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Foreign Exchange Market Update

May 27, 2016

Indicative Interbank spot sell rates only as of 9:00 AM PST.

USD/CNY----6.5620 (onshore)
United States (US) GDP was revised UP by 0.3 points to 0.8% in this second estimate of economic activity for 2016 Q1. This was slightly below the market expectations for an increase to 0.9%. Economic activity is now 2.0% above its year ago level. Consumer spending was revised higher by 0.04% to 1.9%, contributing 1.29% to economic growth. Net Exports were revised higher with a modest increase in Exports and little change in Imports, contributing -0.21% to economic growth. On another note, Consumer Sentiment was revised down by 1.1 points in late May to 94.7%, compared with market expectations for a decrease to 95.4%. Sentiment has improved by 3.0 points over the past 3 months. With this month's moderate increase, compared to April's final level of 89.0%, sentiment is 4.4% above its year ago level. Sentiment has been rising since August 2011 amid substantial volatility. Current Conditions were revised up by 1.3 points to 109.9%. Current conditions are now 9.0% above their year ago level and have been climbing for the past 4 years. Also on another note, during Today’s meeting Federal Reserve Chair Janet Yellen said the ongoing improvement in the U.S. economy would warrant another interest rate increase “in the coming months,” stopping short of giving an explicit hint that the central bank would act next month. “The economy is continuing to improve,” she said. She added that she expects “inflation will move up over the next couple of years to our 2 percent objective,” provided headwinds holding down price pressures, including energy prices and a stronger dollar, stabilize alongside an improving labor market. More than incoming economic data, market sentiment over the June meeting has been shifted by FOMC member comments and by the April meeting minutes. Those records, released May 18, showed a majority on the committee favored a June rate increase if the economy continued to improve. Odds of a June rate hike implied by pricing in federal funds futures contracts were around 28% earlier Friday, compared to about 4% on May 16.
Euro traded at 1.1117 against USD at 11:28 am PST. France's consumer confidence unexpectedly strengthened in May to its highest level in more than fifteen years, as households were less pessimistic regarding their future financial situation and saving intentions for the next 12 months. The consumer confidence index rose to 98 from 94 in March and April. Economists had expected the measure to remain steady at 95. On another note, Italy’s May business and consumer confidence declined over concern of recovery. The manufacturing-sentiment index declined to 102.1 from 102.7 in April. Consumer confidence fell to 112.7,from the previously revised 114.1.
British Pound exchange rate is 1.4613 against USD at 11:28 am PST. UK consumer confidence picked up in May as optimism on personal finances improved. GfK’s consumer confidence index increased to -1 this month from -3 in April, beating estimates for a reading of -4.
Japanese Yen traded at 110.38 per USD at 11:28 am PST. Japan’s national consumer price index (CPI) excluding fresh food fell 0.3% from a year earlier. The core CPI rate, which excludes both food and energy, rose 0.7% from a year earlier. Meanwhile, headline CPI declined 0.3% from a year earlier following a 0.1% annualized drop in March. Inflation in the capital region of Tokyo also weakened in May. Tokyo’s consumer price index excluding fresh food fell 0.5% annually. Tokyo’s CPI excluding food and energy rate edged up 0.5%.
Canadian dollar traded at 1.3037 per USD at 11:28 am PST. Small businesses across British Columbia reported feeling a bit more optimistic in May than they have in the past year, according to the Canadian Federation of Independent Business (CFIB). The CFIB Business Barometer index for B.C. gained almost two points in May, reaching 67.1—almost nine percentage points above the national average of 58.2
Onshore Chinese yuan traded at 6.5620 per USD at 11:28 am PST and offshore Chinese yuan traded at 6.5738 per USD. Profit growth at China's industrial firms slowed in April, in line with other data for the month which suggested the economy may be losing steam again after picking up earlier in the year. China’s industrial firms made 502 billion Yuan ($76.59 billion) in profits last month, up 4.2% from the same period last year and compared with growth of 11.1% in March. For the first four months of the year, profits reached 1.84 trillion Yuan, a 6.5$ gain from a year earlier but down from a 7.4% rise in the first quarter.
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.




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