Article / 18 August 2016 at 2:19 GMT

Morning Report APAC: FOMC split on rates, USD selling, USDJPY sub-100

APAC Sales Trading Desk / Saxo Capital Markets


  • FOMC minutes indicates options are open on timing of next interest rate increase
  • USD selling resumes after two days of profit-taking and stops after FOMC minutes
  • Significant mover USDJPY, breaking the 100 level


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT+8)



1210: AUD – RBA’s Jenny Hancock in panel participation in Sydney

1930: EUR – ECB account of the monetary policy meeting 

2200: USD – Feb’s William Dudley answers questions at press briefing in New York

Overnight news

Federal Reserve speech: 

The minutes from the July FOMC meeting indicated that Fed officials ultimately decided to keep their options open on the timing of the next interest rate increase: “Members judged it appropriate to continue to leave their policy options open and maintain the flexibility to adjust the stance of policy based on incoming information.” 

The committee split into three camps at the meeting: Those who aren’t ready to raise rates, those who are ready, and those who say the moment is drawing near. Several officials “preferred to defer another rate increase in the federal funds rate until they were more confident that inflation was moving closer to 2% on a sustained basis,” the minutes said.

"Some ... members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation."


Foreign exchange



USD selling resumed after two days of profit-taking and stops following the FOMC minutes.

The significant mover was USDJPY, breaking the 100 level with models selling the break and stops in Asia this morning; he same who pushed USDJPY higher yesterday above 101. The market is now waiting for Janet Yellen to speak at Jackson Hole but the trend is definitely lower in this pair .

GBP is following the USD selling and is now trading again at the resistance band 1.3050/1.3070. It will be interesting to see the retail sale numbers today and if there was any negative effect from the Brexit vote. There is no significant resistance above that before 1.3380.

Despite USD buying over the past 1.5 day, EUR didn’t react much and stayed above the 100-day moving average at 1.2228. The resistance for the pair is at 1.1400.

In emerging markets, the USD selling was fairly mild despite the move in G10 after two days of strong USD buying. We might see some sellers re-emerge today, but not aggressively, before Jackson Hole .

Foreign exchange volatilities



With Donald Trump not really performing in the polls, we are hearing US funds are now selling ATM for US election dates .

The break of 100 in USDJPY and the stops are triggering buyers of gamma in the pair.



Chesapeake Energy boosted the size of a loan to $1.5 billion from $1 bn and cut the interest rate to 8.5%. The borrowing will help the company tackle its debt load as it copes with low oil prices and credit downgrades. 

US Treasuries rose for first time in three day after the July FOMC minutes proved to be less hawkish than was feared. The two-year note yield dropped two basis points to 0.726%. The 10-year bond yield was falling 2.4bps to 1.551%. 

The probability of a Fed rate hike in December fell to 48.5% yesterday, from 51.0% on August 16. 

Yield on 10-year Japanese government bonds rose two bps to minus 0.080% yesterday, after FOMC minutes suggested US rates will stay low for longer; the Aussie bond curve flattened after overnight release of Fed minutes. Australian 3-year sovereign yield slid two bps to 1.398%; 10-year yield slipped three bps to 1.879%. 







US stocks edged higher after sharply paring earlier losses as minutes from the Fed's July meeting showed policy makers remained divided on prospects for a near-term rate increase.

DJIA rose 21.92 points to close at 18,573.94, after being down as many as 83 points earlier in session. Cisco Systems Inc. dragged on the average, down 1.5% after a report the networking company plans to lay off almost 20% of its workforce.

Lowe’s Cos. dived 5.7% after the company reported second-quarter earnings below forecasts. 

Target Corp. shares tumbled 6.4% after the retailer cut its full-year earnings forecast.

European stocks continued to retreat from seven-week highs amid disappointing corporate earnings. 

Carlsberg A/S shares sank 5.2% after the Danish brewer’s first-half sales slipped to 31.24 bn kroner, coming in less than an estimate of 31.56 bn kroner in sales.

Dutch chip-equipment company ASML declined 4.9% after Intel Corp.(down 0.54%) said it will not use lithography technology made by the Dutch chip-equipment company to produce its 10-nanometer chips.

