Asia Overnight Highlights - 07 October 2016
Sterling pressure still a big feature & gilts join in with a sharp bout of selling as well. Dollar on the front foot and bonds on the backfoot still into payrolls.
Majors FX Highlights
The dollar index was strongly bid up to a fresh 3-month high of 96.769 as US initial claims data (details below) came in better than expectations, strengthening the case for a rate hike before the end of the year. All eyes are now on the NFP data due today. GBP/USD was seen at fresh 31-year lows in NY, but saw a steep fall to 1.1841 in early Asian trading - no news, possibly just fat fingers. Prices have since recovered to trade around 1.2400 and continue to remain pressured from strong dollar gains. USD/JPY broke past the 104.00 handle, despite reputed strong exporter selling interest at the level, with traders seeing risk of a strong US non-farm payroll on Friday. Pair however returned to trade just below 104.00 in early Asian hours. EUR/USD shrugged off the strong German factory orders report, and extended losses to 1.1136 at last check as MNI reported that ECB's Constancio denied the recent taper report, nudging slightly below in late trade. Oil is trading above the psychological $50 for WTI for the first time in 3 months but CAD was unable to benefit and had no problem surmounting the hitherto tricky 1.32. Eyes will be on September employment data today. We expect a healthy 20k increase with a fall in unemployment to 6.9% from 7.0%. Later on Friday Sep Ivey PMI data is due, and more importantly, the BoC's business outlook survey for Q3. BoC's Wilkins will speak late in the day. AUD similarly getting very little joy from oil, more concerned with gold's recent slump and has traded as low as 0.7560, but AUD/CAD was to correct from a brief move below 1.00.
Majors Data Highlights
The latest initial claims figure of 249k is down by 5k from last week and only 1k above the 43 year low set in Apr. With no special factors to note this week the data clearly illustrates a healthy labor market. Today we expect a 160k increase in Sep's non-farm payroll, unusually below a 175k rise in private payrolls as government corrects a strong Jul increase caused by teachers remaining on the payroll in the summer, meaning fewer hirings will be required in Sep. Average hourly earnings should pick up by 0.3% after a below trend Aug, while the workweek should pick up to 34.4 hours after falling to 34.3 in Aug. We however expect the unemployment rate to remain stable at 4.9%. Later on, Sep wholesale inventories should fall by 0.1%. Aug consumer credit data is due late in the day. Fed speakers scheduled today, all after the payroll, are moderate voter Fischer, who could be the week's most influential Fed speaker, hawkish voters Mester and George and late in the day dovish voter Brainard.
German manufacturing orders rose by 1.0%m/m in August, following 0.3%m/m in July (revised from 0.2%m/m), and this outcome is notably higher than market expectation for 0.3%m/m. Germany and France release August production data today.
Over in Asia, Australia's trade balance significantly improved in August compared to the previous month as the deficit narrowed to come in at A$2010 million and the latest print is also much better than market expectations of a deficit of A$2300 million.
Emerging Asia FX Highlights
USD/Asians were modestly bid overnight as the dollar index rallied following strong US data. China markets were away on holiday for National Day. USD/CNY 1Y NDFs saw another quiet session as onshore traders remained away on holiday. Pair was slightly bid up above 6.8600. USD/CNH broke past the key 6.7000 handle on Thursday, printing fresh 2.5-month high of 6.7142. USD/SGD rallied to a fresh over 4-month high of 1.3743 earlier before easing slightly to trade on either side of 1.3730. USD/IDR 1M NDFs were bid up to 13090 before selling pressure brought the pair back to 13050 levels. USD/INR 1M NDFs saw strong resistance at 67.1000 before slipping back below the 67 handle into early Asian morning.
Emerging Asia Data Highlights
Thursday was a quiet day in Asia on the data front. Focus today will be on trade data for Malaysia for the month of August and Taiwan for the month of September.
OVERNIGHT NEWS HIGHLIGHTS
- Initial Claims 249k from 254 vs Mkt 256, near 43yr lows.
- ECB`s Constancio - Report that ECB near taper consensus not correct (MNI)
- UK chancellor Hammond - cannot say if would approve more QE in the future. Have the opportunity to borrow very cheaply. Further capacity for very specific investment in infrastructure.
- BoE`s Carney - entirely agrees with spirit of PM May`s comments on monetary policy. Has distributional consequences, not the job of CB to offset those.
