Forex - China Flows: CNH still looking to weaken, even as PBOC fixing signals at currency support

 02:18 (GMT) 22 Aug

  [Forex Flows]   [Central Banks]

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China Flows: CNH still looking to weaken, even as PBOC fixing signals at currency support (0101-NKZF-C01)

USD/CNH has continued on a bid tone since the NY session. This is despite Fed minutes arguing for aggressive easing. Pair was last up to 7.0729. 7.1124 resistance is still far although possible to reach in the coming days. A move below 7.0411 support may result in some profit taking.

PBoC fixed mid-point at 7.0490 vs. previous close of 7.0633. This still signalled at some support for currency despite higher than previous days. USD/CNY gapped higher and stayed elevated, last at 7.0673. Attention is now at psychological 7.1000 big figure resistance given recent trends. 1Y NDF last at 7.1396.

Forex - Asia Open - Overnight Highlights

 00:00 (GMT) 20 Aug

 [Forex Highlights]

Asia Overnight Highlights - 20 Aug 2019

The USD was net little changed through the European morning, but there was some cross movement, with the EUR making gains against the JPY and GBP initially although GBP was later back to flat too. Some euro support at least still lingering from German government statement last week indicating a willingness to increase Budget spending in the case of a recession. Slight late dollar lift from Rosengren comments however, although nothing new from this current hawk. JPY weakness looks based on a generally better risk tone with equities up and yields up helped by hopes of stimulus from China and Germany. Initial GBP weakness had no clear trigger but after a strong recovery in the second half of last week, the lack of progress from opposition parties in preventing a no-deal Brexit has reduced optimism.

Data Overnight:
Eurozone CPI was slightly weaker than expected in July, up 1.0% y/y against a market expectation of a 1.1% rise. The current account was also below expectations, at EUR18.4bn in June, down from 30.2bn in May.

Data Ahead:
RBA minutes of August policy meeting due, in which RBA stayed pat. In Canada, we expect a 2.0% decline in Jun manufacturing shipments.

- VIX index: 16.88 (-8.61%)

- Gold Spot: $1,495.69/oz (-0.02%)

- ICE Brent front contract: $59.74 (+$1.10)

- Nymex WTI front contract: $56.11 ($-0.10)

- Reuters/Jefferies Commodities Index: 170.78 (+0.22%)

- 10y UST: 1.606% (+5bp) (Asia morning)

- DJI: 26,135.79 (+0.96%); S&P: 2,923.65 (+1.21%); Nasdaq: 8,002.81 (+1.35%)


FX Highlights:

A mixed day for Asian currencies, and sentiment continued to be driven by trade headlines. The U.S. decision to extend temporary sales permit to Huawei for 90 days provided some relief, and next deadline will be Nov 19. President Trump continued to urge a 100 basis point rate cut by the Fed.
USD/CNH reached a high of 7.0768 overnight and further gains were capped. Pair was seen steady at around 7.0700 into early Asian hours on Tuesday. Upside pressure eased slightly on Huawei-induced trade optimism, eyes on 7.0000 level. USD/CNY traded with a modest upside bias on Monday. We think that a break of the 7.0000-7.0500 range will likely trigger further movements either way. 1Y NDFs consolidated at 7.1350.

USD/SGD pushed to a high of 1.3870 overnight and was last seen holding onto the gains into Asian hours on Tuesday. Pair may edge lower and eye the 1.3833 support next. If broken, will turn our attention to the 1.3806 support.

USD/IDR rebounded to 14240 after some sideway movements at 14200 earlier. We expect the pair to continue to be range bound ahead of key catalysts this week, the FOMC meeting minutes on Wednesday and BI decision on Thursday. Consensus is now split between a rate cut and an unchanged rate by BI. A rate cut by BI may see the pair may test further upside at 14360. 1M NDFs still held onto overnight gains, and were last seen 14350.

USD/INR traded with a bid tone on Monday. Rupee was slightly stronger on the open amid an improved risk tone from the seemingly more conciliatory tone on the US-China trade battle, but soon reversed gains. Pair closed at 71.4425. The pair is likely to consolidate on the 71 handle, with risk sentiment likely the key driver. 1M NDFs were steady at 72.000 handle as Asian session started.

