The euro picked up some strength against the US dollar as European Central Bank (ECB) president, Mr Draghi, failed to deliver enough dovish signals in yesterday's central bank meeting.

With deposit facility rates already at -0.4% and quantitative easing being pushed to policymakers’ limits over past years, the room for further easing is tight. The same problem applies to other major, fiscally-disciplined central banks around the globe.

On the trade front, Wall Street extended a third-day rally on hopes that a deal could be made between the US and Mexico before next Monday to avoid fresh tariffs. Meanwhile, President Trump said he will decide on the next big China tariffs move after the G20 meeting at the end of the month, where he will meet China’s leader Xi.

Since the drastic turn in US-China talks last month, both Washington and Beijing have blamed the other side for the breakdown in talks and took reciprocal retaliation measures to curb their trans-pacific businesses. A breakdown in trust will set the hurdle high for leaders to reach a common ground in trade and other issues in the G20 meeting. But as economic impact hurts, as suggested by latest US ADP report and manufacturing PMI readings, more pressure will be put on the leaders to find a resolution.

In Singapore, the Straits Times Index rebounded this week alongside the US and other Asian markets. Fed rate cut expectations is a major driver behind the rally. It is worth noting that the SGX’s trading volume surged to S$ 1.5 billion yesterday, a jump from its daily average of 1 billion. REITs is the best performing sector, gaining 2% on average yesterday. Falling treasury yield (risk-free rate) made higher-yield REITs more attractive in a low-yield environment.

The US non-farm payrolls is the most important economic data for today. As the ADP report released on Wednesday disappointed with a big miss. It is important to see if the non-farm payroll will be similar and that will re-affirm the major retracement in the jobs market. A weak reading is likely to weaken the US dollar whereas an upbeat one will likely do the opposite. The jobs report is projected to show payrolls rose by 175k in May, unemployment held at 3.6% and average hourly earnings growth at 3.2%, according to Bloomberg.

US SPX 500 - Cash chart

 

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