Please note and carefully read the

Important Disclosure on the last part

Daily FX & Market Commentary

August 5 2016
Published from Tuesday to Friday

Market Recap
U.S. stocks little changed: The S&P 500
Index stayed flat at 2,164 as investors
appeared reluctant to make big bets a day
ahead of the closely watched monthly jobs
report.
Crude oil rose: WTI crude oil gained 2.7%
to US$41.93 a barrel, amid speculation
that traders who had bet on falling prices
were buying back positions.

Table: Daily Market Movement (Aug 4 2016)

Equity Market Indices
U.S.

Close Change

% Commodity Futures
Energy & Metals

Close

S&P 500 Index

Dow Jones Industrial Average
NASDAQ Composite Index
Europe

2,164.25
18,352.05
5,166.25

+0.5
-3.0
+6.5

+0.0% WTI Crude Oil (USD/bbl)

0.0% Brent Crude (USD/bbl)
+0.1% Natural Gas (USD/MMBtu)
COMEX Gold (USD/oz)

41.93
44.29
2.83
1,362.7

+2.7%
+2.8%
-0.2%
+0.2%

Stoxx Europe 600 Index

DAX Index
Japan
TOPIX Index
Nikkei 225 Stock Average
China / Hong Kong
Hang Seng Index
Hang Seng China Enterprises

337.84
10,227.86

+2.3
+57.7

4,831.0

-0.9%

1,282.99
16,254.89

+11.0
+171.8

21,832.23
9,004.62

+93.1
+26.3

+0.7% LME Copper (USD/MT)

+0.6% Bond Yields & CNY
U.S. Treasuries - Yields
+0.9% 3-Month - Yield (%)
+1.1% 5-Year - Yield (%)
10-Year - Yield (%)
+0.4% 30-Year - Yield (%)
+0.3% USD/CNY

2,982.43

+4.0

Shanghai SE Composite

Close Change
0.25
-0.01
1.03
-0.04
-0.04
1.50
-0.04
2.25
Close
%

+0.1% China Renminbi Spot

6.64

+0.1%

Data Source: Bloomberg L.P.

Hot News: BOE announced rate cut and new asset purchases
Chart: UK 2016-18 Real GDP and CPI Inflation
Forecasts (%), Latest

Citi analysts views: Monetary Policy

The BOE cut the 2017 GDP growth forecast from
2.3% to 0.8%; the 2018 forecast from 2.3% to 1.8%.
The Bank Rate cut may affect retail deposit rates
and variable mortgage rates quickly and may thus
help boost household demand, in particular.
The PMIs, which will likely be the key data point to
watch, given the weight the BoE attaches to them,
currently point to outright recession.
We pencil in a 15bp rate cut to 0.10% for the
November meeting.

Note: (*) Consensus Economics projections for 2016-17, Bloomberg

projections for 2018.
Sources: BOE, Consensus Economics, Bloomberg
and Citi, as of Aug 4, 2016

The BOE announced a cut to Bank Rate by 25bp to

0.25% and a total of 70bn in new asset purchases
and a 100bn cheap funding facility for banks.
Details:
1. 60bn in new gilt purchases over 6 months
2. 10bn in new corporate bond purchases over
initially 18 months and
3. a new Term Funding Scheme (TFS) as part of the
Asset Purchase Facility, worth up to 100bn, taking
the total of the Asset Purchase Facility to 545bn.

Citi analysts views: UK equities

Given the FTSE 100 has 50% of sales/profits
outside of Europe and 70% outside of the UK,
weaker GBP should mean higher EPS for UK plc.
We expect post-Referendum GBP weakness to
support an inflection in UK EPS to positive territory
in 2017, for the first time in 5 years.
This may drive higher share prices over the next 1218 months; we expect FTSE 100 at 7000 (mid-2017)
& 7600 (end-2017).
The FTSE 100 Index closed up 1.6% to 6,740
yesterday.

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Important Disclosure on the last part

Daily FX & Market Commentary

FX & Commodity Technical Corner
YESTERDAY PERFORMANCE

FX TREND

TECHNICAL

CCY

USD
EUR/USD
USD/JPY
GBP/USD
USD/CAD
AUD/USD
NZD/USD
USD/CHF
USD/CNY
USD/CNH
USD/SGD
GOLD

Close Price

Day High

Day Low

95.76
1.1130
101.22
1.3107
1.3019
0.7628
0.7173
0.9741
6.6418
6.6465
1.3420
1361.15

95.90
1.1156
101.67
1.3346
1.3089
0.7641
0.7201
0.9750
6.6469
6.6537
1.3439
1365.15

95.42
1.1114
100.86
1.3103
1.2997
0.7584
0.7147
0.9721
6.6304
6.6335
1.3396
1349.20

Short Term
Comment
Neutral
Neutral
Bearish
Bearish
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Bullish

Support

Resistance

92.60
1.0941
99.02
1.2798
1.2987
0.7409
0.6952
0.9500
-6.6405
1.3286
$1,312

97.82
1.1358
102.83
1.3372
1.3312
0.7835
0.7325
1.0093
-6.7195
1.4000
$1,375

Citi Foreign Exchange

Forecast:
0-3
Months
92.92
1.10
106.00
1.25
1.30
0.77
0.69
0.99
6.73
-1.38
1400

6-12
Months
94.13
1.15
105.00
1.28
1.26
0.78
0.70
0.96
6.80
-1.39
1280

FX Rate Source: Bloomberg L.P. (cut off time is NY Time 5:00pm)

GBP tumbled: The BoE announced to cut the rate by 25bps, launched 70 bln pound asset purchase program and
Term Funding Scheme (worth 100bln) for banks to borrow close to BOE base rate to offset low rates
AUD rose although Australian retail sales came in at 0.1% MoM, lower than forecast 0.4%.
US non-farm payrolls: We expect NFP may grow 170K in July, in line with the 6-month average of 172K. If job
growth reaches 250K or above, it may boost expectation of rate hikes.