- VIX index: 12.84 (-1.15%)
- Gold Spot: $1,252.77/oz (-0.13%)
- ICE Brent front contract: $52.51 (+$0.65)
- Nymex WTI front contract: btmm jn (+$0.11)
- Reuters/Jefferies Commodities Index: 188.54 (-0.13%)
- 10y UST: 1.737% (+4bp) (Asia morning)
- DJI: 18,268.50 (-0.07%); S&P: 2,160.77 (+0.05%); Nasdaq: 5,306.85 (-0.17%)
- China: PBOC's Yi says isolation from globalization won't work, China wants more representation for developing nations. - BBG
- Indonesia: Fiscal boost to economy is seen weakening in 2H vs 1H due to falling state revenue and fragile recovery in global economy, Juda Agung, executive director of monetary policy at central bank, says. - BBG
- Indonesia: Impact of tax amnesty funds to economy will be seen next year as investors are still drafting business plans, Thomas Lembong, chairman of Investment Coordinating Board, known as BKPM, tells. - BBG
- As in the Far East, minimal movements were seen in the European morning. However as North American traders entered it was all change, Cable led a burst of general USD buying to a fresh 31 year low of 1.2620, lower initial claims supporting a move that was already in place. Late trade saw 1.2600 touched.
- USD/JPY wasn't for being left out either and 104.00 was cleared, despite reputed strong exporter selling interest at the level, with traders seeing risk of a strong US non-farm payroll on Friday.
- German factory orders were up a better than expected 1.0% m/m but EUR was unimpressed. With the USD buying that occurred later, EUR/USD extended losses to 1.1145 as MNI reported that ECB's Constancio denied the recent taper report, nudging slightly below in late trade.
Again, some early covering gave way to fresh pressure as the day went on heading into payrolls, weaker gilts and near 43 year low claims data going with the grain. Long end tests into the Sep yield tops. 2s +1.8bps @ 0.85%, 5s +3.6bps @ 1.28%, 10s +3.7bps @ 1.74%, 30s +3.5bps @ 2.46%.
- Agency Spreads: Freddie/Fannie 5s -0.8/-0.2 bps, 10s 0.0/-0.1 bps.
- Swap Spreads: 2s -0.29bps, 5s +0.02bps, 10s -0.25bps.
Not much movement as the market waits for any leadership from payrolls. Walmart was soft on flat earnings projections but the indices corrected from midday lows to near neutral levels.
USD/CNY: 1Y NDFs saw another quiet session as onshore traders remained away on holiday. Pair was slightly bid up above 6.8600. Onshore markets remain closed this week for National Day. A firm break of 6.7000 in onshore spot might still have to wait, possibly till after NFP data in early October.
USD/CNH: Pair broke past the key 6.7000 handle on Thursday, printing fresh 2.5-month high of 6.7142. With onshore traders away on holiday, authorities have been relatively less vigilant. No resistance is now seen until 6.7195, but we expect intervention to bring the pair back down early next week.
USD/SGD: Pair rallied to a fresh over 4-month high of 1.3743 earlier before easing slightly to trade on either side of 1.3730. Break of the key 1.3700 handle now looks firm, even through the strong resistance at 1.3749 is yet to be overcome, after which the focus will shift to 1.3774. Focus on the NFP data later today before MAS decision next week.
USD/IDR: 1M NDFs were bid up to 13090 before selling pressure brought the pair back to 13050 levels. Spot USD/IDR continued to remain range-bound just below the key 13000 handle, and was seen on either side of 12990 in the day. With BI committed to maintain rupiah levels in-line with fundamentals, dips below 12900 should remain limited. Do not expect the pair to deviate too far from the key 13000 handle.
USD/INR: 1M NDFs saw strong resistance at 67.1000 before slipping back below the 67 handle into early Asian morning. Spot USD/ INR gapped higher to open at 66.5600 vs last close of 66.5000 and traded on either side of 66.6000 before inching up to the week's high of 66.7000 into the close. Expect range-trading ahead of the US NFP data due on Friday, after which eyes will turn to India's September CPI due next week. Focus on 66.8150 resistance ahead of the stronger 66.9150.
