Asia Overnight Highlights - 04 January 2017
Interesting day as mkt tried to jump two footed back into post Trump / `2017 consensus trades` (dollar, yields, equities up) but ended up seeing some late Europe paring, as oil especially reversed lower from the top
Majors FX Highlights
The dollar index resumed its upward trajectory on the first full trading day of 2017, and printed fresh 14-year highs of 103.820 after strong factory output and construction spending data (details below) and continued expectations that President Trump will provide a boost to public spending and growth. Focus today will be on December's Fed FOMC minutes where a steeper dot plot for 2017 was announced. EUR/USD meanwhile slid to a fresh 14-year low of 10.341, helped by strong US PMI and ISM data before a late European squeeze that saw it regain the 1.04 handle. GBP/USD shrugged off the strong UK manufacturing activity data (details below) and re-printed its December low of 1.2200. The sell-off came around the time that the resignation of the UK's Ambassador to the EU was announced. USD/JPY pushed to a high at 118.60 before European equities turned lower, but the gains were fully erased to a low of 117.19 before moving back to around 117.70, the DJIA still positive if still failing to clear 20k. USD/CAD saw only a limited response to a sell-off in WTI, though the move ensured a marginal dip below 1.3400 was very brief. AUD/USD found buyers around .7200, though the NZD lost out as the first GDT dairy auction of the year saw the index off 3.9%.
Majors Data Highlights
Dec ISM manufacturing at 54.7 is stronger than expected and up from 53.2 in Nov to the highest since Dec 2014, consistent with the majority of regional surveys. New orders and production both above 60, while prices paid see a sharp bounce to 65.5 from 54.5. The UK manufacturing PMI survey rose to 56.1 in December from 53.6 in November (revised from 53.4), which is notably stronger than market expectations of 53.3 (4cast: 53.8) and a two-and-a-half year high. The flash estimate of French December CPI is 0.3m/m, translating to 0.6%y/y (November: 0.5%y/y). Flash German CPI inflation arrived at 0.7%m/m and 1.7%y/y in December (prev: 0.8%y/y). HICP inflation meanwhile came in at 1.0%m/m and 1.7%y/y (prev: 0.7%y/y). Minutes from the December FOMC are due today, as well as Eurozone service and composite PMIs.
Emerging Asia FX Highlights
USD/Asians saw mixed trading overnight despite a stronger dollar index. USD/CNY 1Y NDFs printed a fresh 8-year high of 7.3412 in the Asia morning on Tuesday as the spot gapped higher at the open, but retreated to fall below 7.3000 subsequently, and traded mostly below the 7.30 handle in NY. USD/SGD drifted to a low of 1.4455 on Tuesday after a strong 4Q GDP report but underlying weakness and dollar strength brought the pair back up to a fresh 8-year high of 1.4545 in NY before retreating back to 1.4500 levels on possible central bank intervention. USD/IDR 1M NDFs saw a slightly offered tone and slipped from 13560 to a low of 13505 in NY despite a stronger dollar. USD/INR 1M NDFs edged higher to 68.6300 in NY before retreating below 68.5000 levels subsequently.
Emerging Asia Data Highlights
Singapore's Q4 GDP (adv. est.) growth accelerated to 1.8% y/y and 9.1% q/q (saar) from the revised Q3 GDP of 1.2% y/y and -1.9% q/q (saar) and above the market expectation of 0.3% y/y and 4.0% q/q (saar). This brings the whole of 2016 growth to 1.8%, above the government forecast of over 1-1.5% growth and higher than our 1.4% estimate. However, this compares to growth rate of 2% seen in 2015 and was the slowest pace of growth seen since 2009. Indonesia December consumer prices rose by 3.02% y/y compared to market consensus of an increase of 3.04% y/y. This is softer than the previous print of 3.58% y/y and the latest number translated to a monthly rise of 0.42% m/m. Rest of the week looks quiet in Asia.
OVERNIGHT NEWS HIGHLIGHTS
- US Dec ISM Manufacturing 54.7 from 53.2 vs Mkt 53.7. New orders, prices paid strong
- US Nov Construction Spending 0.9% m/m from 0.6R vs Mkt 0.5
- VIX index: 12.85 (-8.48%)
- Gold Spot: $1,158.70/oz (-0.01%)
- ICE Brent front contract: $55.57 ($-1.25)
- Nymex WTI front contract: $52.33 ($-1.39)
- Reuters/Jefferies Commodities Index: 190.15 (-1.23%)
- 10y UST: 2.444% (+0bp) (Asia morning)
- DJI: 19,881.76 (+0.60%); S&P: 2,257.83 (+0.85%); Nasdaq: 5,429.08 (+0.85%)
- China: At risk of capital flight, China marked the new year with extra requirements for citizens converting yuan into foreign currencies. - BBG
- Singapore: Private residential property prices fell 0.4% in the last four months of 2016, compared to a 1.5% decline in the previous quarter, according to data released by the Urban Redevelopment Authority of Singapore. - BBG
- Indonesia: Economy likely expanded 5% in 2016, household consumption seen growing at 5% in 2016, while the contribution of private consumption remains flat due to budget adjustment, Finance Minister Sri Mulyani Indrawati speaks at a press briefing in Jakarta. - BBG
- India: Federal Reserve seeing limited room for continued accommodation and starting to raise interest rates, I think you will see the pressure on other central banks also come off, as much as it has been over the last few years, to continue accommodation: Rajan. - BBG
- The first truly full day of 2017 saw demand for USD, EUR/USD eventually managing to extend December's 14-year low at 1.0350 to 1.0339, helped by strong US PMI and ISM data before a late European squeeze that saw it regain the 1.04 handle.
