FX
Global
Equities closed
higher, led by tech stocks. The global bond rout took a breather in NY session
with UST 10-year yields slipping under the 2.20% by Asia open. Initial jobless
claims added to the optimism with a print of 265K, lowest levels seen in
15 years but investors are now focus on the NFP release tonight for a better
sense of the labour market and of course, its confluence on the timing of the
Fed hike.
Earlier in Asia,
Australia released its labour report. The AUD slipped at first when the
headline flashed a -2.9K slide in total employment before regaining its
foothold after some upward revisions in the Mar numbers. USD found favour with
the weak risk sentiments along with JPY and CHF. Nearer to home, BNM did not
move. USD/MYR was still on the upmove, buoyed by overnight slide in oil prices.
Looking ahead,
RBA’s quarterly Statement of Monetary Policy is due today and AUD is now under
pressure amid some expectations for RBA to refresh dovish tone missing in Tue’s
statement. Thereafter, AUD players could also be interested in China’s trade
data for Apr. The wait for NFP continues and the Apr numbers could dictate FX
swings for the next few weeks. In between, some interest will be on the GBP
which had rallied 200pips on the back of exit polls indication of a
Conservative lead. This was in contrast to opinion polls that pointed to a hung
parliament outcome.
Currencies
DXY
– All Eyes on NFP.
The greenback firmed on initial jobless claims (remain near 15-year low) data
overnight. Focus on NFP data tonight (830pm SGT) where the market is
looking for +225k following a dampener +129k last month. Our in-house model
revised estimates upcoming NFP data to be about +200k. A strong number (+200k
to +250k) could help DXY gather further momentum higher. DXY was last at 94.60.
Daily momentum remains bearish bias suggesting downside pressure; while daily
stochastics has fallen to oversold levels. We previously cautioned that a daily
close below 100 DMA at 95 could expose DXY towards 92.20 (38.2% Fibonacci
retracement of the run-up since Jun 2014 to Mar 2015); we prefer to buy into
this correction (if it materializes). Our in-house view for medium USD bull
trajectory remains unchanged.. Day ahead brings Apr NFP, average hourly
earnings; unemployment rate.
EUR/USD – Fade Rallies. EUR reversed strength and traded to a low
of 1.1237, down from 1.1392 before closing around 1.1267 overnight on broad USD
strength. Focus today and over weekend leading to 11 May Euro-Finance Ministers
meeting remains on Greece as Greek talk concerns escalated. Daily momentum
remains bullish bias but stochastics have entered overbought territories. Day
ahead focus on US NFP as a strong number (>+200k) could help USD regain
strength and see a return of Euro weakness. Intra-day ahead of US NFP see an
intra-day range of 1.1180 – 1.1280. We continue to reiterate our bearish bias
on the EUR on a combination of macro factors including diverging monetary
policies between Europe and the US (ECB QE while Fed is likely to start
tightening Sep 2015), ongoing disinflationary concerns, structural headwinds
(labor market slack, high debt, slow reforms, possible fiscal slippages, etc.)
and worries over Greece’s ability to meet repayment schedule.
GBP/USD – Awaiting UK Election Results. GBP/USD rose by 200pips to an intra-day
high of 1.5448, from 1.5248 this morning. GBP-cross have also followed higher
with GBPSGD rising to 2.0581, from 2.0310 this morning. The move came off the
back of initial exit polls which suggest that the Conservative is well ahead of
Labour. This is in contrast to opinion polls which have all point to a hung
parliament outcome.Whether its opinion polls or exit polls, they are not a firm
outcome. As of actual count (910am SGT), Labour is leading with 9 seats to
Conservative 4 seats out of 650 seats being contested. Nonetheless a very key
seat for the Labour at Nuneaton was lost to Conservative (pundits have
previously said that a failure to win this seat could be an early sign that
Labour is in for a disappointing night). We wrote in a note dated 21 Apr that
the most probable outcome is likely to be a hung parliament and we cautioned
that the duration the parties will take to form the next government could take
a while and that could weigh on sentiment and GBP. Not that in the previous
hung parliament in 2010, the Conservative took about 7 days to form government
and saw the GBUSD declined by 6% post elections. We prefer to stay side-lined
as we await for the election outcome.
USD/JPY – Awaiting for Fresh Cues. USDJPY traded 119.05 – 119.86 range overnight. BoJ
meeting minutes released this morning showed that some BoJ members said CPI may
go slightly negative; core inflation at about 0% is likely to remain at that
level for time being. Daily stochastics is showing tentative signs of falling
from overbought areas while momentum lacks a strong conviction. Focus today on
US NFP and US-JP yield differentials to provide for fresh cues. Intra-day ahead
range of 118.90 – 120.10 expected.
