ASIA FX: PHP Continues To Underperform, Mixed Trends Elsewhere
It has been a mixed session. Some Asian currencies have struggled to follow the weaker USD seen against the majors. PHP weakness remains a feature. Those currencies that have risen have done so only modestly during today's session.
- CNH: USD/CNH has moved lower today but couldn't test sub 6.6700. The low came not long after the stronger than expected CNY fix. There is more talk of stimulus measures, particularly related to housing, but they look more micro rather than macro based. China equities are firmer but are lagging the better regional trend.
- KRW: Spot USD/KRW is back below 1290, but hasn't seen strong downside momentum. The first 20 days export data for June was disappointing in headline terms, but the details were better. The BoK warned its inflation forecast, updated just last month, may already be out of date. A 50bps hike at the July meeting can't be ruled out, but Governor Rhee is not following a predetermined path.
- INR: USD/INR is back above 78.00, but volatility remains very low. The recovery in oil prices has pushed the rupee slightly weaker in early trade today, while bond yields have firmed as well. Local equities are up close to 1.5%.
- SGD: The Singapore government unveiled a S$1.5bn package to tackle inflation pressures for low income households. The authorities also warned of higher inflation pressures in coming months ahead of Thursday's data for May. The SGD NEER continues to trend higher, although we are getting close to the top end of the MAS policy band.
- IDR: Spot USD/IDR has shed 25 figs so far as broader greenback sales have resumed. We remain above 14800 though. Participants look ahead to the monetary policy decision from Bank Indonesia, coming up this Thursday, with some calling for the inauguration of a tightening cycle.
- PHP: USD/PHP has continued to push higher today. Spot is up a further 0.50% to 54.335. Bangko Sentral ng Pilipinas is set to raise interest rates on Thursday, but consensus is split about the magnitude of the hike. Most expect a 25bp move, but a considerable minority still anticipates a 50bp rate rise. Yesterday's comments from incoming BSP chief Medalla decreased the odds of an outsized hike. The official said that a 25bp hike was "most likely" in light of the central bank's philosophy of "gradualism." See our full preview here.
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US TSYS: Risk Off or Forced Unwinds Run Course? Stock Rebound Late
No data Friday -- But StL Fed President did appear on Fox Business interview in the afternoon. Nothing particularly new from Bullard though he did add he does not see a recession occurring this or next year.
- Bullard said he would leave the "timing" of when to hike rates up to Powell, but sees 50bp hike as a "good plan for now" while "the more we can frontload" hikes, the "better off we'll be." Bullard said he sees economic growth accelerating in the second half of the year to appr 2.5-3.0%, while unemployment will continue to recede.
- Early focus on headline risk with buying/short cover support possibly tied to China/covid headlines (CHINA PORT CITY TIANJIN STARTS MASS TEST IN FIVE DISTRICTS, Bbg).
- Decent overall volumes tied to accelerating Jun/Sep Tsy futures rolling, 5s and 10s lead again w/ over 240k and 175k recorded after the bell.
- Investment-grade corporate credit risk had climbed to new 2Y highs after midday as equity indexes sell-off. Back to March 2021 levels SPX eminis now appr 20% off early Jan high (4778.0) at 3829.00 (-68.75) after breaching key support / bear trigger levels of 3855.00, May 12 low AND 3843.25, the Mar 25 2021 low (cont).
- Equities staged a robust rebound off lows in late equity trade, not headline driven, more program/technical while offers fade, SPX eminis nearly back to steady at 3897.75.
JGB TECHS: (M2) Correction Extends
- RES 3: 151.13 - High Mar 3
- RES 2: 150.44 - High Mar 14
- RES 1: 150.14 - High Apr 1
- PRICE: 149.80 @ 20:30 BST May 20
- SUP 1: 148.72 - Low Mar 29
- SUP 2: 148.79 - 3.0% Lower Bollinger Band
- SUP 3: 147.95 - 1.0% 10-dma envelope
The primary downtrend in JGBs remains intact although a corrective cycle is in play and the contract maintains a firmer short-term tone. Key resistance to watch is at 150.14, Apr 1 high. The breach, in March, of the 61.8% Fibonacci retracement of the 2015 - 2020 rally at 149.65 strengthened a bearish theme and opens 148.79/147.95, which marks both the 3.0% Lower Bollinger Band and the 1.0% 10-dma envelope. A break of 150.14 would alter the picture.
US STOCKS: Late Session Rebound
Equities staging a more robust rebound off lows last 20 minutes, not headline driven, more program/technical while offers fade. Current levels:
- - DJIA down 52.31 points (-0.17%) at 31197.76
- - S&P E-Mini Future down 9 points (-0.23%) at 3887.75
- - Nasdaq down 80.3 points (-0.7%) at 11306
