8 June 2015
Rates & FX Market Update
10y UST at 7-Month High on Better US
Jobs Data; Asian Currencies Underperformed Against USD; Malaysia Exports Fell
Sharply in April
Highlights
¨
¨ The
10y UST touched 2.4%, highest since October 2014, spurred by market optimism
on upbeat US labor data; NFP added 280K worth of jobs in May (consensus: +226K;
April: 221K). The overall upside surprises from the jobs data suggests the slower
growth pickup in 2Q was less sluggish than initially expected, with May US
retail sales numbers due Thursday also expected to improve. In Europe, the
EURUSD touched an intraday high of 1.1280 before closing lower at 1.1104/USD on
poor German factory orders (Apr: 0.4% y-o-y). Meanwhile, long-end P.EGB curves
bear steepened, where capital flight was partly spurred by Spanish
uncertainties and the deadlock between the Greek government and its creditors;
PM Tsipras will meet with Hollande, Merkel and Juncker at the EU summit on
Wednesday. In Australia, ACGBs were little changed, while AUD fell 0.86%, in
line with our expectations where we expect Australia’s elevated unemployment
data to weigh on the currency further.
¨ In
AxJ, Asian currencies mostly underperformed against the USD, with near-term
pressures expected to be evident during the week. Meanwhile IndoGB yields
were broadly higher overnight as weak sentiment sidelined investors amid a
weakening currency; expect yields to trend higher next week amid bouts of risk
aversion amid renewed inflation pressures. Separately, the 10y MGS yields
rose 8bps to 4.049%, given the supply overhang seen from the re-opening 10y
opening, while MYR continued to be pressured higher at 3.719/USD following a
weaker than expected exports reported for the month of May.
¨ USDJPY
broke the 125.00 resistance on Friday, with the pair driven by the stronger USD
given the better US payroll numbers. The stronger revision of Japan’s 1Q15 GDP
data is likely to add onto add on to BoJ’s optimism and slow the rally in
the overbought USDJPY pair where we prefer to express the weakening JPY via the
long JPYKRW position.
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