

CURRENCY MARKET WRAP 

As of Fri, May 10, Singapore Time zone UTC+8

Dollar Index -0.14%, 97.44 
USDJPY, -0.16%, $109.85
EURUSD, +0.20%, $1.1220
GBPUSD, +0.01 %, $1.3010
USDCAD, -0.06%, $1.3466
AUDUSD, -0.05%, $0.6988
NZDUSD, +0.04%, $0.6586

U.S. Producer Price Index for final demand increased 0.2% m/m in April, as expected, while the index for final demand, less food and energy (“core PPI”), increased 0.1% m/m (consensus 0.2%). The report didn’t show any acceleration in core producer inflation, which will keep the market’s pass-through concerns for the consumer in check.

U.S. Treasuries finished on a higher note, although buying interest cooled off as equities staged a recovery. The 2-yr yield declined four basis points to 2.26%, and the 10-yr yield declined three basis points to 2.46%. The U.S. Dollar Index lost 0.14% to 97.44. WTI crude lost 0.6% to $61.73/bbl.

In trade news, a CNBC headline was quick to point out that Trump said he had an “excellent alternative” to a trade deal, which was later clarified that the tariffs were the alternative. Trump also said he received a letter from President Xi and intended to give him a call later, which was a sign of good will ahead of a Thursday dinner (EST) between Vice Premier Liu He and USTR Lighthizer.

CURRENCY MARKET WRAP 

As of Thu, May 9, Singapore Time zone UTC+8

Dollar Index -0.00%, 97.58
USDJPY, -0.20%, $110.03 
EURUSD, +0.05%, $1.1197
GBPUSD, -0.43 %, $1.3012
USDCAD, +0.03%, $1.3474
AUDUSD, -0.31%, $0.6992
NZDUSD, -0.30%, $0.6583

U.S. Treasuries lost steam, sending yields higher, as equities gained traction during the day. The 2-yr yield increased two basis points to 2.30%, and the 10-yr yield increased three basis points to 2.48%. The U.S. Dollar Index was unchanged at 97.58. WTI crude rose 1.2% to $62.12/bbl following bullish inventory data out of the Energy Information Administration.

Trump pumped some optimism into the market after he tweeted that China’s Vice Premier was coming to Washington to make a deal. Press Secretary Sarah Sanders later chimed in that the White House received an indication that China wants to make a deal. Both remarks sent U.S. stocks higher in a knee-jerk reaction despite both statements being nearly identical and neither giving the market any new information. China had already confirmed it was planning on coming to the U.S. this week, and it wouldn’t have done so if it didn’t intend to work on a trade deal. The one new component, is that Reuters indicated sources said China backtracked on nearly all aspects of a trade deal last week. The report raises uncertainty about when, if it all, a deal might get done with the tariff rate on $200 billion of Chinese imports set to increase on Friday.

In a unanimous decision, the RBNZ has cut the Official Cash Rate to 1.5% from 1.75%. The latest Monetary Policy Statement indicates the possibility, but not certainty of a second OCR cut by early next year. The forecast now sees the OCR bottoming at 1.4% before climbing back up to 1.9% by mid-2022. “The reason for the cut is global economic growth has slowed,” Adrian Orr said in an address to a parliamentary committee. RBNZ has a dual mandate of keeping medium-term inflation between 1-3% and supporting maximum sustainable employment. Orr said if the bank had left interest rates on hold, employment would have eased off. Kiwi was offered after the news, trading to a low of 0.6529, finally closing at 0.6583.

CURRENCY MARKET WRAP 

As of Wed, May 8, Singapore Time zone UTC+8

Dollar Index +0.05%, 97.58
USDJPY, -0.46%, $110.26
EURUSD, -0.09%, $1.1190
GBPUSD, -0.23 %, $1.3068
USDCAD, +0.16 %, $1.3469
AUDUSD, +0.26%, $0.7008
NZDUSD, +0.26%, $0.6596

Markets began the day offered after USTR Robert Lighthizer accused China of reneging on its prior commitments, and said the higher 25% tariff rate on $200 billion of Chinese imports will go into effect on Friday. China is prepared to impose retaliatory tariffs on U.S. imports, but it will still send Vice Premier Liu He to Washington to continue trade talks later this week.

The 2-yr yield declined three basis points to 2.28%, and the 10-yr yield declined five basis points to 2.45%. The U.S. Dollar Index increased 0.05% to 97.58.

In RBA, the bank kept Australia’s cash rate steady at 1.5% in May, maintaining the period of policy stability that’s been in place since August 2016. Lowe trimmed his forecast economic growth for this year by a quarter point to 2.75%. But he remained bullish on the labor market, describing it as “strong” and maintaining that unemployment would stay around current levels of 5% before falling in time to 4.75%. The annualised inflation rate of 1.3%, well below the RBA’s target band of 2-3%, proved insufficient to force Lowe’s hand just 11 days out from the federal election. Inflation might be weak but unemployment is still falling and that was the key. Economists and market analysts predict the RBA will be forced to act in the coming months.

As of Tue, May 7, Singapore Time zone UTC+8

Dollar Index +0.03%, 97.53
USDJPY, -0.27%, $110.81
EURUSD, -0.01%, $1.1201
GBPUSD, -0.58 %, $1.3097
USDCAD, +0.20 %, $1.3447
AUDUSD, -0.45%, $0.6992
NZDUSD, -0.58%, $0.6607

U.S. Treasuries finished higher but lost steam as equities regained buying interest. The 2-yr yield declined one basis point to 2.31%, and the 10-yr yield declined three basis points to 2.50%. The U.S. Dollar Index finished little changed at 97.53. A turnaround in oil prices ($62.31/bbl, +0.38, +0.6%) amid rising tensions between the U.S. and Iran also provided some support for the energy space.

Trump said on Sunday that he will increase the tariff rate on $200 billion of imported Chinese goods to 25% from 10%, effective Friday. An additional $325 billion of imported goods could also face a 25% tax. The news rattled equity markets around the world and catalysed a 5.6% drop in China’s Shanghai Composite. Many market participants viewed Trump’s threat more as a negotiation tactic to speed up trade talks than a move prevent the completion of a trade deal. Confident that Trump would not try to upend a market coming off session highs by jeopardising a deal supported a reversal in stocks. China reportedly said it still plans to send a trade delegation to Washington this week.

Later this morning, there is RBA. The RBA has not changed its interest rates since August 2016, but this time may be different. The bank may finally oversee a cut from 1.50% to 1.25% (probability of close to 50%) after Q1 inflation came out flat. In addition, the global economy is slowing down and the housing sector is somewhat struggling. On the other hand, the labor market is doing well and so is the economy. Not all analysts see a rate cut coming now. The uncertainty implies a substantial Aussie reaction to the news.