• UK PM May is facing a constitutional crisis after Labour and the Liberal Democrats tspaneatened to use the House of Lords to water down Brexit
• NZD which was lifted by the RBNZ after it kept rates unchanged as expected and suggested an optimistic tone on growth
• Looking ahead, highlights include Norges Bank rate decision, US weekly jobs and Fed’s Powell

ASIA

Asia stocks were mostly higher after the region gradually sspanugged-off an indecisive tone which lingered from Wall St. where energy dragged the majority of indices lower, but the Nasdaq deviated from its peers amid tech strength. This initially saw a lack of unison in the region, although sentiment eventually picked up with ASX 200 (+0.5%) the outperformer amid a rebound in financials and basic materials, while Nikkei 225 (Unch) traded choppy with upside capped by a firmer JPY. Shanghai Comp. (+0.8%) and Hang Seng (+0.5%) conformed to the improved risk-tone despite the PBoC keeping liquidity operations to a minimal, as some reports suggested that liquidity in the banking sector was very high due to recent fiscal expenditure. 10yr JGBs were marginally lower amid an improvement in risk appetite and reduced demand at today’s enhanced liquidity auction for longer dated bonds. In addition, the latest weekly securities transactions data also showed foreign investors turned net sellers of Japanese bonds in the prior week.

PBoC injected CNY 20bln in 7-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.8197 (Prev. 6.8193)

EUROPE/UK

UK PM May is facing a constitutional crisis after Labour and the Liberal Democrats tspaneatened to use the House of Lords to water down Brexit. (Telegraph/Times)

FX

Commodity linked currencies mostly languished from the recent extended losses in crude, aside from NZD which was lifted by the RBNZ after it kept rates unchanged as expected and suggested an optimistic tone on growth. The remainder of the majors were quiet with the USD-index rangebound amid a lack of drivers and sparse calendar, while JPY firmed across the board which saw USD/JPY briefly retreat below 111.00.

RBNZ kept the OCR Unchanged at 1.75% as expected and said that policy is to remain accommodative for some time. RBNZ also commented that uncertainties remain and that policies may need to adjust accordingly, although it was upbeat on the economy as it stated that the outlook for domestic economic growth remains positive and that changes announced in the 2017 budget should support growth. (Newswires)

COMMODITIES

The commodities complex was mixed with a lack of catalysts keeping price-action relatively quiet. Nonetheless, gold edged further away from a monthly low and its 200DMA as a weaker greenback underpinned the precious metal, while copper was mostly range-bound aside from the brief early volatility seen as Asia trade got underway. Oil prices were also subdued with WTI languishing from yesterday’s losses to sit firmly below USD 43/bbl.

CME reduced margins on WTI crude futures by 7.4% to USD 2,500 from USD 2,700 per contract. (Newswires)

US

The Treasury space initially took a hit on the back of Haldane’s hawkish rhetoric, but pared losses tspanough the afternoon after Fed voter Harker stated that he favoured a pause in rate hikes while forging ahead with balance sheet reduction. Sep 17 T-Note futures settled 2+ ticks lower at 126.21+.

Fed's Harker (Voter, Neutral) seeks 'pause' on rate hikes while forging ahead on balance sheet reduction and commented that balance sheet unwind could start in September. (Newswires)

Republican leaders in the Senate are set to unveil a closely held plan to replace Obamacare today that includes a longer transition period than a House-passed bill, though there’s no indication they have enough support for it to pass in a vote that could come as early as next week. (Newswires)

US policymakers are set to offer Congress means to ease regulations of banks, according to a testimony released yesterday. (WSJ)