Daily FX Update, 23 April 2015 OVERNIGHT MARKET UPDATE:

·         US existing home sales rose 6.1% in March to a 5.19m rate. The economic landscape of rising real disposable income, falling unemployment and low mortgage rates all point to further gains in the housing market.

·         The Bank of England Minutes were less dovish than anticipated with the Minutes noting that “it was possible that the appreciation of sterling was feeding through more quickly into the CPI than expected” which means that after an initial period of weakness, inflation could pick up more quickly. The Minutes also noted that "it was unlikely that activity growth could be maintained at its current pace for long, without generating greater inflation in wages and prices". With spare capacity in the economy diminishing and people increasingly quitting their current jobs, wages growth is likely to emerge later this year. 

·         In the currency market, GBP strengthened as the BoE Minutes struck a finely balanced tone. AUD held onto CPI-induced gains with iron ore bouncing over 5%. CHF declined after the Swiss National Bank expanded the reach of negative rates.        

·         US Treasuries were sold off across the curve, following stronger than expected US housing data. 10-year yields increased 7 bps to 1.98%.               

·         Solid corporate earnings results boosted US stocks. US bourses were up between 0.4% and 0.5%.       

·         Crude oil markets rebounded, with the Saudi-led coalition continuing air strikes against Yemen despite an announcement that the three week military bombing campaign was ending.            

Precious metals were weaker, with gold prices falling below USD1,190/oz. Both the macroeconomic environment and the physical market (China and India) remain unsupportive of gold prices. China’s retail demand for gold dropped to a two-year low of 199 tonnes in the first quarter of 2015.