AUD/USD – Eyes
SoMP - AUD/USD was dragged along with the rest of Asia amid
risk-off sentiments. The pair remains under pressure below the 0.79-figure,
weighed by some anticipation of the quarterly Statement on Monetary Policy.
Market players will scrutinize the report for dovish tone that was missing from
the Apr monetary policy statement. Support lies on the 0.7815-mark, near the
upper bound of the daily ichimoku cloud. The 0.80-figure lies in wait ahead of
the next at 0.8286.
NZD/USD – See You Later. NZD remains soft overnight after breaking
below its key support at 50DMA at 0.7530. Pair last closed at 0.7449 and is
expected to continue its move lower on possible RBNZ easing (next meeting 11
Jun). Daily MACD remains bearish bias; remain better sellers on rally towards
0.7530 for a re-visit of 0.730.71 – 0.72 levels.
Asia ex Japan Currencies
The SGD NEER trades around 0.22% above the implied mid-point of 1.3356.
We estimate the top end at 1.3089 and the floor at 1.3622.
USD/SGD - Consolidate in Triangle. SGD reversed gains overnight on broad USD
strength. USD/SGD traded to a high of 1.3337, up from 1.3231; and was last at
1.3330. Daily momentum and oscillators are showing very tentative signs
of bullish bias. Intra-day range of 1.3310 – 1.3380 expected.
AUD/SGD – Capped by the Cloud. AUD/SGD is still capped by the upper bound of the
daily cloud but a break to the upside cannot be ruled out. Support is seen at
1.0459 while resistance is seen 1.0675. 1.0376 marks the next supports. Eye the
Statement on Monetary Policy later ahead of China’s trade numbers and last but
not lease, US NFP tonight.
SGD/MYR – Consolidate in Triangle. Cross traded 2.6930 – 2.7095 range
overnight; opened around 2.7010 levels this morning. Pair is expected to
consolidate in triangle bounded by 2.68 – 2.73 range. Daily stochastics is
showing tentative signs of falling from overbought areas and could suggest some
downside bias interim; likely to see intra-day range of 2.6950 – 2.71. We
continue to caution that a break out lower with a decisive close below the
100DMA at 2.67 level could see the pair ease towards 2.6350 (23.8% Fibonacci
retracement of 2013 low to 2015 high).
USD/MYR – Respite. USD/MYR drifted higher back above the 3.60
handle tracking the fall in oil prices and broad USD strength overnight. BNM
kept OPR unchanged at 3.25%, as widely expected. Monetary policy statement
suggests policy continuity, as mentioned in our GM daily yesterday. BNM
Governor Zeti noted that CPI inflation is expected to trend higher given impact
of GST; inflation may be at lower end of 2-3% target range of 2015. Intra-day
see 3.5850 – 3.6200 range.
USD/CNH – Consolidative.
USD/CNH eases from Thu high and hovered around 6.2100. The pairing is still in
consolidation phase within 6.1842-6.2292. A breakout is needed for more
directional cues at this point. Expect USD/CNY fixing to be slightly higher
than the fixing at 6.1180 yest. We still await the completion of the head and
shoulders pattern and the clearance of the neckline around the 6.19-figure, which
is near to the 200-DMA at 6.1896. On 7 May, USD/CNY was fixed 43 pips
lower at 6.1113 (vs. previous 6.1156). CNYMYR was fixed 37 pips lower at
0.5748 (vs. 0.5785). At home, an editorial by China Securities Journal
highlighted that the bullish stock markets is supported by the government as
well as real reforms (BBG). Data-wise, Apr trade surplus is expected to widen
to USD39.60bn. Exports is expected to rebound to 1.6%y/y growth while imports
could contract by another 12.2%.
USD/IDR – Supported. USD/IDR had a rally on Thu and remained on the upmove
this morning, led by the overnight NDF move. 1-month was seen around 13,270,
buoyed by broad dollar gains. Spot closed at 13148 and extended upsides
to levels around 13150 at last sight. Expect the anticipation of NFP to keep a
check on bulls and resistance is seen at Mar high of 13250. Support still at
12065. In news, BI told the local press that 1Q current account deficit is
below 2% of GDP but that seem to have done little alleviate underlying
concerns. Foreign funds sold a net USD26.9mn in equities on Wed, supporting the
pair yesterday. The JISDOR was fixed at 13065 yesterday (vs. 13, 040 prev.). We
expect another higher fixing of the JISDOR today.
