17 July 2018
Rates & FX Market Update
Chinese 2Q18 GDP Print Raised Some Concerns among Bulls
¨ Global Markets: US Treasuries closed lower on Monday following a rather solid batch of data including retail sales. The US Dollar, however, fell against the backdrop of trade tensions; the IMF issued a new warning saying that escalating trade tensions are likely to derail the global growth trajectory, yet without revising their global economic projections. Lastly, on the geopolitical front the US President declared that the meeting with his Russian counterpart started well while drawing criticism at home on both side of the political spectrum as prominent Republicans, including Senate majority leader McConnell and Speaker Ryan, and the usual sympathetic media outlets were deeply critical of the President’s comments. The summit is likely to remain in the headlines for several days and could impact Trump’s rate of approval, ahead of the midterm elections; remain neutral USD and UST on rising uncertainties.
¨ AxJ Markets: Over in China, the EU-China summit re-affirmed both countries’ commitment to free trade and resist protectionism, in a clear jab to the US. 2Q18 GDP print due revealed that the Chinese economy expanded at 6.7% y-o-y, in line with consensus expectations but a touch slower than the 6.8% logged last quarter. The other trifecta of data appears mixed, with retail sales better than expected, FAI in line, and industrial production below expectations. While China’s structural slowdown appears inevitable, we noted that authorities still have ammunition to prop up growth and speed up reform processes if necessary; stay neutral CNY.
¨ SGD gained c.0.2% against the USD overnight ahead of the June NODX print, which revealed slower export growth (1.1% y-o-y; consensus: 7.8%; May: 15.5%), although the measure remains notoriously volatile. The USDSGD pair was only a few pips higher post-print, although the greater concern for EM investors remains the US-China trade tension; stay neutral SGD at this juncture.