Up, up, and away with the USD

A stronger dollar was seen overnight while the S&P 500 and DJIA made a last hurrah prior to the Thanksgiving holiday.

Chart
Source: Bloomberg

Pockets of data surprises came from the US prior to the release of November 1-2 Fed FOMC minutes. October’s durable goods order rose 4.8% MoM. This jolted the USD index up a notch to trade above 101.50 levels, trading at fresh highs since December 2002.

The University of Michigan survey of consumer sentiment also backed the optimism in the economy, rising to 93.8 for November, up from the preliminary figure of 91.6 and October’s 87.2.

This further painted a rosy picture for the economy but could not possibly do any more for December’s implied probability of a Fed hike, with the latter already at 100%. The contents from the Fed’s minutes were also largely in line with expectations, backing the odds of December’s move.

Asian currencies have correspondingly softened against the USD overnight, especially for the yen. USD/JPY jumped by more than 150 pips from $111.00 up on either side of $112.50 into Thursday morning, returning to the influence of the USD strength after the Fukushima incident blows over. A mixed open is expected for Asian markets though the Nikkei has returned from Wednesday’s holiday to more than 1.0% gains when last checked (00:30GMT).

On commodities, crude oil prices went into stasis, with WTI futures hanging flat around $48.00/bbl. The brief interlude of EIA report with a 1.2 million barrels drawdown had little impact to the main tune of the OPEC. The latest instalment sees Iraq playing it hot, agreeing to partake the output cut while Russia appears to be having cold feet ahead of next week’s meeting.

It will be down to negotiations and behavioural economics for crude oil prices next week. Notably, the International Energy Agency pinned a figure to increase in US shale at $60 should OPEC push prices up to the level. We are still far from that at the moment with technical hurdles to clear ahead of the $50 mark and at the $52 mark.

 

Singapore GDP

Separately, Singapore’s Q3 GDP (final) came in slightly higher than market consensus at 1.1% YoY and -2.0% QoQ SAAR, up from 0.6% YoY and -4.1% QoQ SAAR in the advance estimates. A zoom in to the details sees both manufacturing sector and construction sector growing slower at 1.3% YoY while the services sector, also accounting for more than half of total GDP, saw no growth from the same time last year. USD/SGD saw little reaction to the final figures after digesting the weaker growth in the advance estimates.

Accompanying the data release had been the announcement from the Ministry of Trade and Industry narrowing the growth forecast for 2016 to between 1.0% to 1.5% from the previous range of 1.0% to 2.0%. This places Q4 GDP on the lower end with the 2.0% YoY growth from the first half of the year. 

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