The US dollar index marched higher for a second day to 97.53 following the Fed’s comment of no bias towards either a rate cut or hike in the FOMC meeting.
US factory orders increased by 1.9% in April, smashing market expectations of 1.5%. Recent macro data were pointing to a tight jobs market, healthy factory orders and revitalised manufactory activities, which are likely to buoy the greenback.
A strong dollar sent commodity prices lower, and oil prices tumbled 2% overnight. Gold price has also fallen for a second day to US$ 1,271 area, about to test a key support level of US$ 1,265.
Technically, Brentoil prices have broken down their SuperTrend (10,2) for the first time in more than four months. This flip in trends suggest oil price may have more downside going forward. Immediate support and resistance level can be found at US$68.0 and US$ 72.5 respectively. The clouds are also gathering on the fundamental side – OPEC+ may use spare capacity to offset Iranian sanction losses, US stockpile is building and higher oil prices are incentivising more production and drilling activities.
AUD/USD is jumping at 0.700 area – a key psychological support level that many traders are eyeing. Breaking down below this level could trigger stop losses and accelerate the selloff.
In Singapore, UOB bank has announced its 1Q earnings that beat expectations on the bottom line but misses in details. The bank’s total income increased 9% QoQ to $2.41 billion led by recovery in net fee income and trading and investment income as the financial markets rebounded. Actual earnings per share (EPS) is at S$ 0.630, 7% higher than consensus S$ 0.587. Net Interest Income increased 8% on a yoy basis, but dropped 1% from 4Q last year.
Net interest margin (NIM) – a key measure of bank’s profitability - decreased 5bps from last quarter, against the broader trend of rising domestic interest rates. Worth noting that UOB’s NIM has been trending lower for the past four quarters, comparing to a gradual increase in its rival DBS. This led to a widening NIM gap between the two banks, from 16bps seen in 1Q18 to 36bps in 1Q19.
Both DBS and UOB have seen their net interest income (NII) moderating in 1Q19, highlighting the risk of economic slowdown as well as lower interest rate expectations following the Fed’s policy shift at the end of last year. Going forward, driving up NII growth amid a low interest rate environment will be the challenge for local banks.
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