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Forex - Asia Open - Overnight Highlights


 23:28 (GMT) 19 Oct

  [Forex Highlights]

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Asia Open - Overnight Highlights (0100-GYNV-C01)

Asia Overnight Highlights - 20 October 2016

David Sloan, Rachel Ziemba

ASIA OUTLOOK

Wednesday was a day when commodities fared well, but CAD has its wings clipped by the dovish BoC.

Majors Data Highlights

The UK unemployment claimant count rose by 0.7k in September from +7.1k in August (revised from 2.4kk). This compares to market expectations for a 3.2k rise. The ILO/LFS unemployment rate is at the same time unchanged at 4.9% in August. August wage inflation (average weekly earnings including bonuses) slowed to 2.3% in 3m y/y terms after July's rate was revised higher to 2.4% from 2.3%, consistent with market expectations.

The US saw quite a contrast between weak Sep housing starts, -9.0% to 1047k, and strong permits, +6.3% to 1225k. The starts decline was fully due to a plunge in multiples with single starts firmer. The fall in multiple starts is likely to be temporary. The permits gain was led by multiples, with single permits seeing only a marginal increase.

The BoC left rates unchanged at 0.5% and initially the market reacted to the BoC seeing risks balanced around its updated inflation forecasts, rather than the fact forecast were revised lower. However when governor Poloz sated the BoC had considered easing, the market saw the message as dovish.

Thursday has a heavy data calendar, with focus on AUD employment, UK retail sales and the ECB meeting. In the US weekly initial claims, the Philly Fed and existing home sales data are due.

Emerging Asia FX Highlights

USD/Asians mostly weakened towards the NY close, after earlier dollar strengthening. USD/CNY 1Y NDFs traded sideways around 6.9065 in the NY trading hours, continuing a weakness than began in the Asian hours. USD/SGD continued to remain supported at 1.3860. /IDR 1M NDFs consolidated lower at 13050, below the 13095 peak in the Asian session. USD/INR 1M NDFs settled just below 66.9500 in the NY hours, retreating from the highs of 67.0500 seen in Asia earlier.

Emerging Asia Data Highlights

China Gross domestic product rose 6.7 percent in the third quarter from a year earlier, matching a projection by economists Bloomberg surveyed. Industrial output increased 6.1 percent from a year earlier in September, compared with analyst's median projection for a 6.4 percent rise. Chinese consumers remained a prop, with retail sales rising 10.7 percent last month from a year earlier, matching economists' median forecast. Due today in Indonesia is the BI Policy Decision (4CAST: 4.75%).

OVERNIGHT NEWS HIGHLIGHTS

- BoC says actively discussed possibility of adding more stimulus after downgrading its economic view.

- US Sep Housing Starts 1047k from 1150R vs Mkt 1175; Permits 1225k from 1152 vs Mkt 1165.

- Fed's Beige Book said most districts reported modest or moderate expansion.

- Fed's Kaplan said growth will be enough to drive down unemployment.

- VIX index: 14.41 (-5.69%)

- Gold Spot: $1,269.83/oz (+0.05%)

- ICE Brent front contract: $52.67 (+$0.99)

- Nymex WTI front contract: btmm jn ($-0.13)

- Reuters/Jefferies Commodities Index: 190.77 (+0.52%)

- 10y UST: 1.743% (+1bp) (Asia morning)

- DJI: 18,202.62 (+0.22%); S&P: 2,144.29 (+0.22%); Nasdaq: 5,246.41 (+0.05%)

ASIA NEWS

- Singapore: "We are currently going through a weak period in our economy, essentially for cyclical reasons," Tharman Shanmugaratnam, Singapore's deputy prime minister, says. - BBG

- Indonesia: Darmin Naustion, coordinating minister for Economic affairs suggests low inflation means Bank Indonesia has no reason to keep rates on hold. He also notes that BI knows when easing will be done and suggests that he is not suggesting intervention - Kontan (via BBG).

- India: Panel to finalize GST rate structure at next meeting, next meeting scheduled for Nov 3-4, Finance Minister Arun Jaitley says. - BBG.

