Daily FX Update, 21 April 2015 OVERNIGHT MARKET UPDATE:

·         In US, New York Fed president Dudley stated that he remained confident “growth prospects for the US economy over the remainder of 2015 will improve”. However, he also added that the “timing of normalisation remains uncertain because how the economy evolves is uncertain”.   

·         In euro area, Greece’s financial situation is deteriorating and becoming more desperate as evidenced by the decree issued overnight, forcing local governments to transfer cash balances to the central bank.

·         ECB Vice President Constancio said that a Greek default does not necessarily mean that Greece has to leave the euro. “The treaty does not foresee that a country can be formally, legally expelled from the euro. So, if anything, some choice of that nature would have to be taken by the Greek government, not by us”.   

·         In the currency market, the USD found demand overnight gaining notably against the JPY. The AUD fell after RBA Governor Stevens remained cautious about the Australian outlook and a Chinese USD debt default soured stimulus optimism.      

·         US 10-year Treasury yields were 2 bps higher to close at 1.89%.            

·         US equity markets were buoyed following the PBoC’s reduction of the reserve requirement ratio (RRR) by 100 bps. The main US indexes were up 0.9-1.3%.      

·         Crude oil markets fell overnight, although US crude sentiment appears to be less bearish, with US CFTC non-commercial traders (speculators) cutting short positions to the lowest levels since February and net long positions up 9% in the week ending 14 April. Speculation of a drop in inventories at the main storage hub in Cushing, Oklahoma in the second half of last week appears to be supporting the better tone.          

Precious markets declined, as market participants pared back safe haven exposures in gold. Risk appetite improved with traders moving towards US and European equities.