Daily FX Update, 27 May 2015 OVERNIGHT MARKET UPDATE:

·         US headline durable goods orders declined 0.5% m/m in April, partly unwinding the sharp increase recorded in March. However, core capex orders outstripped expectations and rose 1.0% m/m (mkt: +0.3%) with the March result also revised higher. Overall, an encouraging report for business investment and consistent with the improvement in new orders in the most recent manufacturing survey. 

·         Headline US consumer confidence improved marginally to 95.4 in May from 94.3. Consumer confidence has softened modestly recently, likely reflecting the recent uptick in gasoline prices.

·         US new home sales rose 6.8% m/m following the very sharp decline recorded in March. On the prices front, US Case-Shiller house prices rose 0.95% m/m in March.

·         Federal Reserve Vice President Fischer has reiterated that the global economy remains an important input into the Fed’s policymaking process. He noted that, “if foreign growth was weaker than anticipated, with consequences for the US economy could lead the Fed to remove accommodation more slowly than otherwise”.           

·         In the currency markets, the USD found a solid bid as markets found reasons to be optimistic from the latest US data dump. USD/JPY broke topside, while EUR/USD continued to extend its break. NZD/USD sits on cycle lows.            

·         Despite generally stronger US dataflow, Treasuries rallied across the curve, perhaps on the back of Fischer’s comments. Political uncertainty in Europe may have also contributed to a safe haven bid for Treasuries. The 10-year yield declined 7 bps to 2.14%.  

·         Major US indices were down around 1.0%.

·         Crude oil prices slipped, pressured by the sharp rally in the USD. WTI crude prices fell below USD60/bbl, while Brent prices declined to around USD64/bbl.            

In the gold market, stronger US durable goods data early in the US session drove gold prices below USD1,190/oz, a two-week low. Falling US yields alleviated some of the downside pressure, with prices steadying just above USD1,185/oz.