As of Mon, Jun 24th, Singapore Time zone UTC+8

Dollar Index -0.42%, 96.22
USDJPY, -0.00%, $107.31
EURUSD, +0.64%, $1.1368
GBPUSD, +0.26%, $1.2742
USDCAD, +0.29%, $1.3223
AUDUSD, +0.04%, $0.6924
NZDUSD, +0.10%, $0.6589

U.S. Treasuries backtracked from their best levels of the year, driving yields higher across the curve. The 2-yr yield increased six basis points to 1.78%, and the 10-yr yield increased seven basis points to 2.07%. The U.S. Dollar Index lost 0.42% to 96.22.

After Iran shot down a U.S. military drone on Thursday, Trump said he ordered a retaliatory strike on Tehran but scrapped the plans ten minutes prior to launch. Trump said he didn’t think the damage inflicted would have been proportional to shooting down an unmanned drone.

Separately in trade, Reuters reported that the Department of Commerce barred several more Chinese supercomputing companies from purchasing parts from U.S. companies. The Philadelphia Semiconductor Index lost 0.7%. The news provided mixed signals ahead of planned talks with China next week. Earlier in the day, Vice President Mike Pence canceled a Monday speech that was expected to carry a hawkish tone, suggesting that the U.S. did not want to upset Beijing before the G-20 summit.

Energy stocks continued to benefit from higher oil prices ($57.37/bbl, +$0.25, +0.4%) and also from an explosion at the East Coast’s largest refinery on Friday. The move in oil wasn’t that noticeable, especially considering it was only a fraction of its 9% weekly gain, but the underlying geopolitical driver had some investors feeling cautious.

S&P500, -0.13%, 2,950.46
Nasdaq, -0.12%, 7,728.78
Nikkei Futures, -0.98%, 21,190.0

Stock market finished slightly lower on this quadruple-witching expiration Friday, as it cooled off from a big stretch of gains. The S&P 500 declined 0.13%, but it did set a new intraday high (2964.63) and finished the week higher by 2.2%. It was a tight-ranged session with neither buyers nor sellers showing much conviction. Indications that the Fed and other central banks are leaning more dovish remained a measure of support for equities, which contributed to a flattish session instead of a pullback.

The S&P 500 energy (+0.8%), utilities (+0.5%), health care (+0.4%), and communication services (+0.4%) sectors were today’s best performers. The real estate (-1.1%), industrials (-0.5%), and information technology (-0.5%) sectors trailed the pack.

As of Thu, Jun 20th, Singapore Time zone UTC+8

Dollar Index -0.48%, 97.18
USDJPY, -0.36%, $108.13
EURUSD, +0.34%, $1.1236
GBPUSD, +0.70%, $1.2655
USDCAD, -0.77%, $1.3271
AUDUSD, +0.13%, $0.6886
NZDUSD, +0.30%, $0.6554

The FOMC’s policy directive came in largely as expected. The fed funds rate was unchanged, the word “patient” was removed, and the directive noted that the Fed will act as appropriate to sustain the economic expansion amid increased uncertainties to the outlook. St. Louis Fed President James Bullard was the lone dissenter among voting members, preferring to lower the fed funds rate by 25 basis points.The Fed’s updated dot plot showed a divided stance in policy for the remainder of the year. Eight voting members indicated they were in favor of a rate cut in 2019, while eight preferred to keep rates unchanged. One member forecast a rate hike. Nevertheless, the fed funds futures market now sees a 100% implied likelihood of a rate cut in July.

Dollar fell across the board after the FOMC statement and dot plot forecast was released but failed to extend lower on the back of Powell’s comments because the Fed Chair downplayed their urgency to ease. The Fed may be waiting for more data before lowering interest rates but it won’t take much to push them into action.

U.S. Treasury yields fell sharply after the release of the directive and took a leg lower during Fed Chair Powell’s follow-up press conference. The fed funds-sensitive 2-yr yield dropped nine basis points to 1.75% after touching 1.90% at its high. The benchmark 10-yr yield declined three basis points to 2.03% after touching 2.10% at its high. The U.S. Dollar Index declined 0.48% to 97.18. WTI crude declined 0.3% to $53.99/bbl.

