v Fed’s
Bullard (voting member): rates too low for too long could be risky
v Fed’s
Williams (non-voting member) sees rate hikes despite Brexit risk, more in
2017
v US
preliminary Markit PMI show manufacturers stagnant in May
v Euro
area Markit Composite PMI show business activity falls to 16-month low in May
v The
new issue of 10.5-year MGS registers a moderately strong BTC of 2.193 times
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OVERNIGHT MARKET UPDATE:
· US – St Louis Fed President
James Bullard (voting member): "I do worry that keeping rates too low
for too long could feed into future financial instability even if it doesn't
look like we're in that situation today." Market assessment for a
Fed rate rise had been close to zero, and the idea it has come off zero is
"probably good", he added.
· US – San Francisco Fed
President John Williams (non-voting member) said the Fed is on track to hike
interest rates in June or July despite risks such as “Brexit” vote, and will
continue with even more hikes next year given US economic strength.
· US – The Markit Flash
Manufacturing PMI dipped to 50.5 in May from 50.8 in April, with production
declining for the first time since September 2009. Manufacturers have been
hurt by a strong US dollar and weak global growth.
· Euro area – The Markit Flash
Composite PMI fell to 52.9 in May, a 16-month low, from 53.0 in April,
failing to meet market expectations for a reading of 53.2. New business
growth also dropped to the lowest since January 2015. Both Manufacturing and
Services PMI also came in below market expectations.
· Currencies – JPY
strengthened against USD as Japan reported a larger-than-expected trade
surplus. EUR eased as the PMIs disappointed markets, while GBP also remained
on the back foot.
· Equities – US major bourses
ended moderately lower as the prospect that interest rates might rise as soon
as June weighed on utilities shares.
· Rates – US Treasury yield
curve flattened as investors moved into longer-date bonds in anticipation of
a coming interest-rate hike from the Fed. As a result, the spread
between the long-term and short-term yields narrowed.
· Energy – Crude oil prices
fell as Canadian producers worked to resume operations after the wildfires
and Iran vowed to increase production. Brent oil prices fell 0.8% overnight
to US$48.35/bbl while the WTI oil prices fell 0.7% to US$48.08/bbl.
· Precious Metals – Gold
prices continued to settle lower as the expectations that Fed could raise
interest in June dampened the appeal of precious metal.
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INDICATIVE
MAJOR CURRENCIES
Source: Bloomberg, AmBank
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Tuesday, May 24, 2016
Daily FX Update, 24 May 2016
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