Data/Events Highlights:

Hong Kong's unemployment rate edged up to 2.9% in July from 2.8% prior, while composite interest rate was at 0.94% in July, down from 0.95% prior.
Thailand's economy has slowed down as expected in Q2. GDP expanded by only 2.3% y/y in the second quarter, the lowest level since 2014. Trade tensions and strong Thai Baht have hit the country's exports, weighing down growth.

Data/Events Ahead:

A quiet data calendar in Asia in the day ahead, with only July Hong Kong composite CPI due.


- 08:30 GMT / 16:30 SGT - HK: CPI (Jul) [Mkt: 3, Prev: 3.3]

- 12:30 GMT / 20:30 SGT - CA: Manufacturing sales (Jun) 4cast:-2 % m/m [Mkt: -1.5, Prev: 1.6]


03:35 GMT / 11:35 SGT - JP: 20yr Bonds Auction

09:30 GMT / 17:30 SGT - EU: ECB Main Refinancing Operation Result

09:30 GMT / 17:30 SGT - UK: 2028 0.125% Index Linked Treasury Gilt

12:30 GMT / 20:30 SGT - US: Philly Fed issues nonmanufacturing business outlook survey for August

Forex - Asia Open - Overnight Highlights

 00:05 (GMT) 19 Aug

 [Forex Highlights]

Asia Overnight Highlights - 19 Aug 2019


The USD made modest gains through the European morning, picking up ground against the EUR and JPY while falling slightly against the GBP, while commodity currencies also made modest gains in a more risk positive market, the CAD extending its move in North America. USD/JPY could not clear 106.50 however.

Risk appetite was supported in Asia by some comments from China's state planner indicating it will roll out a plan to support consumption, and in the European afternoon by a report Der Speigel that Germany would allow the budget to go into deficit in the event of a recession. This saw EUR/USD rise back to around 1.11 but the impact was modest, with no imminent action to prevent recession implied. GBP gains probably owed more to short covering than news, although there was some increase in hopes that a "no deal" Brexit could be blocked as opposition parties continued to discuss potential methods.
Data Overnight:

Aug's preliminary Michigan CSI of 92.1 is down more sharply than expected from Jul's 98.4, the dip looking similar to that in Jan which followed steeper equity declines in Dec of 2018. Jul US housing starts fell 4.0% to1191k, contrasting an 8.8% increase in permits to 1336k.
Data Ahead:
On Monday, the balance of payment data is likely to show a softening in June. Final inflation estimates are also released, with flash estimates pointing at headline inflation declining to 1.1% y/y in July from 1.3% in June and core inflation also easing by a similar degree from 1.1% in June to 0.9% in July.

- VIX index: 18.47 (-12.80%)

- Gold Spot: $1,510.00/oz (-0.22%)

- ICE Brent front contract: $58.90 (+$0.26)

- Nymex WTI front contract: $55.09 (+$0.22)

- Reuters/Jefferies Commodities Index: 170.41 (+0.22%)

- 10y UST: 1.554% (+3bp) (Asia morning)

- DJI: 25,886.01 (+1.20%); S&P: 2,888.68 (+1.44%); Nasdaq: 7,895.99 (+1.67%)


FX Highlights:

Majority of the Asian currencies were in the red against the dollar throughout the week, as risk-off sentiments remained strong after the Treasury bond markets sent a recession signal. Risk off sentiments are likely to remain strong on Monday, as Trump indicates that a trade deal is still not yet imminent. He added that the Hong Kong protests posed difficulty to a resolution between U.S. and China due to concerns by U.S. lawmakers. In addition, as the temporary 90-day reprieve to allow U.S. companies to do businesses with Huawei expires on 19 August, all eyes will be on the U.S. on its next move. Trump continued to label Huawei as a "national security threat" and signaled that the U.S. might not have any business dealings with Huawei at all. Focus for the week, will be on the FOMC minutes on 21 August.

USD/CNH was relatively stable around 7.0500 on Friday. China's data was weak in July, with industrial production and retail sales below market expectations. USD/CNH will likely test the 7.0615 resistance at some stage. Support is at 6.9932. USD/CNY traded in a tight range as well on Friday, between 7.0350 and 7.0464. For USD/CNY, it has since moved on a bid tone, last at 7.0420. We think that a break of the 7.0000-7.0500 range will likely trigger further movements either way. A 7.0700 resistance is key to further upsides. 1Y NDF dipped to 7.1043 at last look.

