Asia morning update

Jawboning down the USD, President Donald Trump’s words had probably been the biggest mover for markets in the overnight session.

Source: Bloomberg

Trump and the USD

The USD index had slumped from the trade around 100.70 to the depths of 100.10 into Friday morning, after President Donald Trump expressed that the dollar is ‘getting too strong’ in an interview. This had not been the first occurrence of its kind, after having done so previously to the effect of a USD dip as well. It might however be some consolation for the market as the US President had also noted that his administration would not label China a currency manipulator in the Treasury report due this month, against earlier threats. This certainly eliminates some concerns for investors in the Asian region.

In reference to the US dollar, the President had also reflected that he prefers a low-interest rate policy, while at the same time touching on the fact that Federal Reserve chair Janet Yellen has not been ruled out for re-nomination when her term ends in 2018. This adds to the list of items which the President had changed his stance on post-inauguration. Despite the above, the biggest way the President can influence markets may still be on the policy end.

Singapore economy

Separately, the advance estimate of Singapore’s first quarter GDP arrived this morning, missing expectations slightly at 2.5% year-on-year (YoY) against the market expectation of 2.6% YoY and the previous quarter growth rate of 2.9% YoY. In seasonally adjusted annual rate (SAAR) terms, Q1 GDP declined 1.9% quater on quater (QoQ), close to the market’s -1.8% QoQ expectation. This is nevertheless a figure on the higher end of the Monetary Authority of Singapore’s (MAS) 1-3% and private forecasters’ 2.0% full year growth expectation. A breakdown has shown that the manufacturing sector had obviously been enliven from the improvement in demand in the region, growing 6.6% YoY.

Meanwhile, the MAS had also kept policy unchanged as the market expected, maintaining its zero appreciation stance. The monetary authority had also maintained the view that this stance is appropriate for an ‘extended period’, likely laying to rest concerns that they may turn hawkish soon. Indeed, with views that the Singapore Nominal Effective Exchange Rate (NEER) having been traversing within the mid-range and the USD evidently softer than expected, there may be less threats to the current monetary policy stance. With the amalgamation of the two, USD/SGD had only seen a brief moment of volatility. The currency pair later returned to trade around $1.3960, levels battered to after President Donald Trump’s comments.

Early movers in the Asian region saw another mixed open, though the Nikkei 225 had dejectedly sunk into losses of over 1.0% once again (as of 9.00am Singapore time) from JPY changes. The Hong Kong and Singapore markets are expected to face pressure this morning, taking after the trend from the US. Ahead of bank earnings on Wall Street, the market can be seen closing some positions, and the financial sector on the S&P 500 index had been one of the worst performers. Client sentiment on IG has not been strong either with over 60% short positions on the US 500 (which sees the S&P 500 as an underlying market), showing the cautious sentiment in markets.

Besides the upcoming bank earnings releases, the attention is expected to rest on China’s March trade balance in the day, ahead of the Good Friday holiday tomorrow.

Yesterday: S&P 500 -0.38%; DJIA -0.29%; DAX +0.13%; FTSE -0.22%

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