DATA RELEASED TODAY MORNING AND DUE TODAY
- 04:00 GMT - MY: Exports (Aug) [Mkt: -2, Prev: -5.3]
- 04:00 GMT - MY: Imports (Aug) [Mkt: 2, Prev: -4.8]
- 04:00 GMT - MY: Trade Balance (Aug) [Mkt: 6.58, Prev: 1.91]
- 05:00 GMT - JP: Leading indicator (prelim) (Aug) [Mkt: 101.6, Prev: 100]
- 07:30 GMT - UK: Halifax House Price Index (Sep) [Mkt: 5.9, Prev: 6.9]
- 07:30 GMT - UK: Halifax House Price Index (Sep) [Mkt: 0, Prev: -0.2]
- 07:30 GMT - TH: Foreign Reserves (42643) [Prev: 180.7]
- 08:00 GMT - TW: Exports (Sep) [Mkt: 2.8, Prev: 1]
- 08:00 GMT - TW: Imports (Sep) [Mkt: 8, Prev: -0.8]
- 08:00 GMT - TW: Trade Balance (Sep) [Mkt: 3.92, Prev: 3.99]
- 08:30 GMT - UK: Industrial Production (Aug) 4cast:-0.1 % m/m [Mkt: 0.1, Prev: 0.1]
- 08:30 GMT - UK: Industrial Production (Aug) 4cast:1.1 % y/y [Mkt: 1.3, Prev: 2.1]
- 08:30 GMT - UK: Manufacturing Production (Aug) 4cast:-0.1 % m/m [Mkt: 0.4, Prev: -0.9]
- 08:30 GMT - UK: Manufacturing Production (Aug) 4cast:0.3 % y/y [Mkt: 0.8, Prev: 0.8]
- 08:30 GMT - UK: Trade Balance (Non-EU) (Aug) 4cast:-3.1 GBP bn [Mkt: -4, Prev: -4.502]
- 08:30 GMT - UK: Visible Trade Balance (World) (Aug) 4cast:-10.8 GBP bn [Mkt: 11.25, Prev: 11.764]
- 12:30 GMT - US: Average Hourly Earnings (Sep) 4cast:0.3 % m/m [Mkt: 0.3, Prev: 0.1]
- 12:30 GMT - US: Non-farm Payrolls (Sep) 4cast:160 k [Mkt: 174, Prev: 151]
- 12:30 GMT - US: Private Payrolls (Sep) 4cast:175 k [Mkt: 170, Prev: 126]
- 12:30 GMT - US: Unemployment (Sep) 4cast:4.8 % [Mkt: 4.9, Prev: 4.9]
- 12:30 GMT - CA: Net Change in Employment (Sep) 4cast:20 k [Mkt: 7.5, Prev: 26.2]
- 12:30 GMT - CA: Unemployment (Sep) 4cast:6.9 % [Mkt: 7, Prev: 7]
- 14:00 GMT - US: Wholesale Inventories (Aug) 4cast:-0.1 % m/m [Mkt: -0.1, Prev: 0]
- 14:00 GMT - UK: NIESR GDP Est. (Sep) [Prev: 0.3]
- 14:00 GMT - CA: Ivey PMI (Sep) [Mkt: 53.1, Prev: 52.3]
- 19:00 GMT - US: Consumer Credit (Aug) [Mkt: 16.45, Prev: 17.713]
EVENTS & AUCTIONS
- EU: EU's Moscovici Speaks in Washington
- CN: Market Holiday - National Day
- 05:30 GMT - EU: ECB's Mersch Speaks in Washington
- 10:00 GMT - UK: 182day bills auction - GBP 3.00 Bn (Act)
- 10:00 GMT - UK: 28day bills auction - GBP 0.50 Bn (Act)
- 10:00 GMT - UK: 91day bills auction - GBP 1.00 Bn (Act)
- 14:30 GMT - US: Fed's Fischer Speaks in Washington
- 14:30 GMT - CA: BoC Releases Business Outlook
- 16:00 GMT - EU: ECB's Draghi Speaks in Washington
- 16:45 GMT - US: Fed's Mester Speaks in New York
- 19:00 GMT - US: Fed's George Speaks in Washington
- 19:40 GMT - US: Fed's Daly Speaks in Phoenix
- 20:00 GMT - US: Fed's Brainard Speaks in Washington
- 20:00 GMT - CA: BoC's Wilkins Speaks in Washington