FX
Global
Global sentiments remained cautious overnight ahead of
the Eurozone summit to be held today for its discussion on Greece. ECB
maintained the ELA limit at EUR89bn while Euclid Tsakalotos is named the new
Finance Minister after Varoufakis’ resignation. Bank holidays in Greece is
extended to Wed, along with capital controls. NY indices closed in modest red,
down -0.2-0.4%, faring better than their European and Asian counterparts. Oil
prices did not take the Greek vote too well, with WTI down 8%. An upcoming nuclear
deal by Iran to lift its UN arms embargo also weighed. Brent slipped under the
key $60/bbl-mark for the first time since Apr.
Just this morning, US President Obama and French
President Francois Hollande urged for Greece to resume reforms and return to
growth and debt stability within Eurozone. EUR is on the downtick after
bouncing to a high of 1.1096 against the USD on Mon. Expect anticipation for
the Eurozone Summit to keep this currency choppy.
In Asia, MYR bled on amid domestic concerns with USD/MYR
breaching the 3.80-mark for the first time since Asian Financial Crisis period.
INR was in favour even as RBI Deputy Governor Patel warned of repercussions on
global trade should China decelerate further.
For the day ahead, RBA decides on cash target rate and
majority (including ourselves) expects this central bank not to move.
Elsewhere, Singapore may announce announced estimates of its 2Q GDP anytime
from today (Cons.: 2.4%y/y vs. previous 2.6%). Just out this morning,
Philippines’s Jun CPI came in at 1.2%y/y, undershooting estimates at 1.5%.
Beyond Asia, focus is on the Eurogroup meeting. Germany’s industrial production
and trade numbers for France are also due, followed by trade data from the US.
Currencies
DXY – Buy Dips. USD firmed marginally overnight as Greek
uncertainty continues to weigh on sentiment. Daily momentum and stochastic
continue to indicate a mild bullish bias. Next resistance at 96.50 (50% fibo
retracement of Apr high to May low) before 97.40 (61.8% fibo). Support at 95.30
(50 DMA), 94.20 levels (trend-line support from May to Jun troughs) likely to
hold. Eurozone Summit tonight is expected to drive sentiment. We remain better
buyers on dips, near 95.30 levels. Medium term, we continue to
reiterate our view for the first rate hike in Sep as data continues to suggest
that growth path remains intact. We also believe that the pace of tightening
will be gradual; a 25bps hike in Sep followed by a pause within the quarter
to assess the impact is the likely normalization path Fed will take, given that
we believe Fed will take into consideration domestic growth and external
environment – China rebalancing risk, Greek crisis and USD strength into
consideration. The latest FOMC statement remains consistent with our house
view. Week ahead brings May trade (Tue); initial jobless claims; FOMC meeting
minutes; Fed’s Williams, Kocherlakota, Brainard, George to speak (Thu); Fed’s
Yellen and Rosengren to speak; May wholesale inventories (Fri).
EUR/USD – Bias to Sell Rally. EUR recovered some of its initial losses
below 1.10 handle; traded as high as near 1.11 levels on Greek Fin Minister
Varoufakis surprised resignation before easing to close around 1.1060 levels.
ECB maintained ELA funding at 26th Jun levels (EUR89bn) with no
increase (unlikely to act ahead of any new deal between the Troika and Greece);
while Greek banks remained shut till Wed. Overnight Obama and Hollande
agreed Greece needs path to reform, growth within EUR; while Tsakalotos was
named the new Finance Minister for Greece. Focus tonight on the Eurogroup
meeting. For the day ahead of Eurozone summit, EUR action likely to be muted
within range of 1.0950 – 1.1150; bias to sell rally towards 1.12 levels (21 and
50 DMAs). Last sighted at 1.1050 levels. Week ahead brings May GE IP; May FR
trade (Tue); ECB’s Coeure speaks; May GE trade, current account balance (Thu);
May FR IP, manufacturing production (Fri).
GBP/USD – Lean Against Strength. GBP more than recovered early losses
(near 1.55-lows) yesterday, on (sell) EURGBP moves and closed at 1.56-handle.
