Daily FX Update, 24 June 2015

v  A relatively packed data calendar for the US brings mixed results and stronger USD  v  Fed Powell is forecasting the Fed to hike interest rates twice this year v  Euro area PMIs are stronger than markets expectations   v  Conditions across Japan’s manufacturing sector deteriorate fractionally in June         v  Manufacturing in China remains in contraction in June v  The value of export orders in Taiwan drop 5.9%y/y to US$35.79 billion in May

Singapore’s consumer prices continue to decline in May                         

OVERNIGHT MARKET UPDATE:

·         New home sales in US rose 2.2% m/m in May to an annual pace of 546,000 – the highest level in seven years. Meanwhile, the Richmond Fed survey rose to +6 in June from +1. Overall, manufacturing activity appears to be stabilising following weakness earlier in the year. However, the headline and core durable goods orders data missed markets expectations.   

·         Fed Governor Powell (FOMC voting member) commented that he is forecasting the Fed to hike interest rates twice this year. However, he acknowledged that the outlook remained uncertain and the probability that the Fed commences its tightening cycle in September was “50-50”.

·         Euro area composite PMI rose to 54.1 in June from 53.6, with both manufacturing and services sectors saw improvement. Overall, euro area activity indicators continue to signal an improvement in euro area GDP growth in the near term.  

·         Euro area leaders welcomed the more serious tone Greece is adopting, noting it as a step in the right direction. But a lot of work still needs to be done. To ensure that the details of the new proposal stack up and that Greece will be able to raise the money, Greece was given 48 hours to reach a detailed, technical agreement with its creditors. 

·         In the currency markets, a relatively packed data calendar for the US brought mixed results, but an unambiguously stronger USD. Meanwhile, EUR declined as news of potential parliamentary revolt in Greece spread. 

·         Moves were smaller in bond markets overnight, albeit in a choppy session. US 10-year Treasury yields rose 4 bps to close at 2.41%.  

·         US equity indices were fairly flat, with the Dow Jones and S&P 500 up 0.1%.   

·         Prices of Brent and WTI up 1.8% and 1.0% respectively, supported by market expectations of a decline in US crude inventories before the EIA report. Iran’s nuclear power talks will remain the key market disruptor in the coming days.                           

Gold prices fell on lower safe haven demand as expectations that Greece is nearing a deal with its international creditors strengthened and is likely to avoid a default.

INDICATIVE MAJOR CURRENCIES Last Close  8.05 am Snapshot        Bid                   Offer Expected Ranges for Today         Low                       High USD/MYR 3.7392 3.7280 3.7610 3.7260 3.7710 JPY/MYR (100) 3.0189 3.0080 3.0400 3.0000 3.0600 SGD/MYR 2.7880 2.7770 2.8100 2.7700 2.8300 EUR/MYR 4.1778 4.1680 4.2020 4.1400 4.2300 AUD/MYR 2.8882 2.8840 2.9170 2.8700 2.9400 GBP/MYR 5.8780 5.8750 5.9100 5.8500 5.9600 USD/JPY 123.86 123.64 124.05 123.24 124.24 EUR/USD 1.1173 1.1020 1.1330 1.1120 1.1230 AUD/USD 0.7724 0.7590 0.7900 0.7700 0.7800