CURRENCY MARKET WRAP 

As of Fri, May 24, Singapore Time zone UTC+8

Dollar Index -0.20%, 97.84
USDJPY, -0.62, $109.56        
EURUSD, +0.25%, $1.1184        
GBPUSD, -0.01%, $1.2664
USDCAD, +0.33%, $1.3475
AUDUSD, +0.30%, $0.6899
NZDUSD, +0.40%, $0.6521

Manufacturing PMIs were both weak for the E.U. and U.S. E.U. Flash Manufacturing PMI at 47.4 vs expected 48.2. U.S. Flash Manufacturing PMI at 50.6 vs 53.0.

In Trade, President Xi warned about a “new long March and “self-reliance,” there will be no quick solutions. By evoking a term that relates to Mao Zedong’s strategic retreat in 1934, China is saying they will not back down easily and are prepared to make the sacrifices needed to preserve their industries for the years ahead. If China refuses to cooperate, Trump could push for new tariffs on USD$300B of Chinese goods. More companies outside the U.S. reportedly began cutting ties with China’s Huawei Technologies. The persisting uncertainty in the outcome, and duration, of the U.S.-China trade dispute fed into concerns about economic growth and corporate earnings prospects. In turn, fears of weakening demand for oil contributed to the 5.8% drop in WTI crude ($57.83/bbl, -$3.57).

Defensive positioning in U.S. Treasuries sent the 2-yr yield down 11 basis points to 2.11% and the 10-yr yield down ten basis points to 2.30%. This was the lowest level in the 10-yr yield since late 2017. The U.S. Dollar Index declined 0.2% to 97.84.

As of Thu, May 23, Singapore Time zone UTC+8

Dollar Index +0.03%, 98.08          
USDJPY, -0.29, $110.25
EURUSD, -0.07%, $1.1156
GBPUSD, -0.33%, $1.2665
USDCAD, +0.22%, $1.3431    
AUDUSD, -0.10%, $0.6878
NZDUSD, -0.19%, $0.6495

The Minutes from the May FOMC meeting showed that policymakers are comfortable with the current fed funds rate range while “a number of participants” saw a moderation in risk and uncertainties surrounding their outlooks for the year. The market has a reasonable assurance to think policy rates are going to remain quite low on a real and nominal basis.

In Trade, reports that the U.S. is considering blacklisting several other Chinese firms put a damper on Apple (AAPL 182.78, -3.82, -2.1%) and many of the stocks within the Philadelphia Semiconductor Index (-2.1%). Qualcomm (QCOM 69.31, -8.44, -10.9%) was further pressured by a federal judge ruling against the company in an antitrust case.

The 2-yr yield declined two basis points to 2.22%, and the 10-yr yield declined three basis points to 2.39%. The U.S. Dollar Index finished little changed at 98.08.

European elections kicks off today and the rising power of a nationalist euro-skeptic movement has many investors worried that populist parties could make strong headway. Elections will be held in 28 countries across the European Union for seats in the 751-member European Parliament. This Parliament will make crucial decisions for the Union over the next 5 years that will include border control, national autonomy and Britain’s relationship with the EU.

CURRENCY MARKET WRAP 

As of Wed, May 22, Singapore Time zone UTC+8

Dollar Index +0.09%, 98.02
USDJPY, +0.48%, $110.58  
EURUSD, -0.06%, $1.1164
GBPUSD, -0.17%, $1.2708
USDCAD, -0.21%, $1.3401
AUDUSD, -0.52%, $0.6885
NZDUSD, -0.47%, $0.6508

U.S. Treasuries declined modestly, pushing yields slightly higher. The 2-yr yield increased two basis points to 2.24%, and the 10-yr yield increased one basis point to 2.43%. The U.S. Dollar Index increased 0.09% to 98.02. WTI crude declined 0.4% to $63.07/bbl.

In trade, U.S. eased some restrictions imposed last week on China’s Huawei. The roll back, which is in effect for 90 days, suggests changes to Huawei’s supply chain may have immediate, far-reaching and unexpected consequences. The news got stocks bid, as it ran counter to yesterday’s reports that several companies began halting business activity with Huawei. The US Commerce Department will allow Huawei Technologies to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets. The reprieve was created as a temporary general licence, in effect until Aug 19, that allows Huawei to purchase goods to maintain existing networks and equipment and provide software updates to existing Huawei handsets.

Aussie, which saw a strong boost from the win of the center-right Liberals over the weekend, gave back a portion of its gains after Governor Lowe conceded that the central bank will likely cut rates in June. Although markets have largely priced an RBA rate cut, up to now Lowe has been non-committal about a rate cut, leaving room for doubt that RBA would move this month. In yesterday’s speech, however, Governor Lowe stated that he would consider a rate cut in June, adding that such a move would help support employment growth and spur inflation.

As of Tue, May 21, Singapore Time zone UTC+8

Dollar Index -0.06%, 97.91
USDJPY, -0.01%, $110.07
EURUSD, +0.10%, $1.1170
GBPUSD, -0.07%, $1.2730
USDCAD, -0.22%, $1.3427
AUDUSD, +0.76%, $0.6921
NZDUSD, +0.27%, $0.6539

U.S. Treasuries finished lower despite the negative disposition in equities. The 2-yr yield increased one basis point to 2.22%, and the 10-yr yield increased two basis points to 2.42%. The U.S. Dollar Index declined 0.06% to 97.91. WTI crude increased 0.9% to $63.30/bbl on rising U.S.-Iran tensions and OPEC producers signaling that production cuts may last throughout 2019.

In Australian elections, Prime Minister Scott Morrison has secured a third term in office for his Liberal-National coalition with a surprise election victory, after Australian voters rejected the Labor opposition’s progressive policy agenda. The shock result has wide-ranging implications for companies, from banks to builders and resources firms, with Labor’s plans to scale back tax incentives for investors and take tougher action on climate change now dead. Australia holds elections every three years but, with infighting rife, no prime minister has succeeded in serving a full term since 2007. Morrison said he had united his government – a coalition between his Liberal Party and its traditional ally, the National Party – in the nine months since he replaced Malcolm Turnbull as prime minister. Aussie gapped higher on Monday’s Open and ended the day higher against the G7.

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.