Daily FX Update, 25 March 2016

OVERNIGHT MARKET UPDATE: ·         US – Orders for durable goods fell 2.8% in February, the third drop in four months, as every major industrial sector except for autos showed declines. Stripping out transportation, durable-goods orders slipped a smaller 1%, due to the cutback in demand for large military-related products. Orders for core capital goods, viewed as a proxy for business investment, also slumped 1.8% in February. ·         US – The number of initial jobless claims in the week ended at 19 March was little changed at 265,000, reflecting the low level of layoffs taking place across the economy. Initial claims have now been below 300,000 for 55 weeks, a feat last accomplished in 1973, when the size of the labour force was much smaller. ·         UK – The retail sales growth fell 0.4% m/m in February, but less than market expectations for a decline of 0.7%. The slide was driven by weak clothing sales as poor weather in February had hurt demand for new spring and summer clothing ranges. ·         Currencies – US dollar continued to climb against broad currencies as market still digesting the series of upbeat comments by Fed officials this week that rekindled that the central bank might soon raise short-term interest rates again.  ·         Equities – US bourses closed little-changed from the previous session after paring sharp losses, with weakness coming from the industrial and financial sectors. Softer dataflow also curbed the desire to invest ahead of the long Easter weekend. ·         Rates – 10-year US Treasury yield rose 2 bps to close at 1.90% due to renewed concerns about the outlook for interest rates after Fed Bullard said that the relatively minor downgrades to the Fed’s economic outlook suggest the next rate hike “may not be far off provided that the economy evolves as expected.” ·         Energy – Crude oil prices finished lower, but pared some of its worst losses of the day after a report showed that the number of rigs actively drilling for crude in the US fell over the past week, suggesting that production might soon decline. ·         Precious Metals – Gold prices were basically flat, pressured by a stronger dollar and talk of an April interest rate hike from Fed Bullard.