Daily FX Focus

GBP/USD may test lower to 1.2798:

1.3372-1.3481
(2Aug & 15 Jul
top)

1.2798 (Jul low)

Source: Bloomberg L.P., data as of Aug 5 2016

GBP Outlook:
Cut GDP forecast: Growth is projected to slow to
0.1% in Q3. The BOE cut the 2017 GDP growth
forecast from 2.3% to 0.8% (Citi 1.0%) and the
2018 forecast from 2.3% to 1.8% (Citi 1.6%).
Expect further rate cut: The minutes said most
members back further rate cut to near zero in
2016 if incoming data in line with forecast. Hence,
we pencil in a 15bp rate cut to 0.10% in Nov.
Confidence is the key in future: This may
depend on how quickly the UK government adopts
a feasible goal and strategy for the upcoming exit
negotiations with the EU.

Technical Analysis:
Yesterdays sharp fall suggests the pair may test lower to 1.2798, with resistance at 1.3372 1.3481. A break
of 1.2798 may bring further fall toward 1.25 (0-3 months forecast).
NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD.
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Daily FX & Market Commentary

AUD/NZD may trade inside 1.0450-1.0772:
1.0703-1.0772 (fibo
0.618 & Jul top)

AUD/NZD Outlook:
RBNZ rate decision next Thur: We expect
the RBNZ may cut the interest rate by 25 bps,
which may make NZD underperform.
AUD may outperform, as the high yield, AAA
credit rating and stable political status may
trigger further fund inflow.

1.0450 (2 Aug low)

Source: Bloomberg L.P., data as of Aug 5, 2016

Technical Analysis:
AUD/NZD rebounded strongly with RSI turning up. We expect the pair may trade inside 1.0450 -1.0772 with
upside bias.

Important Economic Data (August 1, 2016 August 5, 2016)

Time

Importance

Event

Source: Bloomberg L.P.

(K = Thousand, M = Million, B = Billion)

Period

Actual

Survey

Prior

Jun
Aug

-3195m
1.50%

-2000m
1.50%

-2418m
1.75%

Jul
Jul

---

6.90%
10.0k

6.80%
-0.7k

Jul
Jul

49.9
53.9

50
--

50
53.7

Jul

52.0

51.9

51.9

2Q

0.40%

0.50%

0.40%

Australia
08/02/2016 09:30
08/02/2016 12:30

Tue
Tue

!
!!!

Trade Balance
RBA Cash Rate Target

08/05/2016 20:30
08/05/2016 20:30

Fri
Fri

!!
!!

Unemployment Rate
Net Change in Employment

08/01/2016 09:00
08/01/2016 09:00

Mon
Mon

!!
!!

Manufacturing PMI
Non-manufacturing PMI

Canada
China
Euro Area
08/01/2016 16:00

Mon

!!

Markit Eurozone Manufacturing PMI

New Zealand
08/03/2016 06:45

Wed

!!

Pvt Wages Ex Overtime QoQ

U.K.
08/01/2016 16:30

Mon

!!

Markit UK PMI Manufacturing SA

Jul

48.2

49.1

49.1

08/04/2016 19:00

Thu

!!!

Bank of England Bank Rate

Aug

0.25%

0.25%

0.50%

08/04/2016 19:00

Thu

!!!

Bank of England Inflation Report

Aug
52.6
0.20%
0.40%
179k
269k
-3.90%
---

53
0.30%
0.30%
170k
265k
-4.00%
180k
4.80%

53.2
0.20%
0.40%
176k
266k
-4.00%
287k
4.90%

U.S.
08/01/2016 22:00
08/02/2016 20:30
08/02/2016 20:30
08/03/2016 20:15
08/04/2016 20:30
08/04/2016 22:00
08/05/2016 20:30
08/05/2016 20:30

Mon
Tue
Tue
Wed
Thu
Thu
Fri
Fri

!!
!!
!!
!!
!!
!!
!!!
!!!

ISM Manufacturing
Personal Income
Personal Spending
ADP Employment Change
Initial Jobless Claims
Durable Goods Orders
Change in Nonfarm Payrolls
Unemployment Rate

Jul
Jun
Jun
Jul
Jul
Jun
Jul
Jul

NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD.
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Daily FX & Market Commentary

Important Disclosure
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In any event, past performance is no guarantee of future results, and future results may not meet our expectations
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Daily FX & Market Commentary

Important Disclosure
Risk relating to RMB If you choose RMB as the base currency or the alternate currency, you should also note the
following:
RMB is currently not freely convertible through banks in Hong Kong. Due to exchange controls and/or restrictions
imposed on the convertibility, utilisation or transferability of RMB (if any) which in turn is affected by, amongst other
things, the PRC government's control, there is no guarantee that disruption in the transferability, convertibility or
liquidity of RMB will not occur. There is thus a likelihood that you may not be able to convert RMB received into
other freely convertible currencies.
CNH exchange rates and CNY exchange rates are currently quoted in different markets with different exchange
rates, whereby their exchange rate movements may not be in the same direction or magnitude. Therefore, the
CNH exchange rate may be different from the CNY exchange rate.