Last sighted at 1.5592; favour fading rallies intra-day towards 1.5660/80
levels. Daily momentum/stochastics continue to indicate a bearish bias. Next
support seen at 1.5550 (50% fibo of May trough to Jun peak), before 1.5450/60
(61.8% fibo and 200 DMA). We continue to caution for potential downside risks in
the near term on UK’s second budget statement (8 Jul) in a year. We reiterate
that a Conservative-led government could be seen pursuing a tighter fiscal
policy via spending cuts (in order to return to budget surplus by 2019) if it
is to stick to its election manifesto pledges. Focus will be on how the
Conservatives fulfil a pledge to cut GBP12bn in welfare spending. Week ahead
brings May IP, manufacturing production; GDP estimate (Tue); Budget statement
(Wed); BoE Meeting – no change in policy rate and asset purchase plan; RICS
house price balance (Thu); May construction output, trade balance (Fri).
USD/JPY – Better buyers on Dips. USDJPY remains supported on dips; low of 121.70
yesterday on Greek referendum results; last at 122.73. Near term resistance
seen at 123.20 (21 DMA) while next support levels seen at 122 before 121 (100
DMA). We continue to watch if tentative bullish momentum signals materialise;
remain better buyers on dips. Meantime only an abrupt move and close below 120
would cast doubt over USDJPY’s medium term bullish setup. Our
long-standing view is for BoJ to ease in Oct 2015. Week ahead brings May current
account; Jun bank lending (Wed); Jun machine orders, money stock (Thu); Jun
PPI, consumer confidence (Fri).
AUD/USD – BreakOut. Overnight bids touched a high of 0.7533, which used to be the low of the
year. Range-trading has shifted lower with AUD still on the backfoot around
0.7485 ahead of RBA meeting. The cash target rate is likely to remain unchanged
at 2.00% as the central bank allows time for recent macro-prudential measures
to adjust before making its next move. With AUD below the 0.75-mark, there is
even less urgency for the central bank to adjust interest rate at this point.
Expect this pair to remain in choppy trade within 0.7450-0.7533. Momentum
indicators warn of bearish risk and next support is seen at 0.7410. Bids are
likely to be short-lived with upticks expected to be resisted at 0.7633.
USD/CAD – Bullish.
USDCAD is still on its way higher, still trying the resistance around 1.2667.
Daily MACD still indicates bullish momentum, backed by USD strength and slide
in oil prices. A clearance of the resistance at 1.2667 ahead of the next at the
1.27-figure. Unexpected U-turns could find support around 1.2540. This week has
Jun housing starts, due on Thu followed by jobless report on Fri.
NZD/USD – Sell on Rallies. NZD remains near 5-year lows; last at
0.6670 levels at time of writing. Rebound overnight stalled at 0.6715 (we
called to sell on rally towards 0.6720 levels in the GM daily yesterday). NZIER
business opinion survey for 2Q released this morning came in much weaker
(3-year low) than previous reading (5 vs. 23 in 1Q). We remain better sellers
on rally; looking for a move towards our 0.65 objective. Continue to reiterate
our bearish bias on the NZD on a combination of drivers including mounting
expectation of RBNZ cutting OCRs on multiple occasions on weak dairy prices,
falling PPI amid weakening demand. NZ PM Key said while he is confident growth
will remain robust, he agrees that NZD ‘could well’ fall lower than 0.65.
Asia ex Japan Currencies
The SGD NEER trades 0.30% above the implied mid-point of 1.3565. We
estimate the top end at 1.3294 and the floor at 1.3835.
USD/SGD – Range. USDSGD pushed higher; last at 1.3523 at time of writing. 4-hourly
momentum/stochastics are pointing to mild upside bias. 1.3550 remains a key
resistance level; break above could see further upside towards 1.3630 (Jun
high). For the day, expect 1.3480 – 1.3600 range. 2Q (Advanced estimates) GDP
to be announced sometime between 7 and 14 Jul.