Asia Open - Overnight Highlights (0100-GYNV-C03)

CURRENCIES

- CAD was the big interest in the N. American morning, USD/CAD pushing lower as BoC left policy unchanged and despite some lower forecasts from the bank. The pair fell again as the EIA posted a large crude draw of 5.2mn barrels. However, after looking very closely at 1.30 we saw a sharp bounce as BoC Gov Poloz disclosed that further easing had been discussed.

- UK employment had been the earlier interest, the data much as expected but GBP mainly better on the session as modestly risk-off sentiment saw shorts scaling back. Cable saw a high just shy of 1.2330, talk of big stops through 1.2325 seemingly exaggerated, but took a step back down on reports that German officials have been told to shun UK contacts ahead of formal Brexit negotiations. Overall GBP was fairly neutral on the day.

- EUR/USD finally managed a look below 1.0960 but with 1.0950 support close up behind a tight range traded for most of the session. USD/JPY continued to ease to a low at 103.17, again despite a positive showing by equity markets, if only a modest one.

- Elsewhere AUD/USD pushed up to 0.7729, the AUD benefiting from the CAD sell off that saw AUD/CAD bounce over a big figure from a brief look at 1.00. NZD/USD is caught somewhere in the middle.

- EUR/SEK was hemmed in by large 9.70 expiries through the session, the NOK picking up as crude headed higher, WTI hitting levels not seen since June. EUR/CHF has eased lower and at sub 1.0850 in danger of provoking a reaction from the SNB.

Asia Open - Overnight Highlights (0100-GYNV-C04)

BONDS

Overnight strength briefly ran into some pressure from the upsized Saudi supply before the ongoing better bid short end helped pull long end yields back lower again. However, in a choppy session, yields picked up again into the close. 2s 0.0bps @ 0.80%, 5s +0.8bps @ 1.23%, 10s +1.2bps @ 1.75%, 30s +0.9bps @ 2.51%.

- Agency Spreads: Freddie/Fannie 5s -1.0/+0.1 bps, 10s 0.0/0.0 bps.

- Swap Spreads: 2s +0.61bps, 5s -0.13bps, 10s -0.13bps.

EQUITIES

Looking more settled in range, after drawing back higher again Wednesday. Energy stocks lifted by the fresh oil high, while Intel was a drag after disappointing forecasts.

Asia Open - Overnight Highlights (0100-GYNV-C02)

ASIA CURRENCIES

USD/CNY: 1Y NDFs traded sideways around 6.9065 in the NY trading hours, continuing a weakness than began in the Asian hours. Then, once again, onshore spot could not find much headway above 6.7400, managing only a high of 6.7409, from 6.7355 even after poor IP data. The authorities were seen continually on the upside once again. 1Y NDFs might have traded to a low of 6.9075 before the GDP release but bounced straight higher to original levels of 6.9170+ after IP data disappointed. Up move shows no sign of abating, though we would advise against joining crowded longs, especially with the authorities seen vigilant on the topside. Dips towards 6.7200 in onshore spot should be well bought now.

USD/CNH: Pair was seen trading on either side of 6.7420 in the overnight session, further lower from the near-6.7440 levels seen in Asia on Wednesday after poor China IP data was reported. Despite obvious buying interest, the CNH/CNY is now within only 50 pips. With the PBoC not willing to let 6.7500 go without a fight, we do not expect the spread to widen anytime soon.

USD/SGD: Pair was seen trading sideways around 1.3860 ahead of the China GDP data in the morning. Some downside pressure was noted after China GDP came in-line with expectations, but the pair was stalled at 1.3833, remaining supported above 1.3860 thereafter until last check. Strong support is seen at 1.3820 and we expect it to hold, although clearing 1.3870 is now the hurdle to recapturing the 1.3900 handle.

USD/IDR: 1M NDFs consolidated lower at 13050, below the 13095 peak in the Asian session. Spot was sold off to the 13000 handle in the morning, printing a 1-week low as the BI meeting kicked off. Pair however recovered slightly and was seen trading on either side of 13010 subsequently. Upside pressures are expected to return, and we expect support at 12900 to hold ahead of the BI meeting on Thursday.