USD/PHP – Bullish Risks. The USD/PHP bounced this morning, in line with
regional peers and hovered around 44.760 as we write. We do not rule out a
possible bullish breakout of the 44.400-44.800 range. Pair may remain supported
today but the anticipation for US NFP could keep upticks checked. 1-month NDF
bounced this morning, inspired by the spot upmove. Foreign funds bought a net
USD22.0mn in equities on Thu, capping losses in the PSEi which was down -0.73%
yesterday.
USD/THB – Upmove a grind. USD/THB steadied around 33.525. Dollar strength could
continue to keep the pair supported, in line with the rest of Asia. Upmove not
ruled out but expect the key data US NFP to rein in bullish attempts. Momentum
indicators also showing weaker bullish momentum. With 33.450 hurdle behind us,
bulls head for the next barrier at 34.000. Foreign funds sold a net USD1.0mn
and USD202.6mn in equities and debt yesterday, keeping the pair supported.
Rates
Malaysia
§ Local government bond prices tumbled yesterday in line
with global bonds and as players reduced positions ahead of the MPC meeting.
The yield curve took a parallel shift of 4-5bps higher. However, trading
volumes were thin likely due to the already underweight positions of offshore
fast money accounts. The OPR remain unchanged at 3.25% as expected.
§ Active trading in the IRS market as foreign parties
took the curve higher, in tandem with higher global rates. The 2y IRS traded at
3.64%, 4y at 3.77-3.80% and 5y at 3.85-3.87%. We reiterate to square paid
positions now and turn received above 3.90%. 3M KLIBOR remain unchanged at
3.72%.
§ PDS market was quiet as players awaited the MPC
statement. Plus 25s tightened further by 1bp to 4.43% despite the selloff in govvies.
Shorter dated Rantau 19s also tightened by another 2bps. We saw some demand for
very short dated papers, with those by Cagamas, IJM and Aquasar being traded,
likely due to expectations of an unchanged OPR. We also saw 4-8y UEM papers
being taken as they tightened 2-8bps. We expect the PDS market to track the
movements in govvy and MYR today.
Singapore
§ A rather volatile day in the SGS market. Buying on the
30y SGS triggered a buying frenzy but selling interest eventually dominated,
helped by the selloff in Bunds and UST. SGS yields were up by 3-8bps across the
curve, and the SGD IRS also rose by the same magnitude. Bond swap spread for
the 10y benchmark tightened about 1bp. The longer end bonds may see more
weakness, and market awaits the NFP on Friday night.
§ The Asian credit space started off with spreads fairly
unchanged and focus on the new issues until the selloff in Bunds and UST led to
selling in the credit space as well. Market was a better seller in some of the
IG Chinese names. Sovereigns continued to see a selloff and were down by
another 1pt. Investors are slightly jittery with their focus turned to jobless
claims last night and the NFP tonight. Nonetheless, there were still new book
openings such as 1) China Merchants Bank with a 3y USD deal likely with an
issue size of USD500m at initial price guidance of CT3+170 bps, and 2) Hsin
Chong Construction issuing 3y USD200m bonds with a final print of 9.00%.
Indonesia
§ Down trend of Indonesia LCY bond prices continues
after Fed Yellen warned that bond yields may jump higher due to FFR hike.
Another legit reason for the weakening of bond prices is depreciating Rupiah as
well as BI statement that Rupiah may continue to weaken. Vice President Kalla
in a separate session stated that Bank Indonesia may gradually cut policy rate
which have also added the pressure in Rupiah depreciation. Last but not least
is bond selling by the offshore investors post Rupiah hiked above Rp13,000 per
USD. Will the LCY yield continue to hike? We believe that FR0070 yield have the
potential to further hike by 25bps to 100bps before starting to move sideways
or reverse. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.799%, 8.098%, 8.285% and 8.438% while 2y yield shifts up to
7.573%. Trading volume at secondary market was seen heavy at government
segments amounting Rp13,627 bn with FR0068 (20y benchmark series) as the most
tradable bond. FR0068 total trading volume amounting Rp4,214 tn with 139x transaction frequency and closed at 99.391 yielding
8.438%.
§ Corporate bond trading traded thin amounting Rp417 bn.
NISP01ACN2 (Shelf registration I OCBC NISP Phase II year 2015; A serial bond;
Rating: idAAA) was the top actively traded corporate bond with total
trading volume amounted Rp72 bn yielding 8.196%.
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