Asia-Pacific stocks

Hong Kong

Analyst ratings: 

  • Sinopharm (1099 HK): Cut to neutral at Haitong Intl 
  • Sunny Optical (2382 HK): Cut to sell at China Securities; cut to hold at CIMB 
  • TCL Multimedia (1070 HK): Cut to neutral at CCB Intl 


  • Yuexiu Transport(1052) interim net profit up 8.9% YoY to RMB350mn 
  • *China Unicom(762) 1H net income down 79.6% YoY to RMB1.43bn, beat median estimate of RMB1.34bn; company saw an increase in 4G subscribers by 28.26 m to a total of 72.42 m in first half 
  • China Coal(1898) Jan-Jul cumulative commercial coal sales down 1.8% YoY to 76.4 tons 
  • CIFI(884) 1H core profit up 52% YoY to RMB948m, beat our estimate; full note: 
  • Tencent(700) interim net profit up 40.3% YoY to RMB19.9bn, topping estimates; smartphone games revenue up 114% YoY to RMB9.6bn in second quarter; company expects buying over Supercell to be completed by year end 
  • Tianneng Power(819) postpones listing subsidiary Tianneng Energy on NEEQ 
  • Ping An(2318) interim net profit up 17.7% YoY to RMB40.8bn; premium income up 21% YoY to RMB256.9bn 
  • Kingdee(268) interim net profit up 47.2% YoY to RMB135m 
  • Yanzhou Coal(1171)’s Australis subsidiary first-half 2016 operating income fell 26.6% YoY to AUD466mn after tax widens to AUD180m 
  • Techtronic(669) first-half net profit up 12% YoY to $177m 
  • Great Eagle(41) first-half net profit down 6% YoY to HK$787m 
  • China Railway Signal(3969) first-half net profit up 41% YoY to RMB1.6bn 
  • Everbright Sec(6178) debuts today, the shares up 0.8% to HK$12.78 from its offer price of HK$12.68 in grey market yesterday 


Analyst ratings: 

  • Docomo (9437 JP): Raised to buy at New Street Research 
  • Yokogawa Electric (6841 JP): Cut to neutral at Credit Suisse 


Analyst ratings: 

  • ARB Corp (ARB@AU) cut to underweight vs neutral at Morgan Stanley 
  • BlueScope (BSL AU) raised to overweight vs equalweight at Morgan Stanley 
  • CSL (CSL@AU) cut to neutral from overweight at JPMorgan 
  • QBE Insurance (QBE@AU) cut to underweight from neutral at JPMorgan 
  • BHP Billiton (BHP@AU) raised to neutral from underperform at Macquarie 
  • Nanosonics (NAN AU) cut to hold from buy at Canaccord Genuit 


  • Spark (SPK@NZ) full-year net income falls 1.3% 
  • Trade Me (TME@NZ) full-year operating profit up 3.5% 
  • Fonterra (FSF@NZ) confirms early dividend payment of 10 NZ cents/shr 
  • Fisher & Paykel Healthcare (FPH@NZ) to defend patent infringement allegations made by ResMed 
  • Port of Tauranga (POT@NZ) full-year earnings 
  • AMP (AMP@AU) first-half earnings 
  • Sandfire Resources (SFR@AU) full-year earnings 
  • Brambles (BXB@AU) full-year earnings 
  • Treasury Wine Estate (TWE@AU) full-year earnings 
  • Charter Hall Retail (CQR@AU) full-year earnings 
  • Sydney Airport (SYD@AU) first-half earnings 
  • ASX (ASX@AU) full-year earnings 
  • Investa Office Fund (IOF@AU) full-year earnings 
  • Whitehaven Coal (WHC@AU) full-year earnings 
  • Iress (IRE@AU) first-half earnings 
  • SAI Global (SAI@AU) full-year earnings 
  • Bapcor (BAP@AU) full-year earnings 
  • Origin Energy (ORG@AU) full-year earnings 
  • Tatts Group (TTS@AU) full-year earnings 
  • Aveo Group (AOG@AU) halted for A$125m placement 

Source: CIMB / Bloomberg


The market is now waiting for Janet Yellen to speak at Jackson Hole but the trend is definitely lower in USDJPY. Photo: iStock


– Edited by Susan McDonald

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