USD/SGD slipped from just below the 1.3900 big figure on Friday to around 1.3840. We expect risk off sentiments to remain strong. Pair may re-eye the 1.3907 high again. If broken, will turn our attention to the 1.3915 resistance next. Singapore's Prime Minister Lee Hsien Loong acknowledged in his National Day Rally address that Singapore's economic growth had slowed significantly this year, however, stated that there was no need for economic stimulus measures at the moment. Retirement and re-employment ages would gradually be raised by 2030.

USD/IDR dipped lower on Friday to 14220. Focus for the week will be on Bank Indonesia (BI) policy rate decision, and consensus is now split between a rate cut or an unchanged rate. Global headwinds seem to be escalating and we expect BI to cut the 7 Day Reverse Repo Rate again to 5.50% to provide support to the economy. A rate cut may see the pair test further upside at 14360. 1M NDFs dipped to an intra-day low at 14265, before rising to just below 14300 at last look.

USD/INR slipped lower from 71.47 to 71.04 on Friday, before recovering some of the losses towards the end of the session to 71.15. USD/INR should continue to be supported by general risk aversion, geopolitical tension and RBI easing expectations, upside is likelier than a fall back below 71. 1M NDFs dipped lower to 71.42 at last look.

Data/Events Highlights:

Malaysia's GDP unexpectedly grew much faster in Q2 (4.9% y/y) compared to Q1 (4.5%). In our view, currency weakness, alongside domestic fundamentals, partially helped with the performance. Exports of goods and services grew 0.1% y/y, while imports fell 2.1%. This helped Malaysia with some net export contribution to GDP growth. Singapore's Non-oil Domestic Exports (NODX) and electronics exports data were stronger than expected but remained in sharp contraction in July, at -11.2% y/y and -24.2% y/y respectively. Recent trends may prompt the Monetary Authority of Singapore (MAS) to ease policy settings. We continue to monitor currently-fluid trends before committing to an easing call for October.

Data/Events Ahead:

Hong Kong Monetary Authority (HKMA)'s Composite Interest Rate will be released on Monday. Thailand's Q2 GDP will be released on Monday as well and we expect a slip to 2.4% y/y in Q2 from 2.8% y/y in Q1. This will be followed by Hong Kong's unemployment rate for July.


- 23:01 GMT / 07:01 SGT - UK: Rightmove House Price Index (Aug) [Prev: -0.2]

- 23:50 GMT / 07:50 SGT - JP: Imports (Jul) 4cast:-3.9 % y/y [Mkt: -2.3, Prev: -5.2]

- 23:50 GMT / 07:50 SGT - JP: Exports (Jul) 4cast:-3.1 % y/y [Mkt: -2.3, Prev: -6.6]

- 23:50 GMT / 07:50 SGT - JP: Trade Balance (nsa) (Jul) 4cast:-164 JPY bn [Mkt: -210, Prev: 589.6]

- 23:50 GMT / 07:50 SGT - JP: Trade Balance (sa) (Jul) [Mkt: -241.3, Prev: -14.4]

- 02:30 GMT / 10:30 SGT - TH: GDP (Q2) 4cast:2.4 % y/y [Mkt: 2.3, Prev: 2.8]

- 05:30 GMT / 13:30 SGT - JP: Tokyo Department Store (Jul) [Prev: -1.3]

- 08:00 GMT / 16:00 SGT - EU: Current Account (sa) (Jun) [Prev: 29.7]

- 09:00 GMT / 17:00 SGT - EU: HICP - Core (Jul F) [Prev: 0.9]

- 09:00 GMT / 17:00 SGT - EU: CPI (Jul F) [Mkt: 1.1, Prev: 1.3]


03:30 GMT / 11:30 SGT - JP: 12mth Bills Auction

15:30 GMT / 23:30 SGT - US: 3mth Bills Auction (USD 45bln)

15:30 GMT / 23:30 SGT - US: 6mth Bills Auction (USD 42bln)

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