S&P500, +0.30%, 2,926.46
Nasdaq, +0.42%, 7,667.74
Nikkei Futures, +2.20%, 21,370.0

Stock market finished with modest gains on Wednesday after the Fed kept rates unchanged and indicated it was more open to lower rates in upcoming meetings. The 0.3% gain in the S&P 500 left the benchmark index less than 1.0% from its record close. The major averages barely budged from their flat lines prior to the rate decision and wavered with modest gains afterwards. Most S&P 500 sectors finished higher, led by the defensive-oriented health care (+1.0%), utilities (+0.8%), and real estate (+0.7%) sectors. The materials (-0.5%), energy (-0.2%), and financials (-0.2%) sectors underperformed.

In corporate news, Adobe Systems (ADBE 291.21, +14.43, +5.2%) reported upbeat earnings results, helping investors overlook its downside Q3 guidance. U.S. Steel (X 15.17, +0.59, +4.1%) lowered its Q2 EPS guidance due to softening end market demand, but shares pushed higher as investors presumably viewed the news as already being priced in.

CURRENCY MARKET WRAP 

As of Wed, Jun 19th, Singapore Time zone UTC+8

Dollar Index +0.08%, 97.63
USDJPY, -0.01%, $108.53
EURUSD, -0.24%, $1.1197
GBPUSD, +0.19%, $1.2566
USDCAD, -0.26%, $1.3374
AUDUSD, +0.36%, $0.6877
NZDUSD, +0.58%, $0.6534

The Fed will be the first of the three central banks to make its policy announcement later today and is expected to keep the fed funds rate unchanged at the target range of 2.25-2.50%. But with markets convinced that a rate cut at the following meeting in July is a foregone conclusion, traders could be disappointed if the Fed falls short of giving outright signals of lower borrowing costs. Fed will publish updated economic projections, but with most FOMC members having so far only gone as far as suggesting they are open to rate cuts, it will be interesting to see how many committee members will predict a rate cut in their projections. In the previous projections, the Fed had sharply lowered its median forecasts for interest rates but was still anticipating some tightening over the next couple of years. As a reminder, the market is pricing in a 20% chance of a rate cut later today, and 82% for July, with another 2-3 rate cut by the end of 2020.

ECB President Mario Draghi said the central bank is willing to provide additional stimulus if economic conditions don’t improve and inflation remains low. Sovereign bond yields fell on the news, sending Germany’s 10-yr bund yield to a fresh record low at -0.32% (-8bps), other European Bond Yields also bore the brunt of Draghi’s comments with France’s 10yr Yield falling (-10bps) to make record lows at 0.01%, Italy’s 10yr yield falling (-18bps) to trade at 2.11% and Spain’s 10 yr yield falling (-13bps) to make record lows at 0.39%.

In Trade, Trump updated the market with U.S.-China trade news. Specifically, the president tweeted that the U.S. will resume trade talks with Beijing before the G-20 summit and that he will have an extended meeting at G-20 with President Xi.

U.S. Treasuries spent a bulk of intraday action pulling back from session highs, leaving yields slightly lower. The 2-yr yield declined one basis point to 1.84%, and the 10-yr yield declined three basis points to 2.06%. The U.S. Dollar Index increased 0.08% to 97.63.

As of Tue, Jun 18th, Singapore Time zone UTC+8

Dollar Index +0.00%, 97.57
USDJPY, -0.02%, $108.54
EURUSD, +0.13%, $1.1224
GBPUSD, -0.39%, $1.2542
USDCAD, -0.02%, $1.3410
AUDUSD, -0.30%, $0.6852
NZDUSD, +0.06%, $0.6496

U.S. Empire State Manufacturing Survey for June fell to -8.6 (Consensus 12.1) from the prior month’s reading of 17.8. The 26 point drop was the largest monthly decline on record, sending it comfortably below 0.0, which is the dividing line between expansion and contraction for this report. The NAHB Housing Market Index for June came in at 64 (consensus 67), down from 66 from May.

