24 April 2015
Rates & FX Market Update
USTs Recouped Losses Amid Weak Data;
GBP Climbed; Focus On EU Meeting on Greek Debt Bailout
Highlights
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¨ USTs rebounded as weak new home
sales data alongside lacklustre jobless claims and PMI dampened earlier
euphoria seen in the prior session, keeping yields on 10y UST firmly below
the 2% handle. USD depreciated against major crosses where we opine short
term movements of USD to remain relatively directionless and sensitive to data
releases ahead of FOMC meeting amid conflicting Fedspeaks. In the UK, the impact
from softer retail sales was marginal on the GBP as it climbed another 0.16% to
1.5059/USD, although volatility may rise ahead of the May 7 elections.
Meanwhile, EGBs traded firmer while EUR surged 0.94% to 1.0823/USD on possible
short covering ahead of the EU meeting on the Greek debt bailout where we
remain doubtful on a major breakthrough as Greece has yet to set its fiscal
targets for the year, not to mention policies needed in order to receive
the bailout.
¨ In China, the 1y low HSBC
manufacturing PMI contraction helped sustain gains on CGBs and CNH CGBs where
we opine the recent spate of corporate defaults to fuel the cautious
sentiment. Elsewhere, Singapore’s CPI remained in negative region, with MAS
reiterating its expectations for CPI to edge higher as energy prices
stabilise (which we opine may lead to an upward bias) amid the tight labour
market; USDSGD edged lower as expectations for further MAS easing eases.
In Malaysia, Zeti has suggested that MYR and monetary policy are separate
issues and that Malaysia’s GDP remains stable, signalling a likely
neutral BNM stance this year. Else, in a bid to nurse its current account
deficit, the Indonesian government will offer tax breaks to companies that
export a minimum of 30% of their production.
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In spite of the contraction in Japan’s
manufacturing PMI, JPY remained below the psychological resistance level of
120/USD as preliminary QQE exit talks by Kuroda bolstered investors’
confidence of a stable economic recovery, dampening further easing speculations.
Expect USDJPY to test the 120 resistance next week as BoJ updates its
GDP and CPI forecasts.
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