Friday Night roundup from Singapore

The most important news from my neck of the woods, SGD rallied after the central bank continued on their path to normalise. MAS steepened just 0.5%-pts to 1.0% p.a, and this normalisation supports a bullish near-term view for SGD versus regional peers

Oil markets

Crude is off to a positive start in  New York trade. Oil had a strong recovery in Asia as risk sentiment stabilised.

While oil prices were plagued by a massive unwind of riskier assets, we are still at the intersection that barrel losses due to Iranian sanctions and coupled with Venezuela shortcoming; the drops are too significant for OPEC to recompense.

But the emotional impact of equity market melting down with virtually every volatility gauge sending off alarm bells, it was a tough week to be an oil bull.

The IEA released their Monthly Oil Market Report, in which the agency cut its demand forecasts, but still sees prices as generally remaining at elevated levels supporting the bullish narrative

Gold markets

The precious complex is trading off the intersession highs as one would expect after the most significant jump in years. In reflection, the move was a combination of a haven and short covering momentum. But leaves the current landscape extremely shaky if both stocks and US rates markets recovered significantly in the days ahead

Fed Speak

Fed member Evans is speaking on CNBC and generating as some positive US dollar headlines but merely outline the recent Fed communique, but dollar bulls are eating it up none the less

• *EVANS: SLIGHTLY RESTRICTIVE MAY MEAN 50 B.P.S. ABOVE NEUTRAL

• *EVANS: JOBLESS RATE HEADING TO 3.5% SO NEED TO BE ABOVE NEUTRAL

The message is loud a definite; however, even in the absence of inflation, the current employment levels suggest nudging into restrictive policy would be appropriate. Music to the USD’s ears and support my consensus EUR lower given the Italy risk. Continue to favour selling into short positions squeezes like what happened in early London

University of Michigan Survey 

USD trades a bit firmer in the wake of the latest University of Michigan Sentiment survey, despite its softer results: the index declined from 100.1 to 99.00 versus 100.5 expected. But markets are focusing on the inflation expectations which notched up . 1 % in one year frame  while .2 % in the 5 to 10-year forecast

Global Equity Markets

Bottom picking can be a dangerous past time.

It’s amazing how quick everyone is seizing on today market stability to suggest that equities have bottomed out. We have seen a convincing rebound on Asia market sentiment helped by reports overnight that Mnuchin may not name China as a currency manipulator. Still, given how fragile market sentiment has been, let’s leave the nonsense of bottom picking to the experts, cognoscenti’s and pundits. But given the intraday volatility its next to impossible to say the “lows are in.”And while the worst appears to be behind us, it’s always tricky to determine if this is the calm before the storm or we’re merely in the eye of the hurricane. But ultimately where US bond yields settle will be the next significant signal for equity investors.

Still, there’s a lot is riding President Trump accepting the US Treasury currency report at face value. But President Trump has been unwavering in this about China exchange rate regime. And given the unpredictable nature of the commander-in-chief does raise the level of uncertainty. And who is to say he won’t go rogue on the US Treasury if he doesn’t like what he hears and labels them as coco locos? Just saying!

If you thought this week was madness, next week wouldn’t be a walk in the park with US Treasury report, Fed meeting minutes, the possibility of a Brexit deal, Eurozone final CPI and Italy’s deadline to submit the draft budget to the EC. Now, what possibly could go wrong with everyone still flying by the seat of their pants.