- USD/JPY pushed to a high at 118.60 before European equities turned lower, the moves looking more spectacular on the charts than in reality. Gains were fully erased to a low of 117.19 before moving back to around 117.70, the DJIA still positive if still failing to clear 20k.
- GBP started strongly enough but slipped later in the session, Cable seeing a low of 1.2198. The sell-off came around the time that the resignation of the UK's Ambassador to the EU was announced, though we have our doubts that too many traders were aware that there is such a position!
Pretty lively day with a heavy sell off building through into early NY trade, culminating in the strong ISM, before losses were sharply pared as oil reversed off the top and equities slipped back. US5s roll back from the test of 2%. In short, CTA market enthusiastically tried to re-set post Trump trades and hammer back the thin year end gains before having to bail out intraday as momentum faltered. 2s +3.2bps @ 1.22%, 5s +1.5bps @ 1.94%, 10s +0.4bps @ 2.45%, 30s -2.1bps @ 3 .04%.
Early upside effort ebbed somewhat as oil reversed to negative on the day from its earlier 18-month highs, though the indices remained in marginally positive territory, regaining some momentum into the close.
USD/CNY: 1Y NDFs printed a fresh 8-year high of 7.3412 in the Asia morning on Tuesday as the spot gapped higher at the open, but retreated to fall below 7.3000 subsequently, and traded mostly below the 7.30 handle in NY. Despite the authorities push to keep onshore spot below the 6.9500 handle with another midpoint fixing of 6.9498, pair gapped higher on Tuesday and traded around 6.9550 in the day, before rallying above 6.9600 levels to a high of 6.9628 into the close. We expect the bid tone in onshore spot to remain intact amid uncertain trade and foreign policies from Trump. Break of 6.9600 puts the focus on 6.9800.
USD/CNH: Pair was seen in consolidation around 6.9750 at the start of the fresh week of the new year, before a slight sell-off towards 6.9600 in NY. The CNH/CNY spread has again been closed to under 1 big figure.
USD/SGD: Pair drifted to a low of 1.4455 on Tuesday after a strong 4Q GDP report but underlying weakness and dollar strength brought the pair back up to a fresh 8-year high of 1.4545 in NY before retreating back to 1.4500 levels on possible central bank intervention. Despite a strong Q4 growth, there is underlying weakness in the Singapore economy, and a bullish USD bias continues to present upside in USD/SGD. Eyes remain on a firm break of 1.4500 handle.
USD/IDR: 1M NDFs saw a slightly offered tone and slipped from 13560 to a low of 13505 in NY despite a stronger dollar. Onshore spot meanwhile was slightly elevated at the start of the week but the pair was still capped under 13500 as the pair traded on either side of 13480. An overall bullish bias still remains intact, and a break above 13500 should be inevitable. Focus also on Fed minutes and US employment data due later in the week.
USD/INR: 1M NDFs edged higher to 68.6300 in NY before retreating below 68.5000 levels subsequently. Onshore spot meanwhile opened slightly lower at 68.1300 vs last close of 68.2225 and after pivoting around 68.1000 in the morning pair gained traction to inch up above 68.3000 into the close. More upside remains in store in 2017 as central bank remains accommodative while Fed stance remains hawkish.
DATA RELEASED TODAY MORNING AND DUE TODAY
- n/a GMT - US: Vehicle Sales (Dec) [Mkt: 17.7, Prev: 17.75]
- 09:00 GMT - EU: Composite PMI (Final) (Dec) [Mkt: 53.9, Prev: 53.9]
- 09:00 GMT - EU: Services PMI (Final) (Dec) [Mkt: 53.1, Prev: 53.1]
- 09:30 GMT - UK: BoE - Mortgage Approvals (Nov) [Mkt: 68.7, Prev: 67.5]
- 09:30 GMT - UK: BoE - Net Consumer Credit (Nov) [Mkt: 1.6, Prev: 4.6]
- 09:30 GMT - UK: BoE - Secured Lending (Nov) [Mkt: 3.3, Prev: 3.3]
- 09:30 GMT - UK: CIPS / Markit Construction PMI (Dec) 4cast:52.1 index [Mkt: 52.6, Prev: 52.8]
- 09:30 GMT - UK: M4 Money Supply (Oct) [Prev: 1.1]
- 09:30 GMT - UK: M4 Money Supply (Oct) [Prev: 6.6]
- 10:00 GMT - EU: Flash HICP (Dec) [Mkt: 1, Prev: 0.6]
- 10:00 GMT - EU: Flash HICP - Core (Dec) [Mkt: 0.8, Prev: 0.8]
- 22:30 GMT - AU: AIG Services PMI (Dec) [Prev: 51.1]
EVENTS & AUCTIONS
- 19:00 GMT - US: Fed's Dec Minutes Released