Daily FX Update, 9 June 2015

OVERNIGHT MARKET UPDATE:

·         Data releases from Germany eased some emerging concerns that the engine of euro area growth is slowing down. In April, industrial production rose 0.9% m/m following March’s 0.4% fall. In work day adjusted terms, production stood 1.4% higher than a year ago – its strongest pace of annual growth since July last year. Gains were widespread across investment, intermediate, capital and consumer goods. The report was complimented by the April German trade data, where exports rose 1.9% m/m and imports slid 1.3% to leave the trade balance at EUR22.1 billion. For Jan-April, the trade surplus amounted to EUR80.7 billion up 24.3% y/y. Exports to non-EU countries climbed 7.9% in the first four months of this year suggesting little impact from the slowdown in China.

·         There were little major headlines to come out of the second day of a Group of Seven leaders’ summit. That said, with regard to the Greek situation, German Chancellor Merkel sounded exasperated when stating: “There isn’t much time left, that’s the problem…Every day counts now”. 

·         In the currency markets, German data rebounded and the EUR led broad gains against the USD. USD confidence wobbled over concerns that the currency’s strength will impact the economy.

·         European fixed income markets were stable to modestly weaker, while US Treasuries rallied slightly, with the 10-year yield down 3 bps to 2.38%.        

·         It was a weaker session for global equities, with US bourses weaker 0.5%-0.9%.   

·         Brent and WTI came under pressure after OPEC decided to keep its quota unchanged at 30Mb/d. Focus has now turned to Iran and Iraq, where both countries are expecting to raise exports in the short term. Iran in particular has the potential to flood the market with the most crude oil if sanctions are lifted later this month.                   

Gold steadied after a three-day losing streak as the dollar and stock markets fell, though prices stayed near 11-week lows after Friday's strong US jobs report fuelled speculation that interest rates may rise in September.