USD/INR: 1M NDFs settled just below 66.9500 in the NY hours, retreating from the highs of 67.0500 seen in Asia earlier. Spot USD/INR gapped lower to open at 66.6800 vs last close of 66.7200 and slid to a 1-week low of 66.6500 while trading on either side of 66.7000. We expect the downside to remain limited and support is seen at 66.5000 ahead of the stronger 66.3250.

DATA RELEASED TODAY MORNING AND DUE TODAY

- n/a GMT - ID: BI - Overnight BI Rate (Oct 20) [Mkt: 5, Prev: 5]

- 00:30 GMT - AU: Employment (Sep) 4cast:-7.4 chg k [Mkt: 15, Prev: -3.9]

- 00:30 GMT - AU: NAB Business Confidence (Q3) [Prev: 6]

- 00:30 GMT - AU: Unemployment (Sep) 4cast:5.7 % [Mkt: 5.7, Prev: 5.6]

- 08:00 GMT - EU: Current Account (nsa) (Aug) [Prev: 31.5]

- 08:00 GMT - EU: Current Account (sa) (Aug) [Prev: 29.5]

- 08:00 GMT - TW: Export Orders (Sep) [Mkt: 2, Prev: 8.3]

- 08:30 GMT - UK: Retail Sales (ex Auto Fuel) (Sep) [Mkt: 0.2, Prev: -0.3]

- 08:30 GMT - UK: Retail Sales (ex Auto Fuel) (Sep) [Mkt: 4.4, Prev: 5.9]

- 08:30 GMT - UK: Retail Sales (inc Auto Fuel) (Sep) [Mkt: 0.3, Prev: -0.2]

- 08:30 GMT - UK: Retail Sales (inc Auto Fuel) (Sep) [Mkt: 4.8, Prev: 6.2]

- 11:45 GMT - EU: ECB - Deposit Rate (Oct 20) [Mkt: -0.4, Prev: -0.4]

- 11:45 GMT - EU: ECB - Refinancing Rate (Oct 20) [Mkt: 0, Prev: 0]

- 12:30 GMT - US: Initial Claims (Oct 15) 4cast:255 k [Mkt: 250, Prev: 246]

- 12:30 GMT - US: Philadelphia Fed Survey (Oct) 4cast:5 index [Mkt: 5.3, Prev: 12.8]

- 14:00 GMT - US: Existing home sales (Sep) 4cast:5.38 mn [Mkt: 5.35, Prev: 5.33]

- 14:00 GMT - US: Leading Indicator (Sep) [Mkt: 0.2, Prev: -0.2]

- 21:45 GMT - NZ: External Migration (sa) (Sep) [Prev: 5600]

EVENTS & AUCTIONS

- EU: ECB President Draghi gives press conference following interest rate announcement

- EU: EU Leaders Summit in Brussels (to 21st)

- 07:00 GMT - EU: EU's Timmermans Speaks in Brussels

- 09:30 GMT - EU: EU's Juncker & Tusk Speak in Maastricht

- 12:00 GMT - UK: BoE's Shafik Speaks in New York

- 12:30 GMT - US: Fed's Dudley Speaks in New York


Forex - CNH Flows: USD/CNH; Yuan's depreciation is more caused by global situation - NBS


 04:10 (GMT) 19 Oct

 [Forex Flows]

Yuan's depreciation is more caused by global situation, National Bureau of Statistics spokesman Sheng Laiyun says at a briefing after release of 3Q economic data. Yuan depreciation has brought pressure in short term but Yuan doesn't have the fundamentals to depreciate in medium, long term. Yuan internationalization will improve the demand-supply relation of yuan.

USDCNH fell to a low of 6.7380 before the GDP release but poorer than expected IP data saw prices spike up to a high of 6.7472 soon after the release. However, traders were mindful of the presence of PBoC offers near 6.7500 and the pair soon retreated back below 6.7450. Despite obvious buying interest, the CNH/CNH is now within only 50 pips. With the PboC not willing to let 6.7500 go without a fight, we do not expect the spread to widen anytime soon. C.L


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