Daily FX Update, 26 April 2016

OVERNIGHT MARKET UPDATE:

·         US – The March new home sales came in below market expectations, dropping 1.5% in the month to a 511,000 saar rate. However, February was revised up so that compensated for the miss on March expectations. March was the third consecutive monthly decline with weakness last month led by soft sales on the west coast.

·         US – The April Dallas Fed manufacturing index stabilised at low levels of -13.9. Of some encouragement for the region was the rise in the new orders index and the volume of shipments.

·         Euro area – The German IFO reading for April was 106.6, virtually unchanged from 106.7 in March, as global headwinds remain a concern. That was still the lowest headline reading in 16 months. Within the diffusion index, manufacturing rose to +6.5, the highest reading in three months.

·         Currencies – The USD started this week on the back foot while the JPY rose after weakening at the end of last week as BoJ easing expectations increased.

·         Equities – Following the weakness in Asian equities, European bourses gave back some of their recent gains, with the Euro Stoxx 50, DAX, and FTSE 100 down 0.8%. The S&P500 was down 0.2% as investors weighed a round of lacklustre earnings and awaited the conclusion of the Fed meeting later this week.

·         Rates – US 10-year Treasury yield up 2 bps to 1.91% by the close as investors braced for a FOMC meeting that could offer guidance on the Fed’s future monetary policy. European yields continued to advance, with 10-year yields up 4 bps in France, 3 bps in Germany, and 1 bp in the UK. 

·         Energy – News of expansions saw selling pressure build over the session. Kuwait’s crude production is recovering after its recent workers’ strike and output from Iraq has been climbing. Saudi Arabia announced that it will complete an expansion of its Shaybah oil field by June, pushing capacity to 12 million barrels per day.

·         Precious Metals – Gold inched higher after weaker than expected new home sales in the US saw the USD fall.