Daily FX Update, 29 March 2016

OVERNIGHT MARKET UPDATE:

·         US – The personal income growth for February came in at 0.2%, the smallest increase since September, while the personal spending were in line with market expectations of a 0.1% growth. However, spending growth for January was revised sharply lower to just 0.1% from 0.5% previously.

·         US – The core PCE deflator, the Fed’s preferred measure of inflation, rose 0.1% m/m in February. This was below market expectations for a 0.2% m/m increase and follow’s January’s 0.3% m/m gain. In annual terms, it held at 1.7%. This is still above the Fed’s 1.6% forecast for the final quarter of this year, but below market expectations for a 1.8% y/y increase.

·         US – The San Francisco Fed President Williams noted that the US economy was doing “quite well”. “The real issue is the global financial and economic developments, there's uncertainty about what's happening around the world and how that feeds back to the dollar and the U.S. economy,” he added.

·         Currencies – The US dollar index (DXY) snapped a six-day winning streak on the back of softer-than-expected January price inflations. Elsewhere, investors are also waiting for the US consumer confidence and Fed Chair Yellen speech tonight.

·         Equities – US bourses were little changed as disappointing data was offset somewhat by reduced Fed rate hike expectations.

·         Rates – 10-year US Treasury yield inched lower on the heels of lacklustre economic data and as investors awaited additional economic reports ahead of an anticipated speech from Yellen and a key jobs report on Friday.

·         Energy – Crude oil prices settled lower for a fourth straight session as traders showed caution in extending a hefty month-to-date price gain ahead of a meeting in April to address the global oil glut among major crude producers.

·         Precious Metals – Gold prices trended higher after early declines in the Asian trading session. ETF demand is still looking strong even after the 4% decline in gold prices over the month. Central bank buying is still robust even at these elevated price levels.