Gold gains most in more than two years

Gold is back in favor

The safe haven of gold, very much unloved over the past few months as it stood in the dollar’s shadow, saw its fortunes reverse yesterday to record the biggest one-day gain in almost 2-1/2 years. A weaker US dollar amid easing US yields and a below-forecast CPI print, reduced demand for the greenback, leaving gold to take up the slack, for a change.

Gold jumped more than 2.5%, its biggest one-day gain since June 2016, to reach the highest level since July 31. The commodity is now testing the 100-day moving average at 1,228.99, which has capped prices since April 30.

 

Gold Daily Chart

Source: Oanda fxTrade

 

China’s trade surplus with US hits record high

The September trade numbers will likely not be music to Mr Trump’s ears. Exports rose 14.5% y/y, beating economists’ estimates of a mere 8.9% increase. That’s the biggest monthly gain since February. The overall trade surplus widened to $31.7 billion, the highest in three months.

China Customs also reported that exports to the US were up 16.6% y/y while imports from the US rose just 1.6% y/y, pushing the trade surplus with the US to a record high $34.1 billion. The agency commented that the impact from the US trade frictions was “controllable” and that Chinese exporters were diversifying their markets.

The reaction in FX markets was marginal. AUD/USD slid to 0.7118 from 0.7124 while USD/CNH rebound from intra-day lows to 6.9026. AUD/USD currently appears to be struggling to overcome previous highs in the 0.7130-31 window.

 

AUD/USD Hourly Chart

Source: Oanda fxTrade

 

Singapore tightens policy marginally as Q3 growth beats estimate

In its semi-annual policy review, Singapore’s de-facto central bank tightened policy by a minimal amount. Rather than fix a benchmark interest rates, Singapore manages monetary policy by guiding the value of the local dollar against a basket of currencies of its major trading partners. The MAS raised “slightly” the slope of appreciation of the net effective exchange rate (NEER) trading band of the Singapore dollar, keeping the width and center of the band unchanged. This was tantamount to a mild tightening of monetary conditions as latest surveys had suggested it was a 50/50 chance.

Looking ahead, the MAS sees 2018 growth in the upper half of a 2.5% to 3.5% range then moderating “slightly” in 2019. Core inflation is seen in a 1.5% to 2.0% range and averaging 1.5% to 2.5% in 2019.

The Singapore dollar rose marginally after the announcement, with USD/SGD poised to record its second consecutive daily loss. USD/SGD is now at 1.3739 with the 100-day moving average below at 1.3637.

 

USD/SGD Daily Chart

Source: Oanda fxTrade

 

One of the first nations to report Q3 GDP numbers, Singapore’s economy grew 2.6% y/y, faster than the than the 2.5% growth anticipated by economists, but slower than the 3.9% pace in Q2. On a quarterly basis, growth was below expectations of a 4.9% increase, but faster than the 0.6% posted in Q2.

China will release its Q3 GDP data next Friday and is also expected to show slower annualized growth from Q2. The latest survey suggests 1.6% q/q and 6.6% y/y from 1.8% and 6.7% respectively.

 

 

Will German CPI echo the US miss?

After yesterday’s release of below-forecast CPI data from the US, today it’s the turn of Germany. Estimates for September suggest consumer prices rose at the same pace as August, up 0.4% m/m and 2.3% y/y. August industrial production data for the Euro-zone follow the CPI numbers and then the calendar thins out with only second-tier US data scheduled. Export and import prices and Michigan sentiment index are the highlights, with speeches from Fed’s Evans and Bostic completing the week.

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

 

Have a great weekend from Asia.

Dollar Lower on Weak Inflation OANDA Market Beat Podcast

Source: MarketPulse

Are tariffs on all Chinese imports to come?

Trump ups the ante on Chinese imports

Just as the public consultation on the last proposed tariffs came to an end and markets were hoping for possible compromise talks, so US President Trump has said he is ready to tax ALL imports “at short notice” thereby taking the tariff war to the next level.

A complex matrix of confusion

 

China maintains high trade surplus

Data released at the weekend showed China’s trade surplus held near record levels in August as exporters rushed to front-load orders before possible full-blown tariffs are put in place. Exports rose 9.8% y/y in dollar terms, just below the 10.1% economists had expected, while the trade surplus narrowed slightly to $27.91 billion from $28.05 billion in July. Imports beat estimates, rising 20.0% y/y, more than the 18.7% anticipated.

The strong imports number is helping the Australian dollar to hold above the 0.71 level whilst facing an ever-buoyant US dollar. AUD/USD touched a 2-1/2 year low of 0.7099 on Friday after the stellar US non-farm payroll release and the low this morning has been 0.7100. Should this level break, then the February 2016 low of 0.69738 could be tested via the psychological 0.7000 level. The pair is currently hovering at 0.7115.

 

AUD/USD Daily chart

Source: Oanda fxTrade

 

Krona barely moved after inconclusive election

The Swedish Krona is marginally firmer against the US dollar after Sweden’s weekend election. The country may face weeks or even months of political gridlock after an inconclusive result left the country without a clear candidate to form a government. EUR/SEK is now at 10.4410 after briefly touching a three-week low of 10.4363 earlier today.

 

UK GDP the data highlight

It’s a slow day on the data front to start the week. The highlight will likely be UK GDP for July, seen advancing 0.3% m/m from June’s 0.1%, together with the UK industrial production and trade data for July. The only major item on the US calendar is a speech by Fed member Bostic (neutral, voter).

 

The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/

 

Source: MarketPulse

Aussie unmoved by narrower China trade surplus

Both imports and exports higher than estimate

Imports rose 27.3% y/y in US dollar terms, the fastest pace of growth since January, and beat economists’ forecasts of +16.2% by a large margin. Exports also topped estimates, rising 12.2% y/y, defying speculation that the imposition of the first US tariffs on Chinese imports would have an adverse effect on trade. The trade surplus narrowed to $28.05 billion, giving back most of June’s gains. The stronger imports numbers gave the Aussie a quick knee-jerk boost, but it failed to breach the 55-day moving average at 0.7450 to the US dollar.

AUD/USD Hourly Chart

Source: Oanda fxTrade

 

RBA’S Lowe says no case for near term rate move

In a speech today, RBA Governor Lowe said there is every chance that the next move in rates would be higher, something he he has said before,  if the economy evolves as predicted, but current conditions do not present a convincing case for a move in the near term. He reiterated that the timing of the move would be dependent on unemployment data and inflation moving to the middle of the target range. He also admitted that an escalation of the trade war could be damaging for the global economy. AUD/USD was already mildly higher after the Chinese trade data and the comments assisted the gains, though not aggressively so. The pair is currently trading at 0.7425.

 

Trade wars continue

Late yesterday the US Administration announced it would be imposing 25% duties on another $16 billion of Chinese imports in two weeks, which prompted China to respond that it would retaliate again with dollar-for-dollar tariffs of its own. In a dinner engagement, US President admitted that they are having a troubled relationship with China at the moment, but praised his own trade policies and predicted that Q3 growth would have a “5” in front of it. That seems an ambitious call, given that the most optimistic of forecasters in surveys conducted by Bloomberg sees only 4.4% quarter-on-quarter growth. The median estimate is for just 2.9%.

 

Barren data calendar

It’s another lackluster day on the data front with US mortgage applications and a speech by Fed member Barkin the only items of note. Weekly EIA crude stockpiles feature on the commodities side, while late in the session the RBNZ will announce its latest interest rate decision. No change in rates is expected and the accompanying statement is not expected to differ much from the last meeting.

 

The full data calendar can be found here: https://www.marketpulse.com/economic-events/