Forex - Asia Open - Overnight Highlights

 23:54 (GMT) 25 Aug

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Asia Overnight Highlights - 26 Aug 2019


FX Highlights:

Asia Open - Overnight Highlights (0101-NLST-C01)

The Bloomberg dollar spot index traded heavily in Friday's after Powell's comments as he highlighted global risks and said the Fed would act as appropriate - seen as code for locking in a September cut.

China announced retaliatory tariffs on U.S. products and Trump announced further retaliatory measures to that, escalating trade war concerns. Risk aversion saw a pick up in early Asian hours as a result. There were further erratic remarks over the weekend.

USD/JPY slid below 105 to YTD lows of 104.46. AUD/JPY was sold off to lows of 69.967 in early Asian hours this morning.

EUR/USD rose to 1.1140+ levels on USD weakness. GBP saw some mild correction to the euro after Thursday's recovery, as markets remained unconvinced that Johnson's meetings with Merkel and Macron changed anything substantive on the Brexit issue. Anti-EU MPs also created some doubt that any deal would get through the House of Commons by indicating that a removal of the backstop would not be enough to convince them to vote for a deal.

Data/Events Highlights:

- China announces retaliatory tariffs of $75 billion worth of U.S. goods to take effect on Sept 1 and Dec 15

- Trump vows to respond to China's tariff retaliation. Adds we don't need China and frankly would be far better off without them'. US companies ordered to find alternatives to China including bringing companies home

- Powell - economy in a favourable place close to Fed goals. 3 weeks since the last meeting have been 'eventful' with new tariffs, more evidence of global slowdown and geopolitical risks like hard Brexit

- Fed's Bullard: -50bp will be robustly debated in Sep; inverted yield curve, global slowdown, moving inflation to target faster cited as reasons to ease

- Fed's Mester - would say leaves rates were are, but very attuned to downside risks

- Fed's Kaplan - do not see this as a rate cutting cycle. Monetary policy not causing slowdown, yield curve
- US Jul New Home Sales 635k from sharply upward revised 728k

- UK's Johnson - deal not going to be a cinch, people 'shouldn't hold their breath'.

- VIX index: 19.87 (+19.12%)

- Gold Spot: $1,546.77/oz (+1.30%)

- ICE Brent front contract: $58.46 ($-0.88)

- Nymex WTI front contract: $53.16 ($-1.01)

- Reuters/Jefferies Commodities Index: 168.61 (-1.00%)

- 10y UST: 1.535% (-8bp) (Asia morning)

- DJI: 25,628.90 (-2.37%); S&P: 2,847.11 (-2.59%); Nasdaq: 7,751.77 (-3.00%)

Data/Events Ahead:

In the U.S., we expect a 1.5% increase in Jul durable goods orders but a 0.2% decline ex transport.

In Germany, we envisage some consolidation in the headline and component parts of the Ifo survey in the upcoming August numbers. Indeed, the headline is seen rising 0.3 point to 96.0, this making little inroad into the 1.8-point slump witnessed in July, that being the largest in a four-month run of declines that pulled the overall figure to the lowest since 2014.


FX Highlights:

Asia Open - Overnight Highlights (0101-NLST-C02)

Asian currencies posted mixed performances on Friday. CNH (-0.59%) led the losses by a wide margin on escalation of trade war late into Friday, while KRW (-0.27%), CNY (-0.17%) and SGD (-0.11%) also remained weak. THB (+0.27%), INR (+0.21%) and IDR (+0.14%) were however seen in gains against the USD.

USD/CNH rose to fresh highs at 7.1926 earlier on Monday after closing the NY session at 7.1315 on Trump's retaliatory measures in the trade war. Eyes now on the psychological 7.2000. USD/CNY closed Friday near record highs of 7.0992 and will likely surge further to 7.1500+ levels at the open on Monday. 1Y NDFs broke above 7.2000 into the close on Friday and extended gains to 7.2512 early this morning.

USD/SGD remained resilient on Friday despite US/China escalations, closing the NY session at 1.3868 but surged early this morning to 1.3900+ handle printing over 2-year highs of 1.3925. Break of key 1.3900 handle brings our attention to 1.3950 but we wait for further trade announcements.

USD/IDR 1M NDFs saw gains to 14350+ in Friday's NY session following Trump's actions on China spelling a bout of risk aversion. Onshore spot traded heavily on Friday, slipping towards 14200 from 14240-levels earlier in the day. Pair may target the 14360 resistance in the week ahead as risk aversion jumps on trade war escalation.

USD/INR 1M NDFs defied market trends to move downwards on Friday to sub-72 levels as FinMin announced a slew of measures to support the economy. Onshore spot printed YTD highs of 72.0475 earlier on Friday but retreated lower to 71.700-levels as reports of fiscal measures started coming in. Upside bias is likely to be intact given tough external conditions, but a break of 72.050 resistance is needed to put the focus on 72.200.

Data/Events Highlights:

Singapore's inflation came in below expectations, at 0.4% y/y in July from 0.6% in June. This was weighed down by core inflation which was only 0.8% y/y.

Data/Events Ahead:

Singapore's July industrial production is expected to remain in negative territory.

HK's July trade balance is also due.


05:00 GMT / 13:00 SGT - JP: Leading Indicator (June F) [Prev: 93.3]

05:00 GMT / 13:00 SGT - SG: Industrial Production (sa) (Jul) [Mkt: -2.8, Prev: 1.2]

05:00 GMT / 13:00 SGT - SG: Industrial Production (Jul) 4cast: -4.4 % y/y [Mkt: -5.6, Prev: -6.9]

08:30 GMT / 16:30 SGT - HK: Imports (Jul) [Prev: -7.5]

08:30 GMT / 16:30 SGT - HK: Exports (Jul) [Prev: -9]

08:30 GMT / 16:30 SGT - HK: Trade Balance (Jul) [Prev: -55.2]

12:30 GMT / 20:30 SGT - US: Durable Ex Transportation (Jul P) 4cast: -0.2 [Mkt: 0.1, Prev: 1]

12:30 GMT / 20:30 SGT - US: Durable Goods Orders (Jul P) 4cast: 1.5 [Mkt: 1.1, Prev: 1.9]


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