John J Hardy
In this latest webinar, Saxo Bank's head of FX strategy John Hardy analyses the market with topics including synchronised global growth, Saxo’s global risk indicator and data surprises.
Article / 30 August 2016 at 2:49 GMT

Morning Report APAC: September rate hike chance falls to 36%

APAC Sales Trading Desk / Saxo Capital Markets

  • US inflation comes in above expectations at annual 1.6%
  • Probability of a September rate hike falls from above 40% on Friday to 36%
  • USD trades slightly weak on the Asian open as rate hike chance declines

By Saxo APAC Sales Trading




1500 – KRW – Bank of Korea Policy Meeting Minutes

1830 – USD – Feb’s Fischer Speaks on Bloomberg Television

Overnight news

US:  The US Federal Reserve favourite inflation measure, Core PCE, came in above expectations at 1.6% y/y, up 0.1% m/m, creeping ever so slightly higher but certainly not enough to prompt any rapidly rising inflation fears. 

US Personal Spending came in line with expectations at 0.3%, but the prior month was revised slightly up. The data demonstrates the economic data is well supported by the consumer.

Fed rate hike expectations for September fell from above 40% on Friday to 36% yesterday. This mirrors a decline in treasury yields and a slightly higher equity market.

Hong Kong: HK’s retail sales data was released yesterday at 4:30pm SG/HT time. The data was once again a significant downside surprise, printing -8.5% y/y versus -7.4% expected. Hong Kong’s retail sales have been in negative territory since October 2015 and should continue to weigh on the consumer discretionary segment of the market. 



After the strong USD rally of Friday, USD traded mixed through Monday, closing marginally higher but pairing Asia gains through the US session. With the September rate hike probability declining and US yields slightly lower, the USD traded slightly weak on the Asian open. Expect this trend to continue throughout the day. 

EURUSD remained below its 100-day moving average and looks set to test is 200 DMA. Our head of FX strategy, John Hardy, highlighted this yesterday, looking for EUR back to 1.10 on the back of strong US data ahead this week.

Emerging Markets currencies recovered throughout the day as investors’ appetite for carry improved throughout an otherwise quiet session. After an initial spike above 6.70, before the onshore fixing yesterday, CNH recovered to trade in line with the fix, closing around 6.6860. KRW already trades stronger today in line with USD looking slightly soft, but the pair remains extremely volatile, which has sidelined traders.

Foreign exchange movement

Volatilities all traded bid yesterday in Asia’s session as the market digested the weekend's Jackson Hole events, despite paired gains through Europe.

The market has interest in volatilities into this weekend’s non-farm payroll numbers which currently trade rich relative to historic NFPS. However, with this NFP likely to determine whether the Fed goes in Sept or not, that may be expected and a strong print may bounce vols further.


The 10-year US Treasuries yield shed 6.7 basis points to 1.563% as it erased gains from Friday’s hawkish comments by Stanley Fischer on the possibility of two rate hikes this year. Resistance for the 10-year US Treasuries still remains at 1.6%, its two-month high till it was overcome last Friday.
Probability of a Fed hike by the end of this year is at 61.4%. However, the September hike probability has decreased to about 36%, down approximately 8% from last Friday's hype. Focus should remain on Friday’s non-farm payroll data.
German 10-year bond yields down 1.2bps, largely in line with broad Europe bond declines.







After three consecutive days of losses, the Dow Jones Industrial Average closed higher at 18502.99, up 107.58 (0.58%), with financials leading the gain following the hawkish comments from the Fed last Friday and good consumer spending reports. S&P 500 had similar gains and is up 11.34 (0.52%) as well, while the Nasdaq gains were pared at 13.41 (0.26%) higher.

The London market was closed yesterday but the majority of Europe indices closed weaker, with the CAC 40 and DAX down around 0.4%.  

Herbalife rose 2.80 (4.63%) after news that billionaire investor Carl Icahn bought more shares in the supplements and weight-loss products company. The stock was punished last Friday as it gapped down but closed higher after reports that Icahn, its major shareholder, was looking to sell some of his shares after Bill Ackman from Pershing Square disclosed that he was approached to buy the shares. 

Asia Pacific stocks

Greater China highlights 

  • China Railway Construction (1186 HK): Wins $1.85bn light rail project in Nigeria 
  • Industrial Bank (601166 CH): First half net 29.4bn yuan vs 27.7bn yuan a year ago 
  • Spring Airlines (601021 CH): First half net 740m yuan vs 620m yuan a year ago 

Japan highlights 

  • Asahi Group (2502 JP): Recalls baby food after plastic found in some products 
  • Hitachi (6501 JP): Plans to cut costs by 200bn yen this fiscal year, Nikkei says ** JX (5020 JP): President to head combined co. after TonenGeneral merger: Nikkei 

Southeast Asia highlights 

  • Lippo Karawaci (LPKR IJ): CVC buys stake in Siloam Hospitals from Lippo Karawaci and Ciptadana 
  • AirAsia (AIRA MK): Second-quarter net income 342.1m rgt vs 243m y/y 
  • Singapore Exchange (SGX SP): Wins approval from its listing advisory committee to allow dual-class shares; names Kwa Chong Seng new board chairman 

Source: Bloomberg


US Personal Spending came in line with expectations at 0.3%, but the prior month was revised slightly up. Photo: iStock


– Edited by Susan McDonald

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