Asia morning update: Looking for the next lead

As the US dollar remained on its downward trajectory, weighed by disruptions on the political front, US equity markets exhibited indecision on the back of mixed earnings. The lack of positive leads may see moderate pressure for Asian markets in the day. 

US dollar
Source: Bloomberg

Softer it slides

The clear theme of selling the US dollar remains centre stage at the start of the week. Clouded by shuffles within the White House and concerns over North Korea tensions, the US dollar took another downturn with the US dollar index sliding past 93.00 to print a fresh 15-month low. The removal of White House communications director 10 days after his appointment by the White House chief of staff on the latter’s first day certainly appears to be an unusual occurrence.

While the market may take some consolation from the fact that the newly appointed chief of staff has President Donald Trump’s full support, the disarray brings concern over tensions with North Korea. Increasingly, the issue of reaching a conclusion floats to the forefront as North Korea introduces more advanced arm powers. President Donald Trump’s Monday tweet stating that the US will ‘handle’ North Korea, may offer little consolation as the market continues to buy the safe haven JPY under multiple motivations.

For markets, the shift of focus back to economic fundamentals with the labour market updates at the end of the week may be the reprieve for the oversold USD. Watch for extended dips below the 92.56 support for the US dollar index. 

On the commodity front, crude oil certainly stole the spotlight overnight. WTI futures was seen crossing the $50 per barrel (bbl) mark overnight and remained supported above the level as we pen this. Recent bullish bets, as according to the CFTC commitment of traders report, coupled with the expectation of a sustained decline in supply from the US had supported the rise in crude prices. The icing on the cake is truly the upcoming OPEC and non-OPEC meeting in Abu Dhabi where issues of compliance will be discussed. Eye upward move towards the $52.00/bbl resistance for prices.

Asian markets

With US markets seemingly lifeless and European markets coming under pressure from the strong currencies, overnight movements offer little positive leads for regional indices. The perched Hong Kong and Singapore markets are expected to commence the day undergoing moderate pressure despite the gains seen in the regional Australian and Japanese markets. Strong commodity prices and earnings were seen buoying the ASX 200 and Nikkei 225 respectively. The attention truly shifts forward to the Reserve Bank of Australia (RBA) meeting decision and statement in the day. While the market do not anticipate a change in interest rates, there has been some jitters over whether the central bank will attempt to rein in the AUD in their statement. Watch for AUD reactions here.

For Asian markets, the primary focus lies with July’s Caixin manufacturing PMI due 9.45am Singapore time. Following Monday’s softer expansionary official figures, the Caixin numbers will be scrutinised for confirmation of the trend which could invite reactions from regional markets.

Yesterday: S&P 500 -0.07%; DJIA +0.28%; DAX -0.37%; FTSE +0.05%

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