AUD/SGD – Breakout. AUD/SGD swivelled around the axis of 1.0125 for much of Mon, losing much
of its bearish momentum on the intra-day chart. There is little directional
bias at this point as players await RBA verdict. The central bankers will waste
no opportunity to urge for a cheaper AUD. However, the absence of explicit
easing bias could trigger another squeeze. Upticks are likely brief and could
be another opportunity to sell. Tentative resistance is seen around 1.0160
ahead of the next at 1.0300. Expect choppy trades within 0.9950-1.0240 this
week.
SGD/MYR – Hovering at Fresh Highs. Cross continue to push higher this morning
following Ringgit weakness on domestic concerns. Cross was last at 2.8190; high
printed early this morning at 2.8279. Daily momentum has turned mild bullish;
while stochastic is showing tentative signs of turning lower from overbought
areas. Beyond 2.82 resistance could subject the pair for further upside
pressure, possibly towards 2.8350 levels. Failing which, we see the cross
easing back towards the 2.78-2.80 range.
USD/MYR – Into Uncharted Areas. Ringgit remains on a back foot as domestic
concerns continue to weigh on the currency. High of 3.8220 was printed this
morning; last sighted a touch lower at 3.8130. We continue to caution that
domestic and external vulnerability concerns including vulnerability to
external economic shocks remains amid possible Fed tightening in Sep (USD
strength), domestic concerns. Daily momentum and stochastics are mild
bullish bias.
USD/KRW – Buy on Dips. USDKRW traded
higher this morning; last at 1129 (vs. 1126.4 close yesterday) tracking broad
USD strength. Decisive close above 1130 could see the pair push further towards
1137 (Mar high). Remain better buyers on dips. We continue to reiterate our
medium term bearish view for KRW - on concerns over MERS weigh on
growth/domestic consumption/ tourism/ foreign investment against a backdrop of
subdued inflation, weak activity data, soft exports, weak JPY undercut Korea’s
export competitiveness, and rising household debt (165% of annual household
disposable income). USD strength on Fed rate lift-off in Sep (house view) could
further provide support for the pair.
USD/CNH – Unperturbed.
USD/CNH bounced to a high of 6.2182 before tapering to levels around
6.2130 by early Asia today. Momentum indicators flag bullish bias in the pair
but we would still prefer a breakout of the 6.2000-6.2240 range for a more
bullish conviction. 100-DMA is a possible resistance level at 6.2203. The yuan
is still relatively steady as it continues to be shielded from the volatility
elsewhere in the world. We continue to hold the view that the central bank
wants to ensure a steady yuan. USDCNH support is still seen at 6.2019 (200DMA).
USD/CNY was fixed 12 pips higher at 6.1172 (vs. previous 6.1160). CNYMYR was
fixed 103 pips higher at 0.6175 (vs. prev. 0.6072). NBS stated that economy
may continue improving as past policy measures take effect.
USD/INR – Back into The Cloud. INR was the only gainer amongst the AXJs
against the USD and the pair closed at 63.40 on Mon. USD/INR is in the thick of
the cloud now, likely to remain within 63.19-63.80 at this point. Risks are
tilted to the downside with MACD flagging bearish momentum on the daily chart.
1-month NDF is pressing the bottom of the daily ichimoku cloud, last seen
around 63.66. Await the clearance of 63.555-support for further bearish
extensions and that would also lead spot prices lower. At home, RBI Deputy
Governor Patel warned of repercussions on global trade should China slow
further. Future monetary policy decision is data dependent.
USD/IDR – Stuck in Range. USD/IDR gapped down this morning but was unable
to gain much directional bias in initial trade as we write, last seen around
13321. Action is still expected to remain confined within the 13290-13390
range. On the other hand, 1-month NDF is also steady around13415. This session
could be a dull one in the absence of market signals. The JISDOR was fixed
higher at 13353 on Mon vs 13316 previously. Expect little change to the fixing
today. Foreign funds sold a net USD13.1mn in equities on Mon, more than
reversing what has accumulated on Fri. In news, Finance Minister Bambang
Brodjonegoro said government will increase revenue next year to fund
infrastructure spending.
USD/PHP – Range. USD/PHP was little changed for much of Mon, last seen around 45.120 and
we expect another session devoid of much fluctuations amid little market cues.