U.S. Treasuries finished little changed. The 2-yr yield increased one basis point to 1.85%, and the 10-yr yield decreased one basis point to 2.09%. The U.S. Dollar Index was unchanged at 97.57. WTI crude fell 1.5% to $51.76/bbl.

As of Sat, Jun 15th, Singapore Time zone UTC+8

Dollar Index +0.58%, 97.57
USDJPY, +0.22%, $108.56
EURUSD, -0.60%, $1.1209
GBPUSD, -0.69%, $1.2592
USDCAD, +0.65%, $1.3413
AUDUSD, -0.56%, $0.6873
NZDUSD, -0.99%, $0.6492

Global growth worries lingered after China reported the slowest growth rate for industrial production y/y in 17 years in May (5.0% vs consensus 5.4%). Still, investors were placated with economic data that showed the U.S. economy is still in relatively decent footing. Retail sales for May increased 0.5% (consensus 0.7%) after increasing an upwardly revised 0.3% (from -0.2%) in April. The Dollar soared against its G7 counterparts after Friday’s release. It was slightly lower than expected but excluding gas and auto sales, retail sales beat expectations. The main reason why the Dollar took flight was because of revisions, rather than falling -0.2% retail sales increased by 0.3% in April. This suggests that consumer appetite in the US is stronger than previously reported. Industrial production increased 0.4% in May (consensus 0.2%) after declining 0.4% in April.

U.S. Treasuries finished mixed. The 2-yr yield increased two basis points to 1.84%, and the 10-yr yield finished unchanged at 2.09%. The U.S. Dollar Index rose 0.58% to 97.57 to reclaim its 50-day moving average (97.46). WTI crude increased 0.3% to $52.54/bbl.

As of Fri, Jun 14th, Singapore Time zone UTC+8

Dollar Index +0.01%, 97.01
USDJPY, -0.16%, $108.32
EURUSD, -0.12%, $1.1279
GBPUSD, -0.10%, $1.2680
USDCAD, -0.05%, $1.3327
AUDUSD, -0.25%, $0.6912
NZDUSD, -0.28%, $0.6557

U.S-Iran tensions escalated after two tankers were attacked in the Gulf Of Oman. Secretary of State Mike Pompeo on Thursday charged Iran with responsibility for the attack. Pompeo cited intelligence reports and the nature of the weapons used, most likely torpedoes, as evidence. In the last few months, the US has intensified its “maximum pressure” campaign meant to starve Iran’s economy, targeting the country’s oil exports in April. The Trump administration has also signaled its willingness to consider military force, with Bolton ordering updates to a military plan to send 120,000 troops to the Middle East should Iran attack US forces.

U.S. Treasuries advanced to session highs during Pompeo’s press conference. The 2-yr yield declined seven basis points to 1.82%, and the 10-yr yield declined four basis points to 2.09%. The U.S. Dollar Index increased 0.01% to 97.01.

In trade wars, Trump has ramped up pressure on Germany to scrap a gas pipeline from Russia and boost its defense spending, threatening to impose sanctions on the European ally and move American troops elsewhere if it doesn’t comply. “We’re looking at it,” Trump told reporters at the White House, referring to sanctions that might be levied if the Nord Stream 2 pipeline were to go ahead. Trump told reporters that the gas pipeline between Germany and Russia “really makes Germany a hostage of Russia if things ever happened that were bad.” The fear is that if Germany were to move ahead with the pipeline, it would allow Russia to easily cut off energy to Ukraine or pressure Western European nations.Trump is also threatening to cut American troops because “We’re protecting Germany from Russia, and Russia is getting billions and billions of dollars in money from Germany.” Deteriorating US-European relations would not be good for the Euro but at the same time, its unclear how serious the US is about imposing sanctions on Germany.

Australian data came in better than expected, but the currency sold off as the headline data hid the underlying slowdown in labor demand. Australian jobs printed at 42K vs 16K expected, but almost all of the gains came from the lower value part-time jobs, with full-time jobs only expanding by slightly more than 2K in May. The market read the news as a disappointment especially since the unemployment rate came in at 5.2% vs 5.1% expected.

