ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)

  • December Fed funds future implies firming year‐end rate hike outlook even as US economic data has underperformed over the past week. Interesting.
  • Best/worst performers in Commodities today: NGAS: 0.1%, UKOil: ‐0.2%, XPDUSD: ‐0.4%, Copper: ‐0.5%.
  • Best/worst performers in majors vs USD today: JPY: 0.3%, NZD: 0.3%, GBP: 0.2%, CAD: ‐0.0%, AUD: ‐0.1%, CHF: ‐0.1%.
  • Nikkei 225 Retraces below 50% Fibonacci.
  • China sets the Yuan reference rate to 6.4882 against the $USD from 6.5120 on Monday, largest Yuan strengthening since March 18th (+0.37%).
  • Asian stocks fell on Tuesday, with many investors sidelined ahead of the US Federal Reserve’s policy meeting on Wednesday and the Bank of Japan’s corresponding gathering on Thursday. The central bank jamboree this week also consists of a Thursday meeting at the Reserve Bank of New Zealand. The Federal Open Market Committee starts its two‐day conclave later on Tuesday, but the announcement will not come until Wednesday. No changes are expected in rates, and market‐watchers see only a one‐in‐five chance of a Fed rate hike in June, though the bank has kept the door open for a June rise. Asian equity markets took their cue from a lower close for US shares on Wall Street overnight, as softer oil weighed on energy stocks.
  • The US dollar softened against many major currencies while keeping its upper hand against emerging economy currencies. The Japanese yen got a boost from a government pension fund saying that it could hedge its currency exposure overseas. Also, analysts say that ”Iron ore has become the new bitcoin”.
  • The AUD/USD has been capped by good resistance at 0.7730 but now burst higher It’s presented solid resistance of late so it’s understandable that a few stop‐loss buy orders will have been placed above. High so far 0.7742 after early AUDJPY supply saw a good test of 0.7700. AUDJPY higher now as USDJPY finds respite below 110.70 and that’s adding to AUDUSD demand. Currently at 0.7740 with more offers/res into 0.7750. ‐”In yen news, we had a government pension fund saying it could hedge its currency exposure overseas. The yen getting a modest boost on this as we await the BoJ on Thursday. We could see some minor tinkering or nothing [from the BoJ] this week,” says top analyst.
  • Saudi Arabia on Monday said that it plans to make itself capable of living without oil within the next four years—a very ambitious goal for a country that exports more of the energy source than anyone else in the world. The kingdom approved a long‐term blueprint for economic reform dubbed “Saudi Vision 2030,” which aims to reduce the country’s dependence on oil revenues. It’ll be quite a challenge for a nation that still saw about 70% of last year’s revenue come from petroleum despite the steep drop in prices since mid‐2014. “By 2020, we’ll be able to live without oil,” Deputy Crown Prince Mohammed bin Salman, who heads the economic council, told Saudi new channel Al‐Arabiya in an interview aired Monday. He also said that less than 5% of the state‐owned Saudi Arabian Oil Co. will be publicly sold off in a move that would value the world’s largest energy firm at as much as $2.5 trillion.
  • Markets are pricing nearly no chance of a Federal Reserve rate hike over the next few meetings, and less than one full hike by the end of the year (Chart of the day). Near‐term weakness in US activity data and cautious comments from Fed Chair Janet Yellen have reinforced this view. Yet global economic and financial conditions have generally stabilized if not improved, and we expect further progress toward the Fed’s dual mandate objectives over the coming months. As a result, we think the Fed will likely hike rates again this summer, potentially in June if the global market selloff ahead of the Brexit vote is limited. Otherwise, we still see a good case for the next hike in July. Either way, we believe the Fed will have to start preparing the markets for a possible rate hike at an upcoming meeting this summer result, we think the Fed will likely hike rates again this summer, potentially in June if the global market selloff ahead of the Brexit vote is limited.