MACD shows slight bearish bias on the daily chart. Support is seen at
44.916 while topsides could be resisted at 45.40. 1-month NDF ticked
higher to levels around 45.25 as we write. Sentiments soured yesterday with
foreigners selling USD9.3mn of equities. Jun CPI came in at 1.2%y/y, undershooting
estimates at 1.5%. Core CPI also slowed to 2.0%y/y from previous 2.2%. In news,
the Department of Budget and Management will submit its PHP3trn Budget for 2016
to the Congress according to the local press, which is 15% more than the
original budget approved this year. Elsewhere, BSP Tetangco said in a mobile
text to the press that markets will remain cautious on Greece.
USD/THB – Tilting Higher. USD/THB edged higher, on its way to challenge
the resistance around 33.899 as we write this morning. Even so, MACD on the
daily chart does not seem to indicate much momentum to the upside. of 33.969
before easing back to levels around 33.830. We continue to expect further
upmove towards the 34-figure to be a grind. In news, BOT Deputy Governor
Ruengvirayudh warned of volatility in the near-term in the financial markets
though impact will be limited. This week is a data light week with only foreign
reserves due.
Rates
Malaysia
|
Local government bond yields opened higher by 6-9bps on the back of
the Greek referendum decision and negative domestic news which led the USDMYR
to break the 3.80 level. However, buying flows came in on the 7y MGS 9/22s
and 10y MGS 9/25s which closed unchanged and +4bps respectively. We expect
the issue size on the 30y MGS 9/43 retap to be announced this week at an
estimated MYR2b.
IRS market opened trading higher after the higher USDMYR. But market
calmed down on the back of solid buying in MGS 9/22s and some receiving was
seen. 4y IRS traded at 3.88% and 3.90%, and 5y at 3.98% and 4.00%. We reckon
to take a step back in rates for now as there is no clear indication either
way. Basis widened without trades. 3M KLIBOR remained at 3.69%.
Local PDS market was extremely quiet with very few credits quoted as
the market was offered. Bid-offer spreads moved a tad wider, despite the
recovery in govvies in the afternoon. In the GG and AAA spaces, PTP 20s and
Plus 21s were traded (around 3bps wider). Bulk of trades done were AA names
at the belly of the curve with most trading 2-3bps wider. |
Singapore
|
SGS market was unfazed by the volatility in bond
markets amid the Greek referendum decision. Market saw profit taking interest
at open and some two way interest in the afternoon. Yields closed 1-2bps
lower across the curve, underperforming the SGD IRS which ended 4-5bps lower.
The 10y benchmark SGS closed at 2.70%.
Asian credit space is surrounded with uncertainty
and the resignation of Greece’s Finance Minister Yanis Varoufakis adds to it.
IGs traded 2-3bps wider with more demand shifting to financials senior
papers. Sovereigns mostly opened unchanged with little selling off seen.
MALAYS and PETMK continue to see demand, with MALAYS 25 trading as tight as
+68bps. Vanke plans to buyback RMB10b of its Shenzhen listed A-shares which
we think would not significantly impact the company given its strong balance
sheet and cash balance on hand. HYs traded lower with small demand still seen
for property names. Sentiments are weak, on the sovereigns and quasi
sovereigns as well. |
Indonesia
|
Indonesia’s bonds market was resilient yesterday,
amid the negative sentiments of unexpected result on the Greferendum in the
last Sunday. It seemed that market players have priced in against more
exacerbated situations in the Greece’s debt situations. Unlike in the local
equity markets, several Indonesia’s government bonds with short and long
tenors appreciated yesterday. Recent government’s statement on the
realization of infrastructure budgets at around Rp27.22 trillion (10% of
total government capital budget) until 30 Jun-15 gave more confidence to
market players for better economic outlook in Indonesia in 2H15. Meanwhile,
several government bonds that weakened yesterday were the series on 1Y, 3Y,
4Y, 6Y, 10Y, and 15Y. On the other side, Ministry of Finance will hold an
auction with total indicative target by Rp10 trillion on tomorrow. Several
government bond series that will be auctioned tomorrow are SPN 3-month, SPN
12-month, FR0056 and FR0072. |
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