As of Thu, Jun 13th, Singapore Time zone UTC+8

Dollar Index +0.28%, 96.96
USDJPY, +0.02%, $108.50
EURUSD, -0.31%, $1.1293
GBPUSD, -0.24%, $1.2693
USDCAD, +0.40%, $1.3334
AUDUSD, -0.43%, $0.6930
NZDUSD, -0.12%, $0.6576

High expectations for the Fed to signal for a rate cut in its policy meeting next week were bolstered by soft inflation data in the Consumer Price Index (CPI) for May. Total CPI increased 0.1% as expected. In trade, the market remains hopeful for a Trump-Xi meeting at the G-20 summit at the end of the month, although reports indicated there have been little preparations for a meeting.

The 2-yr yield declined four basis points to 1.89%, and the 10-yr yield declined one basis point to 2.13%. The U.S. Dollar Index advanced 0.28% to 96.96.

Chinese CPI (2.7% y/y as expected) rose at the fastest pace in 15 months in May thanks to high pork prices, after farmers were forced to cull hogs amid a countrywide outbreak of African swine fever. Pork prices rose 18.2% y/y in May, pushing up the broader food basket 7.7%.

CURRENCY MARKET WRAP 

As of Wed, Jun 12th, Singapore Time zone UTC+8

Dollar Index -0.05%, 96.71
USDJPY, +0.07%, $108.47
EURUSD, +0.13%, $1.1329
GBPUSD, +0.27%, $1.2724
USDCAD, +0.10%, $1.3281
AUDUSD, +0.01%, $0.6960
NZDUSD, -0.38%, $0.6584

U.S. Producer Price Index for final demand increased 0.1% (consensus +0.1%) while the index for final demand, less food and energy, increased 0.2% (consensus +0.2%). The expected readings left the yr/yr changes at 1.8% and 2.3%, respectively, versus 2.2% and 2.4% in April. The moderation in producer price is another data point that validates an eventual rate cut by the Fed.

U.S. Treasuries finished the session mixed. The 2-yr yield increased three basis points to 1.93%, and the 10-yr yield finished flat at 2.14%. The U.S. Dollar Index declined 0.05% to 96.71. WTI crude increased 0.1% to $53.34/bbl.

China’s beaten down stocks posted their best gains in weeks (+2.6%) on news local governments will have more room to spend on infrastructure, offsetting Trump’s latest threat of more tariffs. Construction-related stocks rallied after the finance ministry said it would ease restrictions on the spending of proceeds from special bond sales and encourage banks to offer loans to projects funded by such debt.

STOCK MARKET WRAP 

As of Tue, Jun 11th, Singapore Time zone UTC+8

Dollar Index +0.23%, 96.77
USDJPY, +0.18%, $108.39
EURUSD, -0.16%, $1.1315
GBPUSD, -0.36%, $1.2689
USDCAD, -0.01%, $1.3267
AUDUSD, -0.57%, $0.6959
NZDUSD, -0.84%, $0.6610

In US-China trade,Trump has warned Xi Jinping that a new round of tariffs would be levied on the country’s goods if the two leaders failed to meet at the G20 summit in Japan, as trade tensions continued to simmer between Washington and Beijing. “I think the differences can be worked out very easily. I would be surprised if he didn’t go. I think he is going, I haven’t heard that he’s not,” Trump said. But he added that levies on $300bn of additional Chinese imports would be imposed immediately if Xi failed to show up, on top of a 25 per cent tariff in place now on $250bn of goods. In US-Mexico trade, Trump could still reinstate the tariffs, though, if the U.S. thinks Mexico is not doing enough to stop the flow of illegal migration through its borders. Nevertheless, U.S. companies dodged a 5% tariff rate on all goods imported from Mexico, which kept the market in good spirits in addition to sizable M&A activity and decreased demand for U.S. Treasuries.

The 2-yr yield and the 10-yr yield increased six basis points each to 1.90% and 2.14%, respectively. The U.S. Dollar Index advanced 0.23% to 96.77. WTI crude fell 1